To all my DP friends over the pond : I'm earning good money in the UK but due to an over-zealous government, I'm shelling out 41% of my income in taxes which really hinders my online endeavors. I believe that in the US, each individual state sets the income tax rate. How do they compare? Does the US system hit you as hard as ours?
I'm not from the US, but I'm in a similar situation to that which you've described an am also seeking to reduce the massive tax burden associated with being based in the UK. One place you may want to look into is the Channel Islands: If I understand the setup correctly, companies and individuals in the Channel Islands do not pay any tax on foreign income and gains.
A little close to France for my liking Yeah I was thinking of the weather also, and the language. For me it would need to be either the US or Aussieland. I'm not quite at the Monte Carlo stage yet I think the Isle of Mann is the same as the Channel Isles though, or very similar.
No in the U.S. income tax is federal and 41 percent is close to what I pay for a little over a hundred thousand a year. You are taxed in the u.s. for everything thing. city state federal, I figure over fifty percent of my money is in taxes.
And by that time, you are so disillusioned you are happy to accept it for the sweet feeling of escape hehehe
Allow me to expand on what thehustler said. In the US you deal with taxes on income at 3 levels; federal, state and local. All the ones I have seen are based on net income, not a value added (VAT) type of tax though many states do have a sales tax which is like the VAT. Federal tax rates are progressive by nature. The more you make the higher the % you pay. You start with Gross income (net profit if from a business) and subtract an allowance for each member of your family plus any itemized deductions you may be entitled to like home mortgage expense or other taxes paid. Most people without a mortgage just use a standard amount per person. This gets you to net income which is then taxed at a rate of 10-30% based on your income level. But don't forget Fica and mediscare which will take 15.65% of your net non-farm earnings for your retirement package. Yeh Right. So the real federal tax rate is 25.65-45.65% because they put all the money in the same p*** pot. Now the states. This varies a lot from state to state. Kentucky will take 6% of your Federal adjusted gross income (after the deductions) for the state income tax. Not done yet.Then the local leeches come for their share of the blood. The really progressive cities like Lexington have a 2.25% net profits fee with a $100 minimum and a school tax of .50%. But Wait. There is one more Special offer. Bend Over. Then if you have any money left to spend almost all goods are taxed at the rate of 6% of selling price. And those blood thirsty leechs in Frankfort are considering extending the sales tax to services. About now 41% may look reasonable to you. Sorry. You caught be on a bad day. I just got the bill for for the extra $100 and a damn form to fill out.
Lmfao I thought I was being sarcastic lol, Yes we are taxed on anything in what one would call a free county. Sort of makes you want to be under a dictator to an extent lol.
Some states don't have a state income tax for individuals...until they form a business (corporation or LLC). I now get to pay federal income tax for the corp and myself as well as state taxes for the business including my favorite: the unemployment tax. I must pay my state (Texas) a tax to cover unemployment benefits should I fire myself or my husband from the corporation. (I'll admit I've considered firing him. *wink*) Oh! And allegedly since our corporation doesn't provide health care benefits to its employees, I might get to pay into a federal pool for that as well. Good times....
I was wondering about this as well. I live here in the U.S. and pay my taxes with my day job, but when it came to the question of how the taxing would work with internet marketing, I hadn't a clue where to start. Are there any special IRS forms or procedures? Should I expect to owe a lot of money to the IRS at the end of the year?
Keep good records of income and expenses. Then is is just 2 extra pages attached to your federal return. A schedule C for income and expenses and an SE for the fica money if you net more than $400.
Here is a chart defining US rates at the federal level.-- http://www.moneychimp.com/features/tax_brackets.htm . Most states have a tax and then counties within states have piggy bank taxes. I think it is close. Q....
You actually have to pay estimated quaterly taxes to the IRS and depending on where you live, your state too if you expect to owe a certain amount of taxes for the entire year. I believe the amount is $1,000 for federal. You can read more about estimated taxes here: http://turbotax.intuit.com/tax-tools/estimated_tax/small-biz-article