Rev. Rul. 67-197

The Internal Revenue Service has reconsidered the information reporting requirements relating to royalty payments made by literary agents to authors or writers as set forth in Revenue Ruling 65-129, C.B. 1965-1, 519.

Section 6041 of the Internal Revenue Code of 1954 and section 1.6041-1 of the Income Tax Regulations require that every person engaged in a trade or business 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.

Under Revenue Ruling 54-571, C.B. 1954-2, 235, a real estate agent must report on information returns the gross amount of rents collected on behalf of the property owner prior to the deduction of commissions, fees, or other expenses if such amount paid to any one property owner totals $600 or more during the calendar year.

Commissions, fees, and expenses deducted from the gross amount of royalty payments collected by literary agents on behalf of authors or writers are considered as having been paid by the agent to the writer and paid back to the agent for the purpose of discharging the writer's obligations; therefore, the gross amount of royalties so received and paid over to authors is subject to information reporting.

Accordingly, it is held that literary agents must report on information returns, Forms 1096 and 1099, the gross amount of royalties received from publishers prior to the deduction of commissions, fees, and expenses if the gross amount of such royalties paid to an author or writer total $600 or more during the taxable year.

Revenue Ruling 65-129 is hereby modified to remove the requirement that the commissions and net amount actually paid over to the author must also be shown on the Form 1099 filed by the agent.