Question about write-offs. If run 3 sites that get paid...can I write off hosting costs, and servers etc? but don't you have to be a business to write this stuff? You can't just be a some punk kid like me...and try to write-off a new computer or hosting needs? But yea...it's that time of the year...and I like 5 thousands or something last year...I want to be able to write off my server costs...is that possible without being a business?
I'm sure you are not some "punk kid," I bet you're a smart young business person. Every country, place is different I guess, but generally speaking... "What" are going to write the expenses OFF against? The concept of a write-off is to reduce your "taxable income/revenue." That is what businesses do... as much as possible. Example: if you had $3,000 in revenue in 2005, and you can find $3,000 in expenses (related) for 2005, then your TAX BURDEN is ZERO. But, if you "don't have" any revenue, then you can't write anything OFF against it. Does that make sense? IMHO of course. Mike Canada
If you're getting paid taxable money (*just about everything) you, as a sole-proprietor, can write off anything that is a business expense. You might not think of it as one, but anything you're making money is technically a "business"- even if its fun
Okay...that was confusing a little. So since I made 5k last year...I have to find 5k in expenses to match it off? So if I had $600 in expense...does that mean I have to paid 4700 in taxes? Or 33% or something like that? And i don't have to be a business? Or have like a license or something?
If you made $5000 and had $600 in total business expenses, you'd pay taxes on $4400--- if that is all you made last year, you won't likely be paying any taxes..
Taxes in Canada and the US are tiered (and probably in othe countries as well). So you'd say you made $5000. You 'wrote off' $1000 in expenses (if you drove anywhere for the business make sure you track your mileage as well). The remaining $4000 would be taxable income. Now the government steps in and says something like: The first $0-$6000 you earned, not taxable. From $7k to 15K, taxable at 15% From 15K to 45K, taxable at 20% and so on (completely made up numbers) As noted above, your income is so low that it's unlikely you'll have to pay any taxes.
Oh I see...yea I made around 5k on my websites...from google adsense. cool...if I don't have to pay that much taxes then I'm good...got to save up for college.
You can definately have more in expenses that in profit, you just post a loss for the year. You do it more than a few years in a row and the IRS will likely start to question your ability to legitimately deduct those items. I'd talk to a qualified tax professional, even if it is just HR Block. Spending a couple hundred now can save you several thousand + jail time down the road. I should also add that just because you likely don't owe any money for taxes doesn't mean you won't need to file a tax return. Another reason to talk to a professional.
Im in a similar situation (im guessing your in britain right?). I made a similar amount and spent it on link building, buying websites, basically expaning my business. So my profit for this year is about 50 GBP And you only need to pay tax on anything above 4500GBP, so im ok. Make sure you right off enough to get you to 4500 profit, and then you dont have to pay any taxes.
Actually I live in the U.S. Thanks for the advice. I'm still confuse on one part though. Do I have to be a business to write stuff off? I don't want to go to jail for not paying my taxes or be fined and penalize. yea I need to go to hr and block.
No, you don't have to be a business and you can deduct even if it eventually means you lose money <g>. However I would work with a professional. I've been making a side income for many years before internet biz (freelance writing) and I pretty much carry on the same basic write offs -- office supplies, services, goods, publications, advertising, etc. that go toward supporting and promoting and basically making my work possible. Some years I operate at a loss and some years I make money but I feel better having someone who knows the code file for me (although I do a good amount of prep work -- don't just bring in a shoebox of receipts) and even better knowing there is someone I can turn to if the evil audit does arrive. In your particular case you probably won't have to pay anything however that doesn't mean the same thing as not filing but I am most definitely not an expert!
No. Don’t worry...they would garnish your wages before sending you to jail. But like the others have stated previously, you probably will not owe much of anything, if anything at all.
Yes, I would definitely talk to a Account/Tax Professional. i just started with websites/earning ad revenue this year, but before I have to pay taxes next year i'll definitely talk to a tax person. This business is a little more complicated than just a "normal" job....So talk to a pro.
If I can add a little something to this - the US has this thing called self-employment taxes. This tax is due on net earnings in a sole proprietorship or partnership in excess of $400. It's 15.3%, with half of that deductible for Adjusted Gross Income. This tax is in addition to any income taxes. If you earned $5,000 with deductions of $600, you may owe taxes if your self-employment taxes are not offset by an Earned Income Credit (available to taxpayers with children or those between the ages of 25 and 65 without children). Earning money can be a painful thing come tax time - I strongly recommend a consultation with a tax professional as a minimum.