When the YPN check is cashed what percentage do you save for taxes ?

I save 25% of every dollar I get, since it seems this is about how much federal taxes will want of it the next tax year.

Otherwise, inmagine if we made $20k or even $5k one year, then we lost our YPN account by the next tax time, and had no big income to pay our earnings, one could easily get into a heck of a mess, unless he saved a good percentage of every check recieved, for taxes.............

 

wow, i never know irs takes that much. 25%?

 

I've been putting aside about 40%. With my YPN earnings and my regular job, according to the IRS 2005 Tax Rate Schedules (http://www.irs.gov/formspubs/article/0,,id=133517,00.html), I'll be in one of the two highest income brackets this year which will be 33-35%. Also, you need to save for state taxes.. I put aside another 5% for this. You may also need to pay local income taxes, depending on where you live. This turns out to be a bit of an overestimate, since not all the money will be taxed at these rates (I think for me it will actually come out to ~32% after agi, deductions, and applying the correct rate to the different portions of my income).

A related question.. do we need to pay the self-employment tax on money earned though YPN, etc? The IRS page (http://www.irs.gov/businesses/small/article/0,,id=98846,00.html) on the topic isn't too helpful in figuring this out, and neither is their and neither is their Publication 533 - Self-Employment Tax (http://www.irs.gov/pub/irs-prior/p533--2004.pdf).

(sorry for the url's, can't hotlink yet..)

 

If you are running your own business, you will need to pay self-employment tax if you earn more than $400 - even if it only considered part-time and you have another job. The rate is 15.3% on the net amount up to $94,200. After that, you only pay $2.9% for the medicare portion.

How much you should set aside depends on the total amount of income and the State income tax rate (if any) where you reside. In California, you can wind up paying a combined total of about half your income in taxes if you fall into the highest bracket.

 

I take out about 20% at the moment, hopefully that will be enough

 

Also make sure to pay your taxes quaterly... other wise after the first year you will have to pay a penalty... the government always gets its money one way or another..

 

As someone stated earlier you must take into account your local, state and federal taxes. Saving 35 to 40% should cover this amount with no issues. Of course the percentage will fluctuate according to your deductions at the end of the year. Best to make sure you keep track of all your expenses so that you can deduct them. This includes anything related to the operation of your business. You can also deduct a percentage of your mortgage if you have an office set up in your home. Your best bet if you are a large publisher to talk to your accountant or if you do not have one then to find one. Tax laws are tricky and if you make a mistake it could potentially cost you thousands.

 

You are supposed to pre pay your taxes every quarter. If you let it sit in the bank all year and pay it all in April on the following year, you are going to get hit with penalties.

 

You need to prepay quarterly estimates, but they can be based on last years income. If you didn't have income last year, you won't get hit with a penalty for not making quarterly payments, or if you made $10K last year, you only need to make quarterly payments based on $10K even if you expect $100K this year.

 

This is correct they give you a break on your taxes for first year but afterwards you better pay quaterly!

 

If you have a "real" job where they automatically take taxes out for you -

Do you still need to pay quarterly?

Even if your automatic taxes are in overpayment to cover the tax from your self employment?

 

If your deductions from your regular job will cover your extra income, then you don't need to pre pay.

 

If you have paid enough taxes to cover your income, then you have nothing to worry about. If you made $20K last year, you are required to make estimated payments based on $20K. If you think that you aren't going to make $20K this year, and make quarterly payments of a smaller amount, and at the end of the year you wind up making more than you paid - then you will get a penalty.

So if you are going to pay LESS than you made last year, you had better be sure you didn't under estimate.

 

Best thing to do is talk with CPA which is what i will be doing. as i have a day job and i do the internet stuff and want to make sure i am covered tax wise and how much i need to pay quaterly etc... as others stated if you under pay by large amount you could receive a penalty.... to bad Uncle sam doesnt ahve to pay a penalty if we give him tooo much

 

where would I find information about doing the taxes? and sending it in? last year I just waited till april because I didn't know anything about taxes then. Now I want to pay all my taxes on time etc etc.

 

You should consult a CPA - especially if you are making a sizable amount of money. A CPA can show you ways to reduce your tax liability with certain write-offs, but all but retirement contributions need to be done before the end of the calendar year (April is too late). If you made X being self-employed and paid X in taxes, you are required to make quarterly payments equal to what you paid last year to avoid a penalty... i.e. if you paid $10,000 in Federal and State taxes last year, you should be making quarterly payments of at least $2,500 to avoid penalties.

 

damn that's a lot of freakin money...quick question all those come back right when you do your income tax? Or atleast some of it.

 

Not sure what you mean? You are required to make estimated payments equal to what you wound up paying last year. If you make more, you will still owe an additional amount (obviously) but if everything was the same, you wouldn't get anything back.

The Govermnent operates on the principal that if you paid X last year, you will pay the same this year - so your payments must equal the same as you paid last year. You are required to make quarterly installments to make sure you don't spend the money and not be able to pay what is owed at the end of the year. It is only a deposit, so if you made less or have more deductions, you could get some of it returned - just like you could pay more.

It's just like working for someone. You have estimated taxes taken out of every check - you don't get to pay at the end of the year. When you are self employed, instead of having the "estimated taxes" taken out weekly, they let you pay it quarterly. You cannot skip those quarterly estimates and pay at the end of the year without receiving a penalty. When you work for someone, they contribute half of you Social Security payment. When you are self-employed, you pay double (the half the employer would have paid, plus your half).

 

How does one define 'business' for tax purposes? IRS Publication 533, which among other things, 'defines' self-employment, is explicitly ambiguous on the subject:

The wording is very open-ended. Strictly, under this definition, I do not belive my activities are that of a business (though they contain, to some degree, 'important elements' of a business). I neither carry on this activity for a livlihood nor did/do I have a profit motive (I placed ads on my free service a while ago in order to support the rapidly growing server costs). However, there is absolutely no way, given their guidelines, I could prove that to the IRS, if they dispute my claim.

Is there some more precise IRS definition of a business that I'm missing?

 

If your only ads are to support your server costs, your website income should be anywhere from extremely small to taking a loss.

How is there no way to prove it to the IRS? You should keep a copy of all your expenses/revenue. You show them that the server cost you $10 a month, and you are making $10 a month on the banners. Thus you are not generating revenue, problem solved.

There is a minimum income level to pay taxes, I think its $500 or so (net income, combination of all sources of income).