Taxes on good received and how to calculate "Fair Market Value?"
June 26, 2015 3:07 PM Subscribe
I am an Amazon Vine participant. Amazon sends me products to review. Amazon has informed reviewers they will be sending a 1099MISC form this year in cases where the total value of all products selected is over $600.
The caveat is that use of these products is restricted. Amazon considers these products their property for 6 months after we receive them and could theoretically ask us to return them at any point during those 6 months. Secondly, products can't be sold or given away. Reviewers are allowed to dispose of products, but we can't donate them to charity, give them to friends, or sell them.
Given these restrictions, is there really a fair market value to these products? If so, how would it be calculated? If a company reports a fair market value on a 1099-MISC that the tax payer disagrees with, what happens?
I have contacted Amazon customer support and they told me that they haven't determined how they are going to calculate fair market value or at what point reviewers will be told what they consider fair market value to be. Many of the items offered are pre-production models or reviewer copies of books. The items may or may not come with the manufacturer's warranty.
I am not sure where to go from here. Any hive minds been in a similar situation? My understanding is that bloggers and other reviewers are able to donate or sell items they receive so that they can cover the cost in taxes.
I know you aren't my accountant/lawyer. Is there a specific type of accountant/lawyer I should ask my questions to? What credentials should I look for? In the past, I have always done my taxes with software.
The caveat is that use of these products is restricted. Amazon considers these products their property for 6 months after we receive them and could theoretically ask us to return them at any point during those 6 months. Secondly, products can't be sold or given away. Reviewers are allowed to dispose of products, but we can't donate them to charity, give them to friends, or sell them.
Given these restrictions, is there really a fair market value to these products? If so, how would it be calculated? If a company reports a fair market value on a 1099-MISC that the tax payer disagrees with, what happens?
I have contacted Amazon customer support and they told me that they haven't determined how they are going to calculate fair market value or at what point reviewers will be told what they consider fair market value to be. Many of the items offered are pre-production models or reviewer copies of books. The items may or may not come with the manufacturer's warranty.
I am not sure where to go from here. Any hive minds been in a similar situation? My understanding is that bloggers and other reviewers are able to donate or sell items they receive so that they can cover the cost in taxes.
I know you aren't my accountant/lawyer. Is there a specific type of accountant/lawyer I should ask my questions to? What credentials should I look for? In the past, I have always done my taxes with software.
This is an interesting question as I also do valuation of assets as part of my job.
Under the circumstances you've described I would be hard-pressed to assign a value beyond a scrap value, up until the point where the item became commercially available.
If your item were to be fully-functional and became commercially available in the same year that you are being 1099'd for, I would have to start with the sales price. I might make adjustments for depreciation and possibly some obsolescence depending on what percentage of fully functional your version of the item is if yours were different from the commercially available model.
Interested to see what others with a background in doing personal taxes have to say.
posted by vignettist at 1:39 PM on June 27, 2015 [1 favorite]
Under the circumstances you've described I would be hard-pressed to assign a value beyond a scrap value, up until the point where the item became commercially available.
If your item were to be fully-functional and became commercially available in the same year that you are being 1099'd for, I would have to start with the sales price. I might make adjustments for depreciation and possibly some obsolescence depending on what percentage of fully functional your version of the item is if yours were different from the commercially available model.
Interested to see what others with a background in doing personal taxes have to say.
posted by vignettist at 1:39 PM on June 27, 2015 [1 favorite]
This thread is closed to new comments.
The only reason you would need a professional to assist you with this is if, after you receive your 1099, you disagree with the valuation. In that case, the cost of professional assistance to you individually is very likely to be more expensive than the total tax liability. If, however, when you receive the 1099 in January 2016, you think that the items are being overvalued, you might consider discussing with a class action attorney the possibility of bringing an action on behalf of all similarly situated persons.
In short, I think you'll probably be okay and that the valuation will take all of your concerns into consideration, it's not going to be ripe for concern until you actually see their valuation, and at that time you can revisit the question.
posted by janey47 at 3:24 PM on June 26, 2015