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Making money how much would go to taxes?

by fromtheashesofthephoenix
17 replies
Okay so I have this plan of making around $700 a month article writing but I don't know how its going to be taxed. I want to make sure I do this right so I don't get in trouble for tax evasion.
How does that work?
#making #money #taxes
  • Profile picture of the author Gewdo
    There are a lot of unknown factors that go into play. First would be what country, state and tax bracket are you currently in? Also have you properly registered your corporation in your state or any state? There are some threads talking about states to register your company in to avoid state income tax.

    What it really boils down to is getting with a CPA, in your area, and discuss your whole picture. Tax or Legal advice on a forum is never recommended.

    I hope this helped in a round about way.
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  • Profile picture of the author Audrey Harvey
    Income is income, whether you earn it from article writing or from going to a job. It needs to be declared. Do as Gewdo suggested and get specific advice relating to your country from a professional.
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  • Profile picture of the author Alexa Smith
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    Originally Posted by fromtheashesofthephoenix View Post

    Okay so I have this plan of making around $700 a month article writing but I don't know how its going to be taxed.
    Just a question, but do you think it might help people to respond if either your post or your profile divulged your location, so that we'd know which country's tax laws and procedures you're asking about? :confused:
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    • Profile picture of the author OutOfThisWord
      If you are in the U.S., then working from your home and being self employed has all kinds of tax advantages...

      ...one being you can probably write off all of your expenses in computer equipment in 2011.

      I am not a tax expert, but I did pass out in the parking lot of a Holiday Inn Express last nite.
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      • Profile picture of the author packerfan
        Assuming your in the US, unless you're already making 100k+, you can pretty safely use 30% and likely be fine. There are a million factors that go into this, but remember you're not taxed on revenue, only profit. So things like hosting, advertising costs, office space, etc. can all be deducted. I'd say 30% would be a decent figure.
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        • Profile picture of the author donhx
          Originally Posted by packerfan View Post

          Assuming your in the US, unless you're already making 100k+, you can pretty safely use 30% and likely be fine. There are a million factors that go into this, but remember you're not taxed on revenue, only profit. So things like hosting, advertising costs, office space, etc. can all be deducted. I'd say 30% would be a decent figure.

          It looks like this....

          If your net income is from $8375 to $34,000 your Fed tax rate for 2010 is 15% (over $34,000 it jumps to 25%)

          Required Federal Self-Employment tax (Social Security) is 13.3 %

          Most State tax for this income range is about 5%. This varies by state and income.

          At that income level you are paying 33.3% in taxes. As a self-employed person, you should be paying your estimated tax on a quarterly basis so you owe little or nothing on April 15th. You are subject to a penalty if you don't do that. Quarterly estimated tax payments are to self-employed people like withholding tax is to those who work for someone else as an employee.
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          • Profile picture of the author fromtheashesofthephoenix
            Thank you Don! I can tell you put a lot of thought into your response. By the way I live in the U.S. so I should be taxed in a similar way.
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            • Profile picture of the author donhx
              Originally Posted by fromtheashesofthephoenix View Post

              Thank you Don! I can tell you put a lot of thought into your response. By the way I live in the U.S. so I should be taxed in a similar way.

              This information is actually stuff that anyone in business in the US knows. The tax rates change sometimes, but the process is the same and has been for 50 or more years.

              Good luck to you. Don't worry about tax evasion. Just pay your fair share and all will be well. If you can't pay all your taxes, ask for an extension (it's automatic by just filing a request form). Or even file all your documents without paying and ask for a payment plan, which they always grant. There is a penalty and interest, but you keep in the good graces of the IRS.

              Don't make the most common mistake... filing a Short Form (EZ) --which is only for those who have a 9 to 5 job--when you should be filing a Schedule C as a self-employed person. Some people do that to avoid paying the 13.3% Self-Employment Social Security Tax, but you only bring yourself grief if you do that.

              Your best bet is to get advice for a competent tax professional in your town.
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          • Profile picture of the author Scott Million
            Originally Posted by donhx View Post

            It looks like this....

            If your net income is from $8375 to $34,000 your Fed tax rate for 2010 is 15% (over $34,000 it jumps to 25%)

            Required Federal Self-Employment tax (Social Security) is 13.3 %

            Most State tax for this income range is about 5%. This varies by state and income.

            At that income level you are paying 33.3% in taxes. As a self-employed person, you should be paying your estimated tax on a quarterly basis so you owe little or nothing on April 15th. You are subject to a penalty if you don't do that. Quarterly estimated tax payments are to self-employed people like withholding tax is to those who work for someone else as an employee.
            Don't forget DIVIDENDS!!! If you open up an S-corp for example (what I have), you pay yourself a salary and the net after that is paid to you as dividends where all you pay (if you're in one of the 7 no state income tax states) is the federal - it's kind of sad that new businesses don't really get the benefit of this until the dough is rolling in, but once you get there you get to keep a lot more of your money.

            I am HORRIBLE with this stuff (why I have an accountant) - so get one! Also, you can start at your local S.C.O.R.E. which is free and ask to speak to an accountant there, tell them your situation, and see what they recommend. S.C.O.R.E. saved me a lot of money in the beginning and they are everywhere. They also have a list of recommended accountants on file.
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  • Profile picture of the author Headfirst
    First, find an accountant. Many are open to barter.

    That being said, I use a web based system called Outright(Outright.com) that connects to your bank accounts and automatically tracks income and expenses and also tells you your quarterly estimated taxes.

    It's one of the best pieces of software I've ever used for my business. I can't recommend it enough.

    I don't know if it works outside of the US though.
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  • Profile picture of the author donhx
    Originally Posted by fromtheashesofthephoenix View Post

    Okay so I have this plan of making around $700 a month article writing but I don't know how its going to be taxed. I want to make sure I do this right so I don't get in trouble for tax evasion.
    How does that work?

    It works like this if you are in the US:

    1. You have gross income (all the money you took in)

    2. You have certain fixed deductions (exemptions)... 1 for yourself, 1 each for wife and kids. There are other fixed deductions and you need to go to the IRS site or a tax preparer (HR Block, Hewitt, Liberty, etc) to see what they are.

    3. You will have business expenses - web hosting costs, office supplies, outsourcing fees, etc, which you can also deduct. If you get audited, you will need to produce proof you paid these amounts to others.

    Once you have taken all allowable deductions, you pay a percentage of this net amount as your tax.

    In addition to this Federal income tax, you will also have to pay the Federal self-employment tax. Also, most states have state income tax, and you need to pay that too. The rate varies depending on your income, but it will probably be around 30-50% pecent of your net (after all deductions) total for all 3 of these types of taxes.

    I notice you have asked other tax questions here before. The best place thing for you to do is to consult a bookkeeper, accountant or tax person in your town and that way you'll you'll get specific information that applies to you. Don't wait until April 15 to see one of these people... do it now.
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  • Profile picture of the author Randy J
    All you will have to do is declare it like you would with any 9 to 5 job...
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  • Profile picture of the author Chris The Traffic Blogger
    If this helps, I lost about 24% to taxes of my earnings. However, I also declared quite a bit, so I would say that the 30% rule is a good one to live by. Always have that 30% ready to be coughed up in April from the previous year. If you have anything to declare then it will lower how much you end up paying.
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  • Profile picture of the author jasonmark
    You can consult with tax expert
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