Does anyone here pay taxes on their affiliate sales? If so how do you calculate what you pay? and what percentage of your sales do you end up paying? Would anyone recommend a good paying taxes for dummies book? I know its 1099 but that is it.
I pay tax on anything coming into my bank account. Our Inland Revenue can access your bank statements and question you about them. I have a friend who receives some payments by neteller, epassporte etc who believes that these accounts are not visible to the Inland Revenue.
You pay taxes exactly the same as if the money we from a job, except you also pay Self Employment taxes, and I think 100% medi-scare and Social Security. And you pay quarterly, or you could get fined. Get TurboTax next year. Oh, luckly you get to deduct business costs!
You're supposed to pay taxes on any income generated. You can search googlet for the IRS website. They have all types of info and forms on there. Look under Small Business/Business taxes. The easiest way to go (in my opinion) is file a 1040 and then a schedule C as a sole proprietor. You can still use your social security number that way, AND you can deduct any related expenses. You should check to see if you need to pre-pay estimated self employment tax. That's usually paid quarterly or monthly, the year prior to when your taxes would be due. It depends on how much revenue you're generating. I'm no accountant or close to be an expert on this so PLEASE go do some research. All the info you need is online. If you are married or have lots of income, or other investments then I would definitely pay an accountant to advise you on the best course of action. There are lots of deductions available but there are some specific rules and abusing them throws up red flags for audits.
LOL http://www.irs.gov/ No need to search Google for it. Just adding a .gov to most Government names will get you to that names site!
After a few correspondances with the IRS, they suggested the following formula/steps to properly paying taxes. 1. Separate the money into two piles, 30% and 70%. 2. Package up the 30% send that to the IRS ASAP. 3. Package up the 70% send that to the IRS the next day. Wow, simple formula. But seriously.... since you mentioned 1099 I'm guessing you are operating as self-employed. You should be paying quarterly taxes, this way you have 90% of your annual tax obligations in by the end of the fiscal year, or risk extra fees. I would suggest you start tracking everything, I've been using QuickBooks for my businesses for years(I only have corporations), and it does a great job with report generation, and asset tracking. With a company, I find myself only filing taxes annually with companies with zero payroll, and quarterly with companies with payroll obligations. Now I wrote not as a DIY, just an example how complex taxes can be, and how your situation can be very different from others, this is where the only real advice I can give you is get an account. Now some people are scared off by having to spend money, but an accountant's fee's are typically 100% deductible, and really can help. Peace of mind, and only paying the taxes you are legally required to pay. later, tom <= not a lawyer, not an accountant
Yes you need to pay taxes on all income earned, by law. Anyone who pays you over 600 per year is supposed to send you a 1099. Depending on how much you are making I would recommend an accountant too - that is, if it's a significant amount. The self employment taxes can eat up a LOT! You know, the more you make, the more you pay! And like Tom said accounting or tax prep is a write-off. Those of us that work from home on the net don't typically have many write-offs so if you are making lots of money, you need all the write-offs you can get. Keep track of office supplies, software, ad costs, hosting, ISP and everything that you need to do affiliate marketing. It's all deductable. So if you are making over 100K or so you may want to consider an Scorp. I'm paying several thousand per qtr in taxes and REALLY need to inc. just have not had time to deal with it. I think my accountant told me last year that if I had an Scorp it would have saved me 12K in self employment taxes alone. Really dumb I have not done it yet. Really need to pay quarterly so you don't end up with penalties and interest and having to pay in one ig chunk. Qtly payments make it a little easier to swallow.
I believe by law you are required to report ALL income - even if under 600. It's just that the company does not need to send you a 1099 unless you make more than 600.
Just want to point out something I've observed, if you go with a corp (even an S), any money you put in your pocket must first come as a paid wage. So you will need to setup unemployment taxes as well. So, seek advice of a professional tax adviser, they might recommend you go LLC, or just SP first. hth, tom
That's not true. Income passes through in a S corp, but doesn't have to paid as a wage. A C corp can also pay dividends which are exempt from payroll taxes. A person can also expense up to $105K in 2005 for equipment - so if you buy a work computer for $3,000 you can use it to offset $3,000 in income. You can even deduct expenses for a home office (including depreciating a proportional amount of the leasehold improvements) in certain situations or the purchase of a work vehicle, etc. Any money you receive, regardless of the individual amount per affiliate is subject to income taxes.
My source of information is my Accountant, a CPA, since I can not paste her here I'll post what others have taken the time to post. G Search #1: s corp employment taxes http://www.thinkinglike.com/S-Corporation/John-Edwards-Saved-With-S-Corporation.html Quote: "But, the law requires that S-corporation owners pay themselves a reasonable salary for the work they do." So you have to pay yourself something as a wage before you distribute dividends. G search #2 s corp must pay officers wages http://taxes.about.com/od/taxplanning/a/scorp_assets_3.htm Quote: IRS has said over and over again that officers of the corporation must receive wages If you are running an S corp and distributing dividends without paying one of your officers a reasonable wage, be prepared to have to explain why you don't need to pay back taxes, fines, and administration fees. Now I'm not an accountant, nor a lawyer, just a duel business owner of two corporations oldest from 2000. Seek professional help. later, tom
That information is correct. In your first post you said "any money" and that is part that wasn't true. A reasonable salary must be paid if you actually do work, but that amount isn't clearly defined by the IRS. As far as requiring Officers to receive a salary, Steve Jobs was paying himself a salary of $1 a year for running the billion dollar Apple Corporation. If you had a corporation making $200,000 yr. a much smaller amount, say $20,000 (depending on the amount of work you actually do) might be paid as a salary and the rest passes through without payroll taxes - which could result in a substantial savings. If you were merely a partner/investor, or all work was subcontacted out, a salary might not be required at all. Dividends paid by a corporation are never subject to payroll taxes. A CPA who knows your exact situation is always the best person to consult.
"any money you put in your pocket must first come as a paid wage" Now I do not know the amount, or percentage, and my Accountant refuses to play these games so I've spoken to other corp owners. It is suggested from THEIR experiences, if you want to put a buck in your pocket, the first 60 cents needs to be through payroll, a wage. Then the last 40 cents can be through dividends. Now on a similar light, some people I know ran c-corps and bypassed double taxation by paying themselves 99.9999% of the company's profits as a wage. That way they don't have to elect a Sub-chapter S to avoid double taxation, aren't limited by the S status, and they only have to pay employment taxes on the first ~$90k/year. But then they were making bookoo bucks, and saw no real personal savings doing an S-corp. So, I'm not saying what percentage I use, but the idea of a 60/40 wage/div split seems to be general accepted by other small business owners I've run into, but the real litmus test would be an audit, and I'll try to avoid those. Now to get this back on topic, probably too late, YoungSmeagol: I've found small business for dummies informative and entertaining years ago, but for the cost of a few hundred bucks/year, you need an accountant. later, tom
There is no percentage rule of thumb. I've had pass thru's of $200,000 with $10,000 in salary as the amount of involvement was very limited. This was done with PriceWaterhouseCoopers auditing the financials. The test comes down to paying yourself a fair market salary for the work done. If your work involvement is 10 hours a month, you will have less required salary than if you worked 40 hours a week. The profit the business makes doesn't determine what you need to pay yourself. If you design a website that winds up making $200,000 a year, you don't have to pay yourself $150,000 salary if you could have hired someone to do it for $5,000 - i.e the "market value" of the work.