I have a question about filing tax. I'm 18 years old, and live in Connecticut, USA. I am not sure how filing tax works but I'm sure you have to file it once you make over certain amount. The question I have is, do I have to worry about recording amount of money I make monthly? Also how much money do you have to earn in order to file tax? Thanks!
since you are 18 and live in the USA, you probably work or have other source of income and file tax return already. just include the adsense income on your tax return. if you dont have any other source of income and adsenes is the only income, then it depends on how much you earn from it. for $100 or $200 a year income, there is no need to fle any tax return as you will not owe any tax to IRS because there will be personal exemption limit. if you are not sure, then best person to advice you will be a tax consultant
If you live in the US and make over $600 you need to report the income. There is no time like the present to start keeping your books. You can get a free guide to starting your business by the book here: http://kimbeckersservices.com/start-a-small-business/
Unfortunately, the above answers paint only a partial picture. For 2008, if you are a dependent on your parents tax return and you have no unearned income (such as interest and dividends) then you must file if your earned income is greater than $5,350. However, you must also file a return if you had net earnings from self-employment of at least $400 (so that you can pay your social security taxes on the income). Your "net earnings" from a web based business would be the amount you make after deducting all your related expenses such as annual domain name fees, hosting fees, etc... Since you won't know in any given year what your net earnings will be until after you reach that amount, you should start recording all your receipts and expenses from the very beginning.
So when I make $400 is when I have to worry about filing tax and any type of forms, right? until then do i have to do anything?
If your net earnings (revenues minus costs) are less than $400, you have no income tax reporting at the Federal level. It is also unlikely that you have any income tax reporting to your state, but that may depend on your state. As far as I know, any state that has an income tax also has a personal exemption amount so that small amounts of income are not taxed. Most states also base their income taxes on the federal return, so having no federal return normally means you also have no state income taxes. You need to verify that for your own state, however. If you are selling goods or services that are subject to a sales tax, that is a different story. Those taxes are applied to gross sales. In other words, if your state has an 8% sales tax and you sell $2,000 worth of goods in taxable sales, then even though your cost of the goods was $1,200 and your other expenses were $500 so your net income was only $300, you will be required to collect and remit $160 (2000 x .08) in sales taxes. Most states only apply sales taxes to tangible goods, that is things you can see and touch. They do not tax the gross sales of services. If your revenues are from AdSense and affiliate commissions, therefore, in most states there is no sales tax on your sales. A few states do impose taxes on services, including advertising services, but my state does not and I am not familiar enough with those states' tax laws to comment on them.