I'm Dead...

I make $200-500 per day. I need to pay any tax?

The IRS seems pretty brutal in their undertakings! Best of luck to you and to everyone else (including me) with their paypal accounts!

LOL Bill - the first thing I thought when I read that subject title is that if it were an email we'd be unsubscribing.

I'm surprised that people don't set a portion of their earnings and sales aside for taxes regardless of what they are making. Ya just never know when the IRS is going to tighten their stranglehold.

You know what they say....death and taxes

Just pay the taxes and don't worry about it. You'll be amazed at how well you'll sleep.
Being a self employed small business owner will get you audited much more often than a regular wage earner. Keep a straight set of books and meticulous records. The I.R.S. doesn't mind if you practice tax AVOIDANCE but they get a bit upset at tax EVASION. Its just not worth the hassle.

Thomas

Im just under the radar this year, but next year it will be mandatory under these guidelines.

You guys don't have to pay tax on all income (over a tax-free threshold) over there?

lol nope, and FRAGGLER!!

haha whats up man, u know me from bht from long long ago before i got into it with drax

As my accountant always tells me...

If you owe the tax man $1m then that's great news because you've made at leat $2m this year.

Frankly, I wish I had this problem.

Hey this is the forum where we talk about making money not about giving most of the money we make to Uncle Sam!

Bill, I don't know whether to laugh or cry for you, LOL.

Been there, done that, wasn't a happy camper ha ha

Paul

It was always mandatory.

I'm surprised how many people on here don't pay taxes! I'm either too wimpy to try and go under the IRS radar or too smart.

I find it wise to always pay your taxes and if you don't pay your taxes it is even wiser not to mention that you don't pay your taxes on a public forum.

Extremely ready.

Here's my simple process that works year in and year out with NO surprises.

1) Paypal
2) Business Checking
3) Business Savings.

I transfer funds (earnings) out of my Paypal account to my Business Checking.
Once the transfer lands in my business checking, I immediately transfer 20% to my Business Savings. So if I transfer $1000, $200 immediately goes to the savings account.
I pretend the Business Savings account doesn't exist until tax time.
At tax time, I withdraw my Business Savings balance to pay Uncle Sam.

Next year, I start over from zero. Works perfectly for me.

I just got a big tax bill so I'm already feeling this. 200 sales in a year is nothing. I hope people who have been selling their stuff for $7 to build their list are ready to reap the tax collectors revenge.

Hope they dont report to my govt lol

tpw purchase some ear plugs they will work wonders for you .

-Lee

I personally excited to fill for my taxes, after all the amount of money I spent online so far and earnings, I bet IRS will send me check

This year I really spent too much, and things just starting to pick up

Glad that it is not like this in my country to, good luck guys.

I'm confused, do you only pay tax yearly? Stuff that for a joke the bill would be HUGE! Here we pay it monthly if we are self employed, or it just goes straight out of our pay if we are employed. I am glad there are such things as accountants

generally not happy to let the wife know how much you are earning;( .She might ideas on how to spend it . Hold on to your credit card real tight .hehe

If you pay quarterly then it doesn't sneak up and bite you in the butt.

...bugger. youre still alive.

Is that only for the US?

Surely you should only pay taxes on your profits and not your gross earnings. Don't know about US, but in UK, everyone even has a personal allowance, which is determined by their tax code, before they are liable for taxes.

We all have to pay taxes

I am not from US, but I am curious: what about the US citizens that do not currently live in US and use PayPal ? Do they have to pay taxes for the US Gov too ?

In Canada, PayPal and eBay also have reporting agreements with Canada Revenue Agency (CRA).

Mahlon

Yes, pay your taxes and eat your vegetables.

If they report earnings, you and the IRS will recieve the same reports. It's a 1099. These will be sent in January. I wait till the end of February to start my taxes. By then, all my 1099's are in.

I spend all my money on WSOs to avoid paying taxes.

Are you operating your business as a sole proprietor?

There are many, many deductions available to offset your income. If you are working out of your home, you can claim deductions for a home office, etc.

If you are set up as a corporation or LLC and have elected a pass through of Subchapter S status, any profit or loss of the corporation will flow through to your individual tax return. Also with this formal entity, you can start a retirement plan, SEP, etc. and contribute money to the retirement plan with tax free dollars.

A good CPA will help you also determine the cost of goods sold, one of the deductions that can get your bottom line down.

I have been told, but I'm not positive, that sole proprietors - those you file the Schedule C, are more apt to be audited. This has never bothered me because I keep impeccable records and have no problem paying my taxes.

However, when I operate businesses as an LLC, I hire an accountant and a good one. He saved me a fortune.

Even if paypal did not have this new rule, it is income that you would be transferring from your paypal account into either a personal or business account. In the event of an audit, you'd have to explain, so I would simply report it.


I'm not an accountant, but I do believe that anyone outside the US who makes an income inside the US is subject to income taxes. A taxpayer ID number would be necessary and the income must be reported. Not sure about this, I'd have to do some research. I do know that if a person outside the US used my services (former registered agent for a decade) to form a corporation, LLC, etc., the only way we could get the taxpayer ID number was to have that individual get a tax ID number that identified himself/his business and was subject to paying taxes on income just like he was a US citizen.


tpw - nice thread title BTW. I had to click on it. : )

If you outsource, you should be sending 1099s to anyone you pay $600+ to annually.

if you ask em it is not such a bad problem to have as it implies that you are making a decent amount of money online

We gotta pay to play!

I don't know about this IRS thing... It seems like a scam to me!

You'd better get to work writing off all of those lunches that you forgot happened to be with clients and those vacations where you think you went to a seminar at some point.

But on a more serious note, I'm grateful for the year that I had and if that means forking over a small to medium sized portion of it - thems just the breaks.

TPW...would you like us to make donations to the IRS in lieu of flowers?

Rose

Please don't change the subject. I much prefer to discuss your tax issues rather than my own.

Rose

I am looking for such a big amount of earning, so that i can pay tax to paypal :-)

You do realize you just told the world you haven't been paying the proper taxes for the past 6 years, right?

I didn't realize you could 'voluntarily' pay taxes?! Must be nice to be you. I'd expect a fairly unfriendly letter sometime soon requesting some information but that's just an educational guess on my part.

Paying taxes means you're making money, but when you're not making money the govt pays you....which one would you rather be?

I already pay mine quarterly and claim every penny so it's no problem for me. I do think that there are going to be quite a few surprised people that sell stuff on ebay as well as people that sell website, services, digital downloads etc...

I know one friend of mine who sells on ebay and insists that if you sell stuff on the internet you don't have to pay any taxes on it. Boy is she gonna be surprised when she gets that 1099! Especially since she doesn't keep any record or any receipts of what she paid for the stuff to begin with.

Lee

Anything that affects people outside the US, apart from the changes in policy?

Just got off the phone with paypal, and after doing research... if you do 200 transactions but didn't make over 20K, you aren't reported. If you make 20k but didn't do 200 transactions you are not being reported.

You have to do 200 transactions AND make over $20,000 for it to be reported to the IRS. By transactions, it means incoming payments.

Warriors,

It really doesn't matter what PayPal's "official policy" is.... The IRS governs that for US citizens... When you file taxes, the IRS has a set period they can audit your returns.... Last I read, it was three years......

So, if you claim all of your income, take wild and crazy deductions and don't get audited... You are scott free.... The IRS cannot come back and audit you later.... and challenge your deductions....

However, if you fail to report income, they can come back anytime and collect taxes, interest and penalties.... This happened to my mother.... My deceased dad made $3,000 ten years earlier from some "side work"..... The IRS came after her for taxes, interest and penalties....

So, all the IRS has to do is force PayPal to release all their past records.... This would mean big trouble for those who failed to report income... I highly doubt PayPal would fight the IRS to protect their customers...

Is it worth the risk? Only you can answer that question......

Rich

I report my Paypal income even if they don't. The IRS is one group of the government I DO NOT want to mess with.

And by the way.. do your business a favor and get a CPA or at least some professional advice. Contact other people you respect and ask who they use.

Time to talk to a tax lawyer about incorporating and incurring some expenses and deductions. It's the only way to fly.

Paypal never ceases to amaze me.

Is that only US account holder ?

HAha well at least if you're paying lots of taxes, it means you are earning LOTS more money too!! Maybe time to think about corporations so that you can balance your incomes with more tax-deductible expenses. =)

Jie

So, I can't be the only guy here thinking of methods to help soften the blow of taxes.

I'm sure a lot of lovely people have used paypal to hide, or just couldn't afford paying taxes because of life and family expenditures.

As a member of Law enforcement, I don't condone breaking the law; especially not on a federal level. I respect that we all have to pay to play, and I myself would very much be doing exactly that just for the peace of mind.

BUT, hypothetically, wouldn't it be easy to bypass something like this just by having a multitude of merchant accounts that doesn't exceed the 20k and 200sales?

Rabble rabble: "I do believe that would be tax evasion young sir".

I do believe you're right Gentlemanly monocle wearing colleague.

I understand if it were easy, everyone would be doing it...but... I feel like there's a loophole here

Does this apply to Australian Paypal accounts? If it doesn't it probably soon will(:

Finally I have a reason to be happy about having made only $27 online (so far). No taxes! lol

Yeah, ready, Always pay all Taxes and sleep well. I am paying a lot from STOCK market earnings as well... thousands and thousands

Looks like Paypal is becoming a headache for all of us!

This thread has given me anxiety! But the good news is....I have not received the reached earnings threshold notification asking for my Tax ID/SS# so I guess I just made it!

Whether or not paypal reports your income, you have to report your earned income. Get audited and you will be producing your bank statements. The deposits will be listed, obviously, so save yourself time and possible penalties, report all of your income.

The key is being able to find allowable deductions to reduce the amount of taxes you pay.

Self employed tax deductions:

- internet expenses, websites, hosting, internet access.

- cell phone

- advertising

- computers (depreciation)

- tax costs - either software or your accountant fees

- postage

- state business license fees (or incorporation/LLC fees)

- office supplies, paper, ink, pens, paper clips, any office supply. Keep your receipts

- do you use your car in your business? Meeting clients, etc? Look up the deductions for the auto expense.

- Take a client to lunch? Deduct 50% of meals

- 1/2 of self employment tax

- home office deduction - look at IRS form 8829. If you have a mortgage, you can deduct part of your property taxes, MID, maintenance, utilities, office furniture, depreciating items

I wasn't aware that you could pay taxes quarterly...to the IRS website!

I guess it's a good and bad thing that I have only made enough money online this year to put a dent in my return. Maybe next year I can grumble about having to pay soooo much lol.

Well there weren't any income taxes before the FED was installed on top of us - and that's all fed income tax goes to anyway, so if everyone is all torked about paying income taxes -- start petitioning congress to kick the FED (a.k.a. World Bank) to the curb. You band together strong enough to get that done and you won't be posting laments about taxes on forums any more.

Bill - you might be dead, but your thread seems to be lingering for posterity. Good grief.

Hi,

If your making as much in IM as the revised reporting requirements for PayPal suggest, then your wife might just hug you instead of killing you!

cheers, Patrick

Thanks for the great post Lori! I didn't know about "1/2 of self employment tax". And I assume all of the SEO services I purchased would fall under "advertising"?

Do you need to pay taxes on the amount earned
but paypal refunded to fraudulent scamming folk?

This is a great problem to have. If only we were all so lucky. Some institutions like banks are taking it a step further by withholding money from earnings (interest income for instance).

So I'm still confused on this topic, I know that Paypal will be sending me a form, but does anyone know a way to look on the site to see how many transactions were made for the year? And how much revenue was brought in? I've tried getting the reports, and I don't see anything anywhere.

I'm scared to see the amount made that I'm going to pay taxes on. I have 178 printed pages of transactions, but I don't wanna have to count them all. And I would like to see a total for the year somewhere on the site. Anyone have any ideas? So I can decide if i need to hang myself or not.

I hope you kept all your receipts to give you some type of break. Some people donate during the year rather it be money or items. I wish we could donate time...

Just remember to itemize your deductions not itemizing the deductions on your tax return will mean you won't be able to claim deductions. If you do, then you'll get a tax benefit. That's it.

Well, I'm not sure I can write off enough from online sales to even it out. I still work a regular job, and they pay my LLC company, just kinda scared to see the final sales for the year through paypal, it will be well over 100k, I happened to have too much fun with it instead of saving some.

Don't get me wrong, I'll still pay the taxes, but its going to be a pain in the ass trying to figure everything out, and I'm too cheap to get a CPA, which is probably needed. BLAH! Heads spinning now, I actually just looked up today to see if Paypal would send some sort of form to me, and this is how it ended up haha

Gee Bill, there are a lot of ways you could reduce your taxes and make your wife happy.

Some people voluntarily fork over their money to the man. Others take advantage of deals selectively offered to them and make use of legal strategies to drastically reduce the amount they owe to only the minimum required.

Maybe I should send your wife a letter.

.

There's a lot of talk about building a business on this forum, but this thread kinda shows me that very few are likely putting it into practice...even at a basic level.

I'm surprised that people could be doing this for so long and not realize that all revenue *should be* reported.

It kinda reminds me of a few years back when a friend of mine ran a summer camp with a teacher her worked with (self-employed) and took in like $20K. I told him to set aside money for taxes and he said he didn't need to, because he deposited it into a personal account and not a business account. I told him he could do whatever he pleased, but keep in mind he wasn't getting away with anything..he was just rolling the dice.

Which by the way is a tax strategy that a lot of people employ, probably people like Tim Geitner. But they are at least aware of the odds/downside.

look just take the tax man out for dinner its called the dinner tax,one company has got away with not paying 6 billion in tax that the uk needs to pay off our deficit but they are squeezing everyone else who owe small amounts.So once again its not what you know but who you know.
Regards
vivi62

I figured our taxes out a couple of months ago for the first three quarters and nearly died from shock when I saw what our liability was. Of course I hadn't sent any estimated tax payments in. So now I'm pretty much handing everything over to Uncle Sam this final quarter and the beginning of next.

I always have claimed every single penny I earned from PP as well as from any other income sources. The IRS doesn't throw people in prison for being late on their tax bill. It's better to owe the IRS money than it is to hide your income from them.

But if you make over a certain amount you are responsible to have all your estimated tax payments in by January 15 to avoid interest penalties.

My CPA gives me a spreadsheet to use when figuring out quarterly taxes/payroll. As an S-Corp, I know I'm going to be paying taxes at year end anyways so I try to pay as I go. So I do a quick P&L at the end of the quarter, and then distribute the cash out of my business checking account.

The spreadsheet takes into account part of the income is being paid through payroll (income taxes+FICA), another part as a distribution (just income taxes). The spreadsheet tallies up how much I owe to Federal+State and then I make the deposit.

I've been using this for the last couple years and I'm usually pretty close when it comes time to do the returns.

One way to find out! Dont pay your taxes on your Paypal earnings haha!