I know you have to pay taxes on your adsense income. 1. From what I have read you must file a Schedule C and also a Schedule SE, is this correct? 2. Of course you can deduct your expenses, I have seen sites that say you can deduct a portion of your Internet/DSL bill, can you only deduct part of the cost or can you deduct the whole thing, and if it is only a portion how is the percentage determined. 3. Are there any free online tax programs that allow you to file the Schedule C an SE? Any other tips are also appreciated. Thanks
Your internet DSL bill would be a very limited deduction subject to a business use %. Example: How many hours are you managing your site out of the 365 days you paid the bill and do you have written logs to prove it? Not worth the risk in my mind. Same rules apply to home office and computer. Your site hosting fees and site advertising expenses should be a legit deduction in full if the only reason you have the site is to make money.
You are either a business or you are not. If you are a business you can deduct your expenses associated with your business and that includes internet access. And if you are a business and you file a Schedule C you had better pay your Social Security and FICA taxes on that income (15.3%). Welcome to the REAL WORLD.