Hi, first off, I live in the USA. It's about time for filing taxes now, and my biggest concern is Paypal. How exactly do you all pay taxes for paypal? I cannot even get my stats past 3 months so I am not sure what to do. I have received a decent amount of money selling links, but I have spent more than 4x on advertising costs from my Paypal than I have actually received into it. How do you guys file taxes when it comes to Paypal?
If you are running your own business, you should be keeping records of what you spend and what your income is.....whether or not you can document it through paypal is a totally different story...would be nice if you could but even if you can't, you should be keeping records and receipts as you go along If your paypal money is also coming from affiliate sales then you don't have to worry about that unless you've earned over $600 from one source in which case you will probably get a 1099-MISC from the affiliate network
I'm not familiar with this type of thing with PayPal. I would like to know this as well, although when the time comes I will be keeping track of my revenue via a separate source. This way my butt is covered in more than one way.
If all of your revenue is coming from AM, and you have submitted your tax ID when you signed up, you will get a 1099-MISC if you made over $600 because the earnings will be reported to the IRS. If your paypal money is coming from your own sales (for instance, my daughter has a shopping cart website selling her product) then you need to keep your own records of income and expenses.
In the US, all earnings are reportable. If you earn over $600 you will get a 1099, but just because you don't get a 1099 it doesn't mean that you are not required to report your income. Also it is your responsibility to track all your income and expenses. Then, for most people in the US, you will need to file a long form (1040) and include Schedules C and SE. On Schedule C your report all your income and expenses. You will either have a profit or a loss. If you have a loss you can use that to reduce your other taxable income. In general, if you have any freelance, or self employment income it is a good idea to hire a professional, or at the very least, do a lot of research so you fill out the forms properly, and so that you take all the deductions you are entitled to. The IRS actually has some free online classes that will teach you what you need to know. You can find out more about that at My CFO on the Go.
I would HIGHLY recommend to hire a professional tax preparer. I did last year, BEST IDEA EVER! Right now, self employment taxes are extremely high. They are around 22% on me. Make sure you note every expense. Your accountant will help you decide whether it is a true expense in the IRS's eyes. If you have enough expenses, it can really help your bottom line.