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Basic tax question

by wAvision
11 replies
Just making figures up here, but lets say I made 23k, but spent 15k to earn that.


For example, paid traffic, seo, services, programmer etc.....


Do I have to pay taxes on the whole 23k, or pay taxes on less the expenses, which would be 8k?


Thanks
#basic #question #tax
  • Profile picture of the author Rose Anderson
    You can deduct the expenses when you file the tax forms. Make sure you've kept every receipt.

    But it's always best to talk to a professional when dealing with taxes.

    Rose
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  • Profile picture of the author nicheblogger75
    Originally Posted by wAvision View Post

    Just making figures up here, but lets say I made 23k, but spent 15k to earn that.


    For example, paid traffic, seo, services, programmer etc.....


    Do I have to pay taxes on the whole 23k, or pay taxes on less the expenses, which would be 8k?


    Thanks
    I would definitely consult a tax professional on that. You really don't want to be making decisions about your income taxes based on advice you get from a forum.

    Now, my personal opinion is that those are business expenses and would be considered exempt, but I know NOTHING about how to do taxes.

    Every year I buy a folder with a few different pockets inside and I put all of my tax statements (papers that have a "W" something on top) in one, receipts in the other, and misc. stuff in another. Then I take the folder (which is quite heavy and loaded with hundreds of papers by then) to my accountant and dump it on his desk, pay him, and leave. He's an accountant and he knows how to do my taxes. I'm an Internet Marketer and I know how to do that.
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  • Profile picture of the author rjd1265
    Depends on location but in Wisconsin, I pay tax on the net profit so in your case that would be the $8,000.

    Anytime i buy a service or pay for PPC, Facebook ads and shit like that I pay through PayPal so all i do is print that off and give it to my accountant. done! all receipts in one place. no file folders. i am 100% paperless
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  • Profile picture of the author nthock
    I was once a tax professional. Though every country and every states have different tax rules, but the basic principles are the same.

    You can get the expenses (15K in your example) deducted. This means you will only be taxed on the remaining 8K, which is your profit.

    That's being said, there are some exceptions. Not every expenses you made can be deductible. Also, certain expenses can be deducted twice, at least in my country. So at the end of the day, your taxable profit (profits that is subjected to the tax) is going to be different from the 8K.
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  • Profile picture of the author wAvision
    Thanks for the info... what about internet as an expense?

    Can that usually be deducted in your experiences?

    I am going to meet with an accountant, but just thought I would get some input here as well....
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    • Profile picture of the author GlobalTrader
      You asked about your Internet as an expense and that you are going to an accountant - take the receipts for your Internet service with you and let him/her decide based on the questions they will ask you about your business. You should take ALL receipts you are unsure of and let the accountant decide if they are deductible for both federal and state taxes.
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      GlobalTrader

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      • Profile picture of the author JohnMcCabe
        Here's a freebie...

        Go to the irs.gov website and download the information booklet for filling out Shedule C. I'm assuming you are operating as a sole proprietor.

        You might also want to spend some time exploring the other information. Uncharacteristically, the IRS is quite helpful in this area.

        As far as deducting Internet access, my own layman's reading of the law says that you can deduct that portion of your Internet access used for business purposes. Let's say that your only Internet use was 50% watching YouTube videos that are business related and 50% watching WWE videos. You should be able to deduct half of your Internet access fees. Lots of stuff you can deduct a portion of if you can document it.
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        • Profile picture of the author Jill Carpenter
          Originally Posted by wAvision View Post

          Thanks for the info... what about internet as an expense?

          Can that usually be deducted in your experiences?

          I am going to meet with an accountant, but just thought I would get some input here as well....
          Accountant = Good move.

          So typically if you are working from home, you want to collect some additional things that may qualify as deductibles (let the accountant clarify for you).

          Things I include are things like a portion of my rent - cause yes, it is office area. My original accountant actually came to my apartment at the time and determined 40% of my studio was actual "office" lol, which it was.
          Internet
          Part of phone bill
          Part of electric bill
          Car/gas for when I go to see clients - (I can include things like lunch too)

          I'm about to buy a new phone, I can deduct that.

          But be aware, another requirement in getting some of those deductions (like for a computer for example) is that the equipment (for one state I live in) needs to be logged and taxes have to be paid on use of that equipment in that state. This applied to my video and computer stuff at the time.

          My advice, save receipts for EVERYTHING that relates to you actually being able to perform business, and go have a sit down with the accountant to get the full story of where you should be signed up for things.
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    • Profile picture of the author RhysEvans
      Originally Posted by wAvision View Post

      Thanks for the info... what about internet as an expense?

      Can that usually be deducted in your experiences?

      I am going to meet with an accountant, but just thought I would get some input here as well....
      Anything required to run your business is a taxable deduction. Internet, cellphone, new laptop, adwords, facebook, software, tools, travel to conferences, hotels at conferences, entertainment (50% deductible 100% for work trips etc). If you can justify it then it's fine - if you can't then use your personal funds.
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  • Profile picture of the author Cosmit
    Originally Posted by wAvision View Post

    Just making figures up here, but lets say I made 23k, but spent 15k to earn that.


    For example, paid traffic, seo, services, programmer etc.....


    Do I have to pay taxes on the whole 23k, or pay taxes on less the expenses, which would be 8k?


    Thanks
    let me ask you this. if i make $250k, but i spend $245k, lowest tax rate would be somewhere around $30k. does this mean i owe the government $30k when i only profited $5k?

    taxed income = gross income - expenses
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  • Profile picture of the author nicheblogger75
    You really do need an accountant. If u have a decent one they can show u haow tomsave a lot of money. For instance, last year I found out I'm able to deduct some of my rent because I have a home office and that room is used for my business so I am able to deduct that. The formula used is beyond me, but I know that by paying an accountant I'm saving lots of money and also the piece of mind of knowing that your taxes are done by a professional is priceless IMO.
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