Are There Any Irs Tax Problems In Giving One’s Book Royalties Directly To Charity?
I self published my book. The company who prints and distributes my book has said that if they get the tax code no. of the charity and a letter from the charity saying they will accept the royalty payments that they will send my royalties directly to that charity. I cannot take credit for a charitable donation but neither will the royalties be reported as income to me. I would appreciate it if anyone could advise me if there are there any tax problems with this plan?
Well, there is one possible problem, albeit minor. It appears you had the right to the royalties and this is known as constructive receipt. In order for your way to work. there needs to be some sort of contract in place that assigns away the royalty rights altogether.
Without this contract, then technically, you need to report the royalties as income and then take the charitable contribution as a deduction on Schedule A. The IRS would want it done this way mainly for three reasons:
1) By reporting the royalties as income, it increases your adjusted gross income (AGI), which limits certain deductions and tax credits,
2) You may not have enough itemized deductions to get a tax benefit from the contribution, and
3) If all you have are the royalties and contributions, your contributions are limited to 50% of your AGI.
Your publisher may have some sort of form letter/contract that you sign that assigns your rights. Otherwise, you could probably type something up that does the same thing.
Comment by Edna M — November 25, 2009 @ 11:36 pm