Rev. Rul. 65-129

Advice has been requested concerning the problems of how to report royalty payments made by publishers to authors or their literary agents and of obtaining and furnishing taxpayer identifying numbers of the parties involved.

Under section 6041 of the Internal Revenue Code of 1954 and section 1.6041-1 of the Income Tax Regulations, every person engaged in a trade or business is required to file information returns, Form 1096, U.S. Annual Information Return, and Form 1099, U.S. Information Return for Calendar Year, for each calendar year after 1962 with respect to payments made by him during the calendar year in the course of his trade or business to another person of fixed or determinable interest, rents, royalties, annuities, pensions, and other gains, profits, and income aggregating $600 or more.

Section 1.6109-1(b)(2)(i) of the regulations is concerned with the furnishing of taxpayer identifying numbers and provides that a person required to make a return, statement, or other document with respect to another person for any period commencing after December 31, 1962, must request the account number or the employer identification number, as the case may be, of the person for whom he must make the return, statement, or other document and the person with respect to whom the return is made must furnish the number.

In view of the provisions of the regulations cited above, it is concluded that where a publisher makes royalty payments, aggregating $600 or more in a calendar year, directly to an author, he must file information returns, Forms 1096 and 1099, showing the payments made to the author and he must request the author's social security number (account number) to be used on these returns.

On the other hand, where the publisher pays royalties, aggregating $600 or more during a calendar year, directly to a literary agent (individual or partnership) in behalf of the author, he must report these payments made to the agent and must request the taxpayer identifying number of the agent.

It should be observed that a publisher is not required to file information returns or obtain employer identification numbers in those cases where he pays royalties to agents which are corporations. Section 1.6041-3(c) of the regulations.

The agent, in turn, whether or not a corporation, must file information returns for the royalties received from the publisher, showing the gross amount he received from the publisher, the commission retained by him, and the net amount actually paid over to the author. It is necessary that all three items be shown on the information returns in order for the Internal Revenue Service to be in a position to determine the full amounts paid by a publisher and received by an author as royalty payments. Furthermore, the literary agent must request the social security numbers (account numbers) of the authors to be used on these returns.