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TAX, TAX, TAX!!!

by BTSands
21 replies
With all the money that is being made on the internet the government obviously wants a portion of this too. Fair enough. Taxes have to be paid to benefit THE PEOPLE.
BUT.... how much/little do you pay? (I dont want actual figures) Do you pay your tax through a registered company name? (Is this THE best option?) Do you MINIMIZE the tax you pay by using legal loophole methods? (What are these methods?) Or do you just not pay tax at all on your IM income? (Is there a legal way to do this?)
Of course, this will change from country to country (I'm hoping some Aussies can help out here) so please put your comments/advice here.....

Cheers!
#minimize #tax #tax advice #tax laws
  • Profile picture of the author shaggard
    Personally, I minimize my taxes with all the legal ways possible. I pay Federal taxes like I am required on my IM work which is pretty much necessary since everyone sends me a 1099-MISC.

    My cousin didnt think it was necessary until the IRS froze his bank accounts for not paying taxes. I figure it is like any other job and taxes are necessary.
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  • Profile picture of the author Deepak Media
    Contact a CA.
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    • Profile picture of the author Marty S
      Originally Posted by Deepak Media View Post

      Contact a CA.
      If only it was that easy. It is not, and most CAs don't do the day-to-day journal entries in regards to small business. They are even more in-the-dark about IMers working out of their homes. Ok, this may be generalizing but from my experience, my CA(s) have learned just as much from me as I have from them about MY business. Maybe I had a head start since I owned a restaurant before and I have a business degree, but the real accounting is done by the bookkeepers who understand more daily functions, accounts, and government requirements of real small business.

      1- Buy a book about small business accounting guidelines particular to your country/province.

      2- Hire a bookkeeper part-time that freelances - these people generally have a LOT of small business experience and know-how. (Post an ad on Craigslist for this and you will be brushing applicants off your shoulder.)

      3- Connect with a CA when you set-up your books and at 6 and 12 month intervals, but mainly just to be sure your system is working right - that is their specialty.

      This way you keep your costs low, get the right info, use your own common sense input and a more affordable skill-set does the real work.
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      • Profile picture of the author BTSands
        Originally Posted by Marty S View Post

        If only it was that easy. It is not, and most CAs don't do the day-to-day journal entries in regards to small business. They are even more in-the-dark about IMers working out of their homes. Ok, this may be generalizing but from my experience, my CA(s) have learned just as much from me as I have from them about MY business. Maybe I had a head start since I owned a restaurant before and I have a business degree, but the real accounting is done by the bookkeepers who understand more daily functions, accounts, and government requirements of real small business.

        1- Buy a book about small business accounting guidelines particular to your country/province.

        2- Hire a bookkeeper part-time that freelances - these people generally have a LOT of small business experience and know-how. (Post an add on Craigslist for this and you will be brushing applicants off your shoulder.)

        3- Connect with a CA when you set-up your books and at 6 and 12 month intervals, but mainly just to be sure your system is working right - that is their specialty.

        This way you keep your costs low, get the right info, use your own common sense input and a more affordable skill-set does the real work.
        At last, some constructive help. Just as I thought.... some/most CAs won't have an idea about IM from home.
        So would anyone like to share what they actually do when it comes to tax?
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        • Profile picture of the author Marty S
          Originally Posted by BTSands View Post

          At last, some constructive help. Just as I thought.... some/most CAs won't have an idea about IM from home.
          So would anyone like to share what they actually do when it comes to tax?
          Not sure what you are after with that request, but you still have to treat your IM situation as a business. All of the sales you make is income that ends up on your income statement.

          If you are looking at this long term, I recommended forming a corporation (or similar) to protect yourself (liability) and create an entity which can (eventually) be sold and kept separate from personal accounts. Get this done by a lawyer and tell him what you do, because there are many options to choose from in terms of structure.
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          • Profile picture of the author Adam Nolan
            Originally Posted by Marty S View Post

            Not sure what you are after with that request, but you still have to treat your IM situation as a business. All of the sales you make is income that ends up on your income statement.

            If you are looking at this long term, I recommended forming a corporation (or similar) to protect yourself (liability) and create an entity which can (eventually) be sold and kept separate from personal accounts. Get this done by a lawyer and tell him what you do, because there are many options to choose from in terms of structure.
            Sole Proprietor is cheaper, faster and easier if you're in Canada. Don't know about U.S. regulations but I'm sure there is something similar. That way you don't need to file separate income tax forms for personal and business and if you put your money in Segregated Funds you're just as protected from creditors.
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            • Profile picture of the author skyzeda
              Originally Posted by Maverick_ View Post

              Sole Proprietor is cheaper, faster and easier if you're in Canada. Don't know about U.S. regulations but I'm sure there is something similar. That way you don't need to file separate income tax forms for personal and business and if you put your money in Segregated Funds you're just as protected from creditors.
              Sole Proprietorship is generally better for Internet marketing in the US as well. I had an S Corporation for awhile with a couple of folks and it only led to extra costs and paperwork. There really isn't much of a "legal shield" for most purposes and it's a pretty inflexible business structure.

              For those earning ridiculous amounts of money online, I believe that a corporation would be a more attractive option.
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              • Profile picture of the author LB
                Originally Posted by skyzeda View Post

                Sole Proprietorship is generally better for Internet marketing in the US as well. I had an S Corporation for awhile with a couple of folks and it only led to extra costs and paperwork. There really isn't much of a "legal shield" for most purposes and it's a pretty inflexible business structure.

                For those earning ridiculous amounts of money online, I believe that a corporation would be a more attractive option.
                Originally Posted by skyzeda View Post

                We are also required to pay Social Security and Medicare on top of that. It's 15.3% of your earnings on up to $106,800 of income. An employed person would have half of this cost covered by their employer but since we are self-employed we actually have to pay the full amount. However, there are special credits that you can get though being self-employed. These depend entirely on your individual situation.
                [/URL]
                Your posts confuse me....you do realize one of the main reasons a person would use an S corp is to take some of the profits as dividend income thus avoiding social security and medicare?

                There's no way a sole proprietorship is going to be less expensive than an S corp if you do this correctly.
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                • Profile picture of the author JohnMcCabe
                  Originally Posted by BTSands View Post

                  What is a 1099?
                  Just to fill in the gap, 1099 is the form number used to report a multitude of tax related events in the USA. The one most IMers are familiar with is 1099-MISC, which is used to report miscellaneous income. It's the form used to report affiliate commissions, for one thing. The person paying sends one copy to the person being paid and one copy to the Internal Revenue Service.
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                • Profile picture of the author skyzeda
                  Originally Posted by LB View Post

                  Your posts confuse me....you do realize one of the main reasons a person would use an S corp is to take some of the profits as dividend income thus avoiding social security and medicare?

                  There's no way a sole proprietorship is going to be less expensive than an S corp if you do this correctly.
                  The IRS is strict about making sure employees and officers of a corporation are being paid a "reasonable and appropriate" salary for their position before dividends are paid out. The average Internet marketer doesn't make enough to constitute a "reasonable salary". If you are only paying $20,000 a year as a salary and taking another $5000 as dividends, for instance, you may be subject to prosecution for tax evasion.

                  From the IRS website:
                  Some factors considered by the courts in determining reasonable compensation:
                  • Training and experience
                  • Duties and responsibilities
                  • Time and effort devoted to the business
                  • Dividend history
                  • Payments to non-shareholder employees
                  • Timing and manner of paying bonuses to key people
                  • What comparable businesses pay for similar services
                  • Compensation agreements
                  • The use of a formula to determine compensation
                  However, If you are making 6 figures, a corporation is going to be a much more attractive alternative to a sole proprietorship.
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  • Profile picture of the author BTSands
    I'd like to know what seasoned IM marketers are doing (rather than spend $100s for a CA)
    Personally, I minimize my taxes with all the legal ways possible. I pay Federal taxes like I am required on my IM work which is pretty much necessary since everyone sends me a 1099-MISC.
    What is a 1099?
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    • Profile picture of the author LB
      Originally Posted by BTSands View Post

      I'd like to know what seasoned IM marketers are doing (rather than spend $100s for a CA)

      What is a 1099?
      LOL. "Seasoned marketers" are not such unless they are using a professional to manage their taxes.

      Accounts don't cost you money- they SAVE you money.
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  • Profile picture of the author Biggy Fat
    Pardon the dumbassedness, but what does CA stand for (in this case that is haha)?
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    • Profile picture of the author BTSands
      Originally Posted by Biggy Fat View Post

      Pardon the dumbassedness, but what does CA stand for (in this case that is haha)?
      Chartered Accountant
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    • Profile picture of the author Adam Nolan
      Originally Posted by Biggy Fat View Post

      Pardon the dumbassedness, but what does CA stand for (in this case that is haha)?
      Canadian... all Canadians are geniuses!
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  • Profile picture of the author Joe Benjamin
    I think there's a %20 - %30 on the income we make (not as
    high as the over 50% government steals from people who are
    employees).

    Still, the taxes are too high, and there ARE ways to avoid it.

    I don't want to reveal too much at the risk of anything I regret
    saying later, but most earned income I make (employee and
    business income) I put in real estate for tax deferred income.

    Tax Deferment is only possible with Real Estate Investment
    ownership, and is the quickest way to build wealth...in large
    part because you get to keep every penny you earn (as long
    as you invest in real estate).

    Taxes is one reason I quite forex. Those butthole governement
    officials wanted too much money from me to make it worth my
    while once I knew what I would have to pay if I succeeded to
    much...

    but Real Estate is immune to almost all taxes. So there you go.
    That's MY secret (if it ever was). You won't do anything with it
    anyways, most people won't. But, who knows...it might inspire
    someone to take this approach to keeping you're money away
    from the governement LEGALLY.
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    • Profile picture of the author skyzeda
      Originally Posted by WhoIsBenjamin View Post

      I think there's a %20 - %30 on the income we make (not as
      high as the over 50% government steals from people who are
      employees).
      We are also required to pay Social Security and Medicare on top of that. It's 15.3% of your earnings on up to $106,800 of income. An employed person would have half of this cost covered by their employer but since we are self-employed we actually have to pay the full amount. However, there are special credits that you can get though being self-employed. These depend entirely on your individual situation.

      Here are the base income tax brackets:
      http://taxes.about.com/od/preparingy...ax-rates_2.htm
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      • Profile picture of the author Joe Benjamin
        Originally Posted by skyzeda View Post

        We are also required to pay Social Security and Medicare on top of that. It's 15.3% of your earnings on up to $106,800 of income. An employed person would have half of this cost covered by their employer but since we are self-employed we actually have to pay the full amount. However, there are special credits that you can get though being self-employed. These depend entirely on your individual situation.

        Here are the base income tax brackets:
        2010 Tax Rate Schedules: Marginal Ordinary Income Tax Brackets for Year 2010
        I don't believe it. That's insane. Thanks for sharing
        that. Still, any all monies I make are tax deferred
        for as long as I don't plan on spending large amounts
        of cash...and I really don't to live an incredible life-
        style.

        Again, that's Real Estate Investments in America,
        don't know about other countries.

        If only the government knew how much wealthier
        america would be if there were zero to less than 5%
        taxes, there would be almost no poverty in america.
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  • Profile picture of the author affiliated survivor
    In the Netherlands I have to pay nearly 35%.
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  • Profile picture of the author talfighel
    I do my taxes with my accountant.

    I let him know how much I made, how my I spent, other business expenses and when I have to pay the government here in Canada I do just like everyone else who has a business.

    Tal
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