An interesting observation about taxes - New people will want to read this, too!

by Michael Oksa

Posted: 14 years ago 18 replies

INTERNET MARKETING

So, I just finished up my tax info for 2009 so I can take it to the accountant today.

While looking over my records for the previous year something jumped out at me.

Once I saw the correlation, it made perfect sense, and it won't come as a surprise to many of you here. So, what was it?

Simply this: The months that I made the most money were also the same months where more of my budget went to advertising. If I were to chart my income and advertising, they would follow the same track.

I wanted to mention this, especially for people newer to internet marketing because it's important to know that running a profitable business isn't free.

Also, in the spirit of full disclosure, I will tell you exactly how much I spent on advertising. Ready?

I spent $0. That's right, I didn't spend anything. How is that possible? It's because I consider it an investment. When you spend, your money is gone, when you invest, you get more back than you shelled out.

Invest wisely in your business and you will see your returns increase. Sometimes the correlation is downright amazing!

All the best,
Michael

#interesting #observation #people #read #taxes

JayXtreme 14 years ago

So true...

Nothing more to add. It is exactly like that in every area of my business.

Jay
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- Adam Nolan 14 years ago
  
  That's why i'm in the business I love it when my clients come back to me thanking me... feels great.
  
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jennypitts 14 years ago

I have to agree. I too have made the most money when I spent the most on advertisement. There is no doubt that in order to be successful with ANY business, online or OFF, one must spend a good chunk of the budget in Promotion.
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- Tina Golden 14 years ago
  
  Although I didn't spend a lot on advertising this year, I have to say that the same thing happened for me. My highest earning months were the months that I advertised the most.
  
  And I get what you're saying about advertising being an investment, but I'm still happy that the IRS lets me count it as an expense...lol.
  
  Tina
  
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  Paul Hancox 14 years ago
  
  Originally Posted by TMG Enterprises
  
  And I get what you're saying about advertising being an investment, but I'm still happy that the IRS lets me count it as an expense...lol.
  
  Why wouldn't they, Tina? It IS an expense
  
  Michael, I agree with you 100%. I think the problem for a lot of newbies is they don't have an advertising budget AT ALL.
  
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Ken Leatherman 14 years ago

Well let's see if I can throw a little bit of a new look at this. I'm advertising each and every time I run a WSO here on the WF. My accountant tells me the $20.00 fee I pay is indeed an advertising expense. Because it's how I get a lot of my customers. (Check with your own accountant, as I'm not giving any tax advice, nor should you consider this as tax advice; with my comment)

Do I consider the advertising of my business with a WSO and Investment? Oh my gosh yes. Why? Very simply put the proof is in the pudding. The very first WSO I offered was the catalyst to my successful online present day business.

In fact the first 3 or 4 WSO's I offered, I put all the income and my time back into writing another WSO and running it. Then my wife told me I had to give her some money or she was going to invest in getting 2 guys from Sicily (Vinny and Veto, fondly known as the "Knee Breaking Twins", to get the money for her. Needless to say...

Now each time I advertised (WSO), my income grew and my dedication to taking action grew. Again my time was time well invested. Every dollar I made became a motivating factor for me to continue to take action.

What I'm trying to say is boys and girls advertising works and it is an investment into your business. It is an essential tool and without it you won't have any income to report to the IRS. That's my story and I'm sticking with it. :p

Ken Leatherman

The Old Geezer
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- ronr 14 years ago
  
  Michael-did you get the PM I sent you the other day about Pro Hot List?
  
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R Hagel 14 years ago

Good point about how income rises with advertising.

However, I think there are a few folks reading your post, scratching their heads and thinking, "What? You have to report online money as income... and pay taxes on it?"
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Ken Leatherman 14 years ago

Becky,

I think you are right about those scratching their head and saying, "I have to report my online income and pay taxes?".

Another little thing those of in the U.S. have to be concerned about is issuing a 1099 to those who have done work for us. In particular to those we have paid more than $600.00 to over the year.

Once again boys and girls consult with your accountant or at least your tax preparer. I'm not giving tax advice, just a few little suggestion which may save you some big time headaches and a whole bunch of money.

Ken
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Miguel Oliveira 14 years ago

You got me wondering for a moment there when you said you spent $0 on advertising.

Completely agree with you - no advertisement equals no profit in my experience. And, as Ken points out, advertising comes in many forms other than ads.
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TelegramSam 14 years ago

To clarify, advertising is a waste of money unless it leads you towards better results..

"Good advertising" that gets results is what you are aiming for.

I suppose even bad advertising is worth something, in that at least you learned something by your test.

You can lose a cr*p load of money on poor advertising, or if you learn copywriting or hire someone effective, than you can make a fortune and really ramp up your expansion.

Sam
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- Tina Golden 14 years ago
  
  However, I think there are a few folks reading your post, scratching their heads and thinking, "What? You have to report online money as income... and pay taxes on it?"
  
  Becky, I said something very similar to Michael earlier...lol.
  
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Maddi

14 years ago

Excellent thread and awesome advise.

Though my advertising didn't return ROI and was actually a loss and not a profit in my starting days but that still was investment nonetheless as I learned many valuable lessons.

Cheers guys

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Black Hat Cat

Banned 14 years ago

Originally Posted by Maddi

No no.....since you lost money, it wasn't an investment. You were just spending money.

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Michael Oksa 14 years ago

Originally Posted by Black Hat Cat

No no.....since you lost money, it wasn't an investment. You were just spending money.

Then let's say it was an educational investment, shall we?

~Michael
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Michael Oksa 14 years ago

Warriors rock! A lot of excellent responses here.

I think it's worth highlighting that the money you earn online IS taxable income and needs to be reported as such.

It's not that complicated to keep track of income and expenses. You can do your taxes yourself, if you are comfortable with them, or hire an accountant. Don't worry, they are not that expensive for what they do. And, again, this is part of treating it like a real business (assuming you want real income).

All the best,
Michael
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Branlan17 14 years ago

I bit the bullet and picked up Aweber, EZA Premium, AND the pro version of the web editor I use this month.... *Crosses Fingers* Time to get to work!
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An interesting observation about taxes - New people will want to read this, too!

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