Tax Guidance/Help

Hello.
I started my website about 6 months ago and it's starting to see some decent traffic. I've managed to acquire a few high PR links from some friends who have sites with good PR. I've been waiting since last update for my PR to go up to 7 or maybe even 8 in order to start selling advertising text-ads on some of my pages. Not because I want to sell PR(I know that's a 'no no'), but because with the higher PR rating the offer of advertising on my site would be more enticing to a potential customer. I will only seek themed links for pages I wish to offer text-ads on. Here's where the topic comes into play. I've never filed taxes before, I'm still young [19], but when I do offer these services of advertisement I want to know how I can go about when it comes to taxes. I don't want to have a lot of money and go spend it, then when tax time comes have the IRS knocking on the door saying I owe them $10,000 in taxes and not having a cent. I was wondering if anyone out there has advice, tips, knowledge on anything I can do in order to stay legit and not find myself in a bind. Someone told me to form an incorporated business and keep all receipts of transactions that I make, for tax reasons. I understand that, but I do need more details. Is there a certain percent that the gov. takes from you(I heard somewheres that it's 30%, but don't know if it's true)? Are there any good books that helps people like me with no tax kowledge what so ever to get them on the right track? I'm looking for any advice or anything you can port to this, because this is a BIG topic for me and I really want to understand it as well as I can.
Thank You.

 

Depending on your tax bracket, you could easily lose as much as 50% of your income to the money-grubbing governments(feds, state, local). I would consult a local accountant as to how to best handle this in your situation. In NY State, you can get a DBA and file it with your taxes, along with your income/expenses. Expenses lower your taxable income, which is always a good thing tax-wise... Good luck.


--
Derek

 

And if you don't want to get audited, make sure you consult an accountant. While the regulations usually allow you to write off part of your rent(or a room of your house if you have one), you can't write it all off(state laws vary). Doing so may get you audited fairly quickly...


--
Derek

 

Thanks for all the input. I will seek guidance from an accountant as soon as the money starts to pour in ... I hope.... LoL, but with-out a doubt if things go well I shall form an incorporated business & find an accountant to help me out with write-offs and stuff.... I'm really looking for some good books that will help me with this. I read a book a few years ago called 'Rich Dad Poor Dad' and it was very interesting and he touched somewhat on ways of saving on taxes. These are the types of books i'm looking for. That give specific examples of what can be done in regards to taxes.
Once again thanks & keep the suggestions coming.

 

You may not have to incorporate to get the tax benefits you desire. It depends on state laws, but in NY State, I simply operate under a "DBA"-- Doing-Business-As form from the county clerk. Incorporation is an expensive option, and I'm told it doesn't make financial sense until you start making $200k+ annually with the business-- that, or you need liability coverage or something...


--
Derek

 

I will look into this "DBA" and see if it's available here in Louisiana.... Thanks

 

- You need to set up a system that keeps track of your revenue and expenses.

- A simple Excel spreadsheet will probably suffice in your case.

- Keep all your receipts whenever your purchase something even remotely related to your business.

Computer related expenses
Programs purchased
Office Supplies
Fees paid for business activities (i.e. licenses)
Gas expenses or miles driven (keep a log)

- Get a credit card that you use solely for business expenses. This will help you keep track of your expenses much easier. Get a checking account that pays all your business expense bills. Don't be tempted to mix personal and business expenditures. You'll have a nightmare at the end of the year untangling the mess.

Being in business for yourself takes discipline. It would be wise to learn this from the start, rather than finding out the bad news (big tax bill) later.

When I say say discipline, this means not spending everything you take it. Set aside 40% of your net earnings (revenue minus expenses) and put it into a savings account you are not allowed to touch, except to pay taxes. If there's a little left over at the end of the year, it's yours. If you're short, you'll have to cough up the rest, but at least the lion's share of the payment will be set aside.

It would be wise to make quarterly payments on your federal tax return. This will help alleviate the temptation to spend your savings account money.

Good luck.

 

Look at forming perhaps an LLC and I would certainly consult an attorney &/or Tax professional

 

When you reach that stage, I would recommend talking to your accountant about setting up an S Corp (sub S Corporation). It has certain tax advantages, most notably, the avoidance of double taxation (as with a C Corp) and Self Employment taxes (15.3%), which you will incur as with a Partnership, Sole Proprietorship or LLC.

 

Unfortunately there is no book that is going to give you the tax knowledge you need. Just from looking over these posts here I see a lot of confusing and poor advice.

Ultimately the source for tax knowledge is irs.gov but it can be equally confusing. Still you probably want to start there. Click on the businesses tab and then Small Business/Self Employed.

If that becomes to overwhelming talk to a tax professional who concentrates on tax planning for small business and self employed. Oh, that is what I do and you can get a hold of me through my website http://www.1040WealthDesigns.com.

I hope this helps.