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

The good faith refers to people who claim they are operating a business and deducting expenses to offset other income. You can't take deductions unless there is an intent to make money i.e. you claim you are trying to make money with adsense and deduct your computer, home office, car, etc., but your site takes in $5.00 the entire year and you did nothing to promote it. It wasn't really being operated to make a profit - just a scheme to deduct equipment expenses that you really purchased for personal use. While there could be some grey area here, they are talking about offsetting taxes with purchases for something that wasn't really a true business. This deals with net losses only.

If you are taking in more revenue than your expenses, it is something that potentially needs to have taxes paid on it (assuming we're talking about more than a few hundred dollars per year). It doesn't matter if you were trying to make a profit or not if you are talking about a net gain. If your advertising income only equals your server costs, then you don't have a net profit to pay any taxes on. If your advertising income exceeds your costs by a thousand dollars, then you have a net profit which would be subject to taxes - depending on your total income from all sources.

 

Right. The income will of course need to be reported, regardless. The issue is whether it needs to be reported on a Schedule C and subjected to the employer's half of the social security and medicare taxes that come with 'self-employment'.

It seems like you're saying that if revenue exceeds costs (so there is a net profit) by more than a few hundred dollars, then the IRS will consider the activity as a 'business' and it will be subject to the additional 'self-employment' taxes?