So I have started a site that sells digital goods. I was just wondering, I realize if I make enough I will have to claim it on taxes as income, but what if I hire people to help with the content creation with me. What legal issues do I face there?
If you don't make too much, the IRS won't go for you. However, once you start making alot, they might start to take legal action. If you company does go big, I think you should register it and put it on your tax as income.
It is never good advice that you should ignore paying your taxes properly, and never accept advice that you won't get caught. The IRS is not stupid and you just might get caught with devestating consequences. If you are doing business online as either a sole proprietor or as an LLC you should keep records of your income and expense. Your income minus your expenses are called profits and should be declared on your taxes. Please keep in mind that once you are doing business out of your home you will have extra business expenses you can claim to lower your income. Discuss these issues with your accountant, but consider that running a business can allow you to deduct your cell phone, your internet connections, the cost of your domain names, hosting costs, legal and accounting fees, mileage, postage and a whole slew of other costs regular mortals cannot even begin to claim. In the immortal words of "The Godfather" - "a lawyer with a briefcase can steal far more than a thief with a gun." Getting good legal and accounting advice will make you far more money than sticking your head in the sand. Doing business in a orderly and legal manner is always perferable to hoping you won't get caught with your hand in the cookie jar.
When they have a hard time taking down the biggest criminals in the world. Sometimes their only options are to go after them through the IRS for unpaid taxes. Just saying. That's a very dangerous game.
You don't mention what country or state you are in? In the UK you would have to register as self employed (a 10 minute phone call) and therefore do a self assessment tax return even if you only take $1 a month income. That said, for some people it is beneficial to do self assessments anyway because of limitations of PAYE means people are frequently being overtaxed on their employee income and this gets identified and refunded through the SA process. As to "employing" content writers.... the legal ramifications depends on if you are actually hiring them (ie they will be employees) or if they are independents that your are commissioning work from. If it is the former then you must obtain Employers Liability insurance and register for PAYE with HMRC. If they are independents then you must ensure that they will be considered self employed by HMRC (their website gives some sample tests) otherwise despite the contracts stating they're self employed you'd be taxed as if they were employees and expected to have insurance. If they are legally considered independents then there are no legal ramifications for using 3rd parties, just put the monies paid to them on your expenses returns and if applicable on your VAT return.
Typically if you hire people for you and you acknowledge your income comes from self employment or the like, (as in, you are a sole trader,) then if these people are being paid wages you will be able to deduct that from your personal income tax. Speak to an accountant as they'll be able to give you details that apply to your location
You make income. You have to pay taxes. If you're not making a lot of money the taxes are low or even zero so why bother to hide the income? It's easy enough to claim the income.