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How do I make my "employees" pay their own taxes?

by oldwarrioruser1
8 replies
A few questions:

I'm starting a website with several entertainment sources.

-Humor
-Music
-Short Films
-etc.

I'm going to be making money from advertisements, our online store, etc.

All that money is going to be going into my company bank account. (I opened a bank account for just this business, good idea?)

I have people who are going to submit their own content to my website and I have a system to calculate how much they are going to get paid based on their contribution.

So I have a few questions:

1. Technically all the money is mine, but I was going to keep a certain percent of the money in the bank(to reinvest into the business) and cut myself a percentage. Would I have to pay taxes on the percent I cut myself and the money I keep for the business? Could I pay them together as one lump sum?

2. What papers do I need my "employees" to sign to show that I give them $xxx amount each week and they are responsible to pay their own taxes?

Is there anything else I should probably know when it comes to these things?
#employees #make #pay #taxes
  • Profile picture of the author Quentin
    The best thing is to see a good accountant who understands the online market. In then end they will save you a lot of time and money and help you set these things up properly.

    Also these things differ from state to state and country to country so you will need to know what applies to your area.

    I did this a number of years ago and it has helped my business because as it has grown I have been able to change the different things I do with just a phone call to my accountant who knows my business well and has grown with me.

    Que
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  • Profile picture of the author Chris Grable
    Kory,

    Sorry... bad news here.

    Question 1) The simplest answer is that you pay taxes on ALL income.... after deductions, of course.


    Question 2) If they are your employees... you MUST collect and remit state/local/federal income tax as well as social security and medicare. You are also responisible for matching their social security and medicare contribution (6.2% + 1.45%). The only way around that is to treat them as independent contractors and 1099 them. Still, depending on the situation... that might not be possible.

    EDIT: There is a very good book that explains many of the basics..... "Tax Loopholes For eBay Sellers" by Kennedy and Elms. Yes, I know that you are not talking about an eBay business but the basics are the basics. After reading the book.... follow Quentin's advice and find a CPA.
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  • Profile picture of the author ArticlePrince
    It doesn't matter where you put the income, you'll pay taxes on it. Even if you put it into an IRA, your website will have to pay taxes on the original income. Structuring employee taxes gets complicated through different states and countries (as yours probably are), so just print off your financials and see an accountant. Much easier than trying to figure it out on your own
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  • Profile picture of the author Alan Petersen
    Hire an accountant! Sounds like they're independent contractors not employees. Big difference when it comes to taxes.
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    • Profile picture of the author Lloyd Buchinski
      Originally Posted by Alan Petersen View Post

      Sounds like they're independent contractors not employees.
      That's the main thing. You don't have to handle the tedious tax details if they are contractors.

      If you pay them per job as contractors they are responsible for all the taxes after that. This includes reporting (or not) their income.
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      • Profile picture of the author bretski
        A good accountant is worth his or her weight in gold...plus they're tax deductible!!!!

        Chances are you will 1099 them since you are not providing anything for them as far as a building to work in, electric etc.

        You should also talk to your accountant about corporate structure since there ARE ways that you can avoid paying more taxes than you need to and many benefits that you might be able to leverage.

        BTW, there are ways to offset paying taxes on income and a good financial planner would be able to tell you about Roth IRA's and the benefits to both you and your heirs. Again, another great person to have on your team.
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      • Profile picture of the author Dan C. Rinnert
        Originally Posted by Lloyd Buchinski View Post

        That's the main thing. You don't have to handle the tedious tax details if they are contractors.

        If you pay them per job as contractors they are responsible for all the taxes after that. This includes reporting (or not) their income.
        In the U.S., if you pay a contractor more than $600 in a year, you have to file the proper forms with both the IRS and the contractor. So, there are still some "tedious tax details" to be taken care of.
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  • Profile picture of the author oldwarrioruser1
    Sweet, I'll contact an accountant!

    Thx guys!
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