i'm a full time college student and i was wondering what i needed to know about the taxes i need to pay from the money i make online. do i have to pay tax on it? are there different requirements? anybody knowledgeable on the matter?
Yes, you have to pay. As long as you make more than $600 a year in one company like Google Adsense or other like this they will send you 1099 Form at the last week of January. Of course you have to file it during tax time.
And even if you don't get a 1099 from a specific company, you still have to declare the income and pay any self-employment and income taxes. Go to www.irs.gov and search for information on self-employed individuals, and then look into your state's rules as well.
Yes it goes for eBay also. In the US you have to report all income. Whether or not you will owe tax depends on how much you made. Life Rule #4: Do not mess with the IRS.
your info on the self-emplyment tax is a little misleading...not all of us are self employed and yeah, doesn't matter what it is...ebay, google, yard sale, baby sitting...whatever...if you make more than $600 you have to declare it...
They asked about the money they're making online. It's extremely unlikely that they wouldn't be subjected to self-employment tax given the information the OP presented. Not many people making their money online are legally employees in the eyes of the IRS. At the same time, many of them make the mistake of thinking they're an employee (because they have a regular writing gig or something along those lines - although long-term or regular gigs don't mean you're an employee) without understanding the legal differences between a client and an employer and how it affects the taxes they owe. I didn't say that everyone here was self-employed. But the vast majority are, and my answers are going to be tailored to the bulk of readers; not the exceptions to the rule.
well in that case ...lol My perspective is on the other side (i'm fully employed so i've never had to worry about the self-employment tax)
Things can get very complicated for the self-employed, depending upon which state you live in. Rhode Island, for example, has unique taxes on the self-employed (beyond the obvious income taxes) that you would not know about unless you consult with an accountant or tax attorney. Likewise, if you register as a business in many states, they have minimum corporate taxes that you must pay every year whether or not you meet the threshhold income. Once you get your first inquiry or audit from a tax authority (federal, state, or local), you will realize why Yankee's Rule #4 should probably move up in ranking to Rule #1. The bottomline: if you start making any kind of serious money, talk at least once to an expert about taxes, licensing fees, sales taxes, etc. It will save yo much heartache and grief down the line.
you definitely have to pay income taxes on your online revenue.. count on around 40% of income to be paid in taxes.. it may be less.. but it is better to set money aside
It could be either, or a variety of other amounts. It's dependent on how much you earn and what tax bracket it puts you in.
Sheesh, 40% is really pushing it! That's almost half of your income. I don't mean to sound cliche by bashing taxes, but that would be ridiculously high. I really need to go see an accountant, lol.
40% definitely isn't an unreasonable assumption (especially for those paying self-employment tax on top of the income tax), so yeah... the government definitely takes a nice chunk of change.
That's quite possibly the worst advice I've ever seen given here. You must report all income. $20k is no limit in any way. Even if you don't owe taxes, you need to be reporting it.
Exactly. If you hold a full time gig elsewhere, and online income is something on the side (like many) then you will not fall under self employment, and quarterlies, etc.
That's not true either. You pay self-employment tax on any of that income you make outside of your full-time job as long as you meet the minimum the IRS sets). If your self-employment results in losses, it can be used to offset income from your full-time job. You guys are really giving terrible tax advice here. If you earn ANY income (online or not) that isn't coming from a true employer (based on the IRS' definition of an employer vs a client - basically if you're not getting a W-2 and they're not paying employment taxes on you, you're not an employee legally), you MUST report all of that income as self-employed income. You'll pay income tax on your regular job earnings AS WELL AS your self-employed earnings, and your SE earnings will also be subjected to the self employment tax (medicade and social security, where you pay both halves, since there's no employer paying the other half as there would be in your normal job). You'll pay these taxes if you earn more than a few hundred in the entire year. Long story short, everything you earn needs to be reported, whether you expect to have to pay taxes or not. Once you get past the few exceptions, you'll also have to pay estimated taxes throughout the year, even if your business is only part-time (and running a website or business where you're earning money also falls under that category).