Taxes are going to eat my soul in 2012

55 replies
just got back from HR Block. interesting experience to say the least.

seeing as though I didn't really make much income until Nov/Dec 2011, I won't truly have to claim income until April 2012. i;m wi/ Amazon so i didn't get paid for November's earnings until January 2012.

that said, I was pretty surprised to find out likely how much I'll end up paying.

i was quoted around 40%. since I am a small business owner, not only does my "company" get taxed, but when technically i "pay the employee" - ie myself.

even if i keep the $$ within the business and don't transfer it over to my personal account.

that's some pretty hefty crap when I look at in numbers. If I make $1000, $400 of that belongs to the IRS. If make $100,000, i really only get $60,000.


i'm thinking i should get an LLC. taxes will eat my soul if i don't officially segregate the two
#2012 #eat #soul #taxes
  • Profile picture of the author Madush
    Banned
    In italy there are no such taxes
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    • Profile picture of the author Trapped
      Originally Posted by Madush View Post

      In italy there are no such taxes
      Huh? You are being sarcastic, right? Because I live in Italy and only if you earn less then 3000 euros a year you may not declare that as income and pay taxes for, but if you earn 3000.01 then you better declare and pay taxes for that. While from a sarcastic point of view then yeah, even Valentino Rossi didn't pay taxes for over 60million euros (but that's another story LoL).
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  • Profile picture of the author redstanford
    yea but i hear Italy is pretty pricey to live in... that and I don't know any Italian
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  • Profile picture of the author Rich Struck
    The last people I'd take tax advice from is H&R Block. Get an accountant. Nobody pays 40% in taxes. Being self-employed, there are all kinds of ways to cut your tax bill and many accountants will help you out with that.
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    • Profile picture of the author Cataclysm1987
      Originally Posted by Rich Struck View Post

      The last people I'd take tax advice from is H&R Block. Get an accountant. Nobody pays 40% in taxes. Being self-employed, there are all kinds of ways to cut your tax bill and many accountants will help you out with that.
      Yep.

      H and R block is the place working folks go to get their tax returns, not the place where businesses go to get their taxes lowered or written off.

      Get the heck outta there.
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    • Profile picture of the author Curtis2011
      Originally Posted by Rich Struck View Post

      The last people I'd take tax advice from is H&R Block. Get an accountant. Nobody pays 40% in taxes. Being self-employed, there are all kinds of ways to cut your tax bill and many accountants will help you out with that.
      Definitely this.

      If you are paying 40% taxes, you are doing something wrong!!!
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  • Profile picture of the author GMD
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    Originally Posted by redstanford View Post

    just got back from HR Block. interesting experience to say the least.

    seeing as though I didn't really make much income until Nov/Dec 2011, I won't truly have to claim income until April 2012. i;m wi/ Amazon so i didn't get paid for November's earnings until January 2012.

    that said, I was pretty surprised to find out likely how much I'll end up paying.

    i was quoted around 40%. since I am a small business owner, not only does my "company" get taxed, but when technically i "pay the employee" - ie myself.

    even if i keep the $$ within the business and don't transfer it over to my personal account.

    that's some pretty hefty crap when I look at in numbers. If I make $1000, $400 of that belongs to the IRS. If make $100,000, i really only get $60,000.


    i'm thinking i should get an LLC. taxes will eat my soul if i don't officially segregate the two
    Either H&R Block has given you the most horrible, worse advice (possible), and wrong advice about your "tax" situation or you just totally don't understand your own situation.

    "seeing as though I didn't really make much income until Nov/Dec 2011, I won't truly have to claim income until April 2012."

    What does that mean? Sure, if you had NO income from January 2011 until October 31, 2011 AND THEN made only a little bit of money during November and December, sure you MIGHT not have any TAXABLE income to declare because you didn't meet the minimum threshold to file taxes (and that depends on your specific situation as to WHAT AMOUNT that would be) -- but

    "I won't truly have to claim income until April 2012" -- this makes zero sense. If you have any income to claim from 2012 it will be declared in 2013 (whenever you file your taxes that year).

    "i;m wi/ Amazon so i didn't get paid for November's earnings until January 2012."

    This doesn't matter. You EARNED the money in November 2011 therefore it does count for your 2011 taxes -- which must be declared and filed this year. It doesn't matter WHEN you actually receive the money; it matters when it's EARNED. I hope H&R Block didn't tell you that November's earnings don't count until January 2012. 'Cause that's as wrong as two boys, um, ...well never mind.

    "i was quoted around 40%. since I am a small business owner, not only does my "company" get taxed, but when technically i "pay the employee" - ie myself."

    First, 40% is the THE HIGHEST tax rate for the HIGHEST EARNERS. We're talking several hundred thousand dollars and up per year. There's no way that applies to you. In fact...

    General Electric -- billions in revenue -- paid an 11.3% tax rate this past year. You 40%? Your tax "preparers" are smoking crack.

    And what's this about "double taxation"? Are you, redsanford, at this time incorporated? Have an LLC? Or are you just "doing business" as yourself?

    If you're doing business as "yourself" you file your taxes as an individual, at the individual rate -- in fact if you're a "small business" as you describe (or a sole proprietor) you STILL file taxes as an individual.

    Again, unless you have a corporation or LLC or something similar, you're not an "employee" of your small business.

    "Double taxation" doesn't apply in your present situation. At all. And I know this because you've written at the end of your post: "i'm thinking of getting an LLC..."

    Okay, do that. Then you'll have to deal with "double taxation". But any tax preparer worth his or her salt knows that there are legal ways around that and it's not actually as "bad" as it seems.

    I seriously think there's some issues here that you need to address with yourself and your income & tax situation. At a minimum, you've explained your situation wrongly to H&R Block and based on that they've given you horrible/wrong advice OR you were thrown a deluge of information that you just processed wrong.

    Seriously -- figure your situation out cause it can and will bite you back sometime in the future when you least expect it or need it.
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    • Profile picture of the author redstanford
      actually I made over $2,000 over the period of November 2011-December 2011. that money is not recieved on my end until Jan 31 and Feb 28 (today in fact)

      it does not get claimed as 2011 income.

      in fact, i can copy/paste the exact email message Amazon sent me three days ago if you care to disagree.....

      it goes towards 2012 FY taxes.
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      • Profile picture of the author GMD
        Banned
        Originally Posted by redstanford View Post

        actually I made over $2,000 over the period of November 2011-December 2011. that money is not recieved on my end until Jan 31 and Feb 28 (today in fact)

        it does not get claimed as 2011 income.

        in fact, i can copy/paste the exact email message Amazon sent me three days ago if you care to disagree.....

        it goes towards 2012 FY taxes.
        It's not a problem -- you can take Amazon's word on this!

        I just prefer to take the Internal Revenue Service's word on it. Which by-the-way you can find here:

        Publication 334 (2011), Tax Guide for Small Business

        If you don't want to read any of that, here's an example from the publication that might make you understand:

        "Example.
        On December 30, 2010, Mrs. Sycamore sent you a check for interior decorating services you provided to her. You received the check on January 2, 2011. You must include the amount of the check in income for 2011."


        Let's rewrite that to apply to your situation:


        In November and December 2011 you earned money through Amazon. You received payment for that on January 21 & February 28, 2012. You must include those amounts in income for 2011."


        It's not my intent to be a jerk here; my intent is to help out.
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        • Profile picture of the author redstanford
          Originally Posted by GMD View Post

          It's not a problem -- you can take Amazon's word on this!

          I just prefer to take the Internal Revenue Service's word on it. Which by-the-way you can find here:

          Publication 334 (2011), Tax Guide for Small Business

          If you don't want to read any of that, here's an example from the publication that might make you understand:

          "Example.
          On December 30, 2010, Mrs. Sycamore sent you a check for interior decorating services you provided to her. You received the check on January 2, 2011. You must include the amount of the check in income for 2011."


          Let's rewrite that to apply to your situation:


          In November and December 2011 you earned money through Amazon. You received payment for that on January 21 & February 28, 2012. You must include those amounts in income for 2011."


          It's not my intent to be a jerk here; my intent is to help out.
          and i'm not trying to be a jerk either but i see flaw in that example. the check by that example was mailed on December 30, it was issued then but because of New Year's Eve and standard days required for shipping, it didn't arrive until Jan 2.

          but

          in this case Amazon does not even issue payment until Jan 31st for earnings earned in the month of November because they don't know how much they are really going to pay you (taking refunds into account)
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          • Profile picture of the author GMD
            Banned
            Originally Posted by redstanford View Post

            and i'm not trying to be a jerk either but i see flaw in that example. the check by that example was mailed on December 30, it was issued then but because of New Year's Eve and standard days required for shipping, it didn't arrive until Jan 2.

            but

            in this case Amazon does not even issue payment until Jan 31st for earnings earned in the month of November because they don't know how much they are really going to pay you (taking refunds into account)
            "You can lead a horse to water...but you can't make it drink."

            There's no "flaw" in the example because the example is not meant to be taken literally -- it's the CONCEPT behind the example.

            The concept is:

            1. Earned income
            2. Paid income

            You can "earn" income today but not receive the income for 20 years. It was still "earned" today, 2012.

            If you "earn" income during 2011 -- even if it was "paid" to you in 2012, 2013, 2058, it's declared for 2011.

            Either way, take everybody's advice thus far: go see real professionals about your specific situation OR do the research yourself so that you understand your situation and file your own taxes.
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            • Profile picture of the author redstanford
              Originally Posted by GMD View Post

              "You can lead a horse to water...but you can't make it drink."

              There's no "flaw" in the example because the example is not meant to be taken literally -- it's the CONCEPT behind the example.

              The concept is:

              1. Earned income
              2. Paid income

              You can "earn" income today but not receive the income for 20 years. It was still "earned" today, 2012.

              If you "earn" income during 2011 -- even if it was "paid" to you in 2012, 2013, 2058, it's declared for 2011.

              Either way, take everybody's advice thus far: go see real professionals about your specific situation OR do the research yourself so that you understand your situation and file your own taxes.
              so riddle me this:

              i do a job today yet i don't get paid until 2058 as you claim, how exactly do i claim that on my 2012 taxes?
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            • Profile picture of the author Dan Curtis
              Originally Posted by GMD View Post

              "You can lead a horse to water...but you can't make it drink."
              Actually this is not true. If you put salt in the oats he will drag you to the water and drink for half an hour.
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  • Profile picture of the author redstanford
    here is the exact email verbatim, un-edited:

    Hello, Eric.

    I apologize for any inconvenience. I show you had Associates payments of $204.32, for 2011. Any Amazon Associate who received payments of $600 or more.

    Please note the calculation is based on issued payments during the calendar year, not earnings from the calendar year. For example, 1099 forms issued in January 2012 will be based on earnings for November 1, 2010 through October 2011 as these produced actual payments paid in 2011. Fees earned in 2011, but not issued until January 2012 or later, specifically the months November and December 2011 are not included.

    If you'd like a 1099 copy for your earnings we have a separate department that handles this request and they can send you a copy by e-mail. You can contact this department by email at: ap-vendorinfo@amazon.com. Be sure to include your Associates store ID and last 4 digits of your tax ID in your message to ensure the prompt handling of your request.

    Alternatively, if you'd prefer to speak to our Tax Department, please call our Tax Information Hotline at 206-266-2595.

    I hope this helps. We look forward to seeing you again soon.

    Did I solve your problem?

    If yes, please click here:


    If no, please click here:



    Best regards,

    Patric
    Amazon.com Associates Program
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  • Profile picture of the author Tsnyder
    GMD... seriously... you need to stop giving professional
    advice that you clearly know little about. People are routinely
    prosecuted for doing such things.

    redstanford... get the heck away from H&R Block and have
    a real tax accountant take a look at your situation. Not just
    a CPA... not all CPAs are competent in taxation. Make sure
    they specialize in small business taxes.

    And... the one thing GMD was correct about was the LLC.
    You will, indeed, be subject to the possibility of double taxation
    with that type of business structure. Think about... and ask
    the tax consultant about... a Sub-chapter S corp. That is,
    essentially, a "pass through" type organization. An S corp pays
    no income tax... similar in that regard to a partnership.

    Best of luck to you. Did I mention that you need to get away from H&R Block?
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    If you knew what I know you'd be doing what I do...
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    • Profile picture of the author GMD
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      Originally Posted by Tsnyder View Post

      GMD... seriously... you need to stop giving professional
      advice that you clearly know little about. People are routinely
      prosecuted for doing such things.
      You're absolutely correct!

      I'll proceed to rip up my accounting degree, current CPA credentials, English degree, and my J.D. right now. In fact, I'll toss out my life experience into the trash as well. It's clear that such things aren't a use to anybody including me.

      As it's been stated numerous times on this forum -- and as it's clear and natural as breathing air -- everybody here KNOWS not to take any kind of financial or legal advice to heart. It's called a "given".

      Advice can be offered to point persons in the correct direction so that they themselves might "see and believe" for themselves. Inclusive in that is, of course, personally visiting a verified professional and/or doing their own research based upon reputable sources (i.e., publications from OFFICIAL sources such as the IRS or your state tax authority).

      Lastly, any advice given is GENERAL advice. There's too many unknown variables to give anybody anything that realistically useful in terms of "tax" advice.

      The OP situation? Is he living with his mother at home? Does she claim him on her taxes? Is he on his own? What's his total income? Is he married? Kids? Does he qualify for any business exemptions? Where does he work? How much did he make? When did he make it? What form does he conduct his business?

      All these things and more we don't know. All we know is what he's written and that's not very much.

      AND BASED UPON WHAT HE'S WRITTEN, I've replied. Sure, what I've written may or may not apply to him. Again, it's hard to theorize what can or cannot apply to him because of the lack of specifics. However...

      ...what I've written is sound, up-to-date, and correct.
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      • Profile picture of the author GarrieWilson
        Avoid H&R block and all processors like them. They hire anyone off the street to enter the data.

        Find a CPA who knows about small, home business AND the Internet.

        Garrie
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  • Profile picture of the author Green Moon
    Originally Posted by redstanford View Post

    i'm thinking i should get an LLC. taxes will eat my soul if i don't officially segregate the two
    An LLC doesn't generally change your tax position at all. If you simply set up a single member llc, it is a disregarded entity for tax purposes. That means you are taxed the same way as if you had no LLC at all.

    Your LLC can elect to be taxed as an S corporation. Since an S corp is a pass-through entity for income tax purposes, it does not save you any income taxes, but under the right circumstances it can save you up to several thousand dollars in employment taxes.

    As far as recognizing the Amazon earnings in 2012, you are correct. Unlike accrual basis taxpayers who must recognize income in the period it is earned, individuals in the U.S. are cash basis taxpayers and only recognize income in the period that the income is actually received (with a few exceptions not applicable here).

    I will point out, however, that your conclusion that "taxes will eat your soul" is an understandable feeling, but the truth is that as much as all of us dislike paying taxes, personal income taxes in the United States are among the lowest in the world. In terms of what each of gets in return for our taxes, including such things as the world's best military defense, a strong financial safety net for the elderly and disabled, a network of interstate highways that lets hundreds of millions of people travel freely and easily throughout the country, a massive system of national parks and national monuments for which we are caretakers for future generations, and so on.

    Although there is certainly room for improvement, we actually get quite a lot for our tax dollars.
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  • It's true that you get double taxed as a self employed person, but you can cover a lot of your taxes with deductions up to a point. It's only once you get really deep into the six figure range that you're still paying way more taxes than employed people after ordinary deductions... But then, you can afford a better accountant, and get into more complicated types of deductions
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  • Profile picture of the author redstanford
    hey GMD, why don't you go back and re-read that example one more time:

    Example.

    On December 30, 2010, Mrs. Sycamore sent you a check for interior decorating services you provided to her. You received the check on January 2, 2011. You must include the amount of the check in income for 2011.


    maybe you should listen better to what the IRS is saying.....
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    • Profile picture of the author Green Moon
      Originally Posted by redstanford View Post

      hey GMD, why don't you go back and re-read that example one more time:

      Example.

      On December 30, 2010, Mrs. Sycamore sent you a check for interior decorating services you provided to her. You received the check on January 2, 2011. You must include the amount of the check in income for 2011.


      maybe you should listen better to what the IRS is saying.....
      GMD, you are just wrong on this one. The taxpayer in the example given by the IRS was not taxed in the year the money was earned (2010) but in the year it was received (2011). That is a basic tenet of cash basis accounting.

      Of course, if the taxpayer has the option to require that Amazon mail the check (which is NOT the case here, btw), then the taxpayer has constructively received the payment even though he has not actually received it. Even in that case, however, the test is based on receipt (actual or constructive), not when the money was earned.
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  • Profile picture of the author lapeoro
    40% tax on the income earned is too hectic.Go with a well versed accountant stating your problem and it may get resolved.
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  • Profile picture of the author Wide
    So,

    What you earn in 2011 has to be reported as 2011 earnings, even if you receive the payment in 2012?

    So, you earn $20.000 from adsense in december 2011, then 1 month later your account is closed for abuse (or something) - but you already reported the earnings to the IRS for 2011...that cant be right?
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    • Profile picture of the author GarrieWilson
      Originally Posted by Wide View Post

      So,

      What you earn in 2011 has to be reported as 2011 earnings, even if you receive the payment in 2012?

      So, you earn $20.000 from adsense in december 2011, then 1 month later your account is closed for abuse (or something) - but you already reported the earnings to the IRS for 2011...that cant be right?
      Its not.

      The example even says you claim it on the year it was received.
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  • Profile picture of the author Halcyon
    Yes, the Tax Man Cometh...but at 40%? Yikes!

    First, I agree with those who advise you stay away from H&R Block. Second there are waaaaaay too many variables involved and you should find an accountant.

    At the very least invest in TurboTax.
    I'd trust TurboTax over H&R any day. Keep in mind that as a business, you're only taxed on net profits. Therefore if you take the proper deductions, you can decrease your tax bill. The are myriads of deductions available to businesses. (Health insurance, internet, educational materials, supplies etc.)

    Lastly, US business have the option of using cashed based or accrual when calculating taxes. If you choose the accrual method, then you are taxed when funds are earned, if you select cash, the money is taxed when it's received.
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  • Profile picture of the author redstanford
    thanks for the input guys. the more i think about the more i must've heard her wrong. i don't believe now that it was 40%.
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  • Profile picture of the author MarketingChad
    As many have said, don't go to H&R block, ever...most of their "sales people" don't have CPAs or similar credentials.

    Not sure what people are talking about above (again talk to a proper accountant), but LLCs and Sole-proprietorships use Pass-Through taxing meaning you are not subject to both a business tax and income tax. To earn this however you do need to keep funds separate (no co-mingling) - separate bank accounts for your business.

    I'm not sure what type of LLC the person was talking about getting double taxed...I have an LLC and it was pass through taxing for 2011.
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    • Profile picture of the author redstanford
      Originally Posted by MarketingChad View Post

      As many have said, don't go to H&R block, ever...most of their "sales people" don't have CPAs or similar credentials.

      Not sure what people are talking about above (again talk to a proper accountant), but LLCs and Sole-proprietorships use Pass-Through taxing meaning you are not subject to both a business tax and income tax. To earn this however you do need to keep funds separate (no co-mingling) - separate bank accounts for your business.

      I'm not sure what type of LLC the person was talking about getting double taxed...I have an LLC and it was pass through taxing for 2011.

      thanks man. yea GMD went on a tyraid last night tossing out all his shiny degrees and such but I haven't heard from him since.

      don't get me wrong, i appreciate his help but if you're going to come in guns ablazing and someone see fault in your example, you better be prepared to explain yourself....
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  • Profile picture of the author kindsvater
    Something is definitely wrong. With a business you should end up paying a lower tax rate than if you were a wage earner because of all the deductions and "loopholes" available to you.

    .
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  • Profile picture of the author milla04
    Hey redstanford,

    Let me tell you my story and hopefully it will encourage you to do something about your situation, I publish books on Kindle, createspace etc and been making about 1k a month, when i received my payments is was deducted 30% withholding's from amazon and the UK banks deducted their fees too, wow, not much was left as you can imagine.

    So i created an LLC in New Mexico where I dont pay any tax fees, no filing fees after the first year, no franchise tax fees NOTHING, absolutely nothing annually, except the registered agent annual fee which you can find some will charge $50 -$99, i found a company that charge $150 for 5 years.

    Once i did that i contacted a few banks and provided my EIN, articles and my passport and i got a bank account opened, now, because UK has a treaty with the US I dont pay NO TAX whatsoever to Amazon, i just have to file in my own country once a year, with that said now my kindle, createspace profits go into my US bank account and now i am only charged one small fee to transfer the money to my UK account.

    This may inspire you to do the something similar.

    All the best
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    • Profile picture of the author capitalalchemy
      I ended up buckling down and getting an account, because I wanted to pay for advice, not pay to have someone prepare my taxes (I can do that on my own)..

      He was for certain that I would pay a 15% Self Employment tax and actually told me that my business was most likely "losing money"...

      That's what I'm paying for...someone to give it to me straight and show me how I can turn that around.

      As it turns out, I won't owe anywhere near 15% and I'm not losing money. It was a little freaky getting everything finished at the last minute, but such a great experience thus far.

      I agree, 40% does not sound right to me at all. That's usually the tax bracket for upper class.

      And I've never heard of someone paying taxes on their company when they are not registered as a company, which it doesn't sound like you are.

      I agree H&R Block is not for business owners or the self employed. You need to find an accountant who works with other business owners and has knowledge of how that side of the picture really works.
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  • Profile picture of the author Cary Bergeron
    Taxes Suck! GO with the LLC
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  • Profile picture of the author PPC-Coach
    Move up to Canada, 40% is nothing.



    There should be flat tax with a cap on lifetime taxes paid.
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  • Profile picture of the author atrbiz
    H&R Block.........? That's definitely the LAST company you want to speak with in regards to business accounting.

    I pay an experienced accountant to do my taxes yearly, and he's saved me A LOT of money! He actually put an effort into learning my business,etc,etc. He's not just crunching numbers into a spreadsheet.

    Bottom line, if you're going into business...you need to pay for a good lawyer and accountant.

    Best of luck,
    Ahmad
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    • Profile picture of the author cashp0wer
      I would never use H&R Block to do my taxes. I have my own personal accountant that I have used for years and he is wonderful with doing my taxes and has always been there for me. Try to find a CPA in your area instead of H&R Block.
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      • Profile picture of the author atvking
        look up incorporating in Wyoming...thank me later
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  • Profile picture of the author Rod Cortez
    1. Never use H & R Block for business tax planning.

    2. Two words for you: tax planning. Which COULD mean a LLC, an S-corp, corporation, heck, it really depends on your business, what you're trying to accomplish, etc.

    For some people, it makes more sense to set up a holding corporation and then have a separate corporation for each division of your operation, but that's why you need an accountant and/or tax attorney (or both) to plan these things out so you don't get reamed with taxes the following quarter / year, etc.

    RoD
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  • Profile picture of the author nicholasb
    I would go talk to a real accountant, I didn't pay anywhere near 40%
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  • Profile picture of the author Troy_Phillips
    I went to H & R Block years ago and they didn't even know what my schedule K was. I apologized for wasting their time and left.
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  • Profile picture of the author Jeff Hollyhand
    Hi redstanford,

    I know you are getting a lot of conflicting advice.

    On my 1099s for last year Amazon, Google, and most others only included payments they had actually sent me in 2011.
    So December's earnings (which were not paid until 2012) were not included on most of my 1099s.

    ClickBank did include some of December's earnings on my 1099 for 2011 even though the payment was not made to me until 2012.
    So that is the number I use for my 2011 taxes.

    Hope that helps.

    Definitely find a real accountant locally and not a national chain.
    The account can recommend the best business entity for your situation (and State).
    You may want to ask a local small business owner who they use for taxes (and bookkeeping).

    One last thing - Having to worry about taxes because you made money is a problem, but it's a good problem to have.

    Good Luck
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  • Profile picture of the author Terry Crim
    [DELETED]
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    • Profile picture of the author Green Moon
      Even asking for advice on an accounting forum or a tax forum makes no sense unless you are an accountant or tax professional trying to get some insight from your peers.

      Asking for tax advice or accounting advice on what is primarily an internet marketing forum is just plain silly. Listening to that advice (except for the many intelligent people who responded "get an accountant") borders on the insane.

      Stop reading now, and go find an accountant. Don't go to a temporary store front tax preparer that typically handles the most simple individual tax returns. Find a real accountant or CPA who deals with small businesses on a regular basis. It will save you time, money and headaches in the long run.
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    • Profile picture of the author Istvan Horvath
      Originally Posted by Terry Crim View Post

      I do know that what a few people have stated as fact, "you pay taxes on when you earn the money not when you receive it" IS COMPLETELY WRONG!

      I am not going to provide evidence or spend a lot of time on trying to convince anyone why I know this is not correct because you should NOT be taking any kind of legal or tax advice from a forum, EVER!!!
      I guess the last bold statement should be applied to your YELLING bad advice, too.

      What others were saying about when you earn and when you pay vs. what you were saying... will depend on the accounting method. Try reading about the accrual vs. cash accounting method.

      Seemingly, you heard only about the cash method, while the other guys were talking about the accrual method.

      Just sayin'...
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      • Profile picture of the author theemperor
        Originally Posted by Istvan Horvath View Post

        I guess the last bold statement should be applied to your YELLING bad advice, too.

        What others were saying about when you earn and when you pay vs. what you were saying... will depend on the accounting method. Try reading about the accrual vs. cash accounting method.

        Seemingly, you heard only about the cash method, while the other guys were talking about the accrual method.

        Just sayin'...
        Glad someone mentioned this at last. In the UK I was advised you can choose your method - accrual or cash if you are a sole trader.
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  • Profile picture of the author gasman
    Well you know what they say, small business owners are the backbone of our economy. It only makes sense to do whatever they can to make it more difficult for the small business to survive now doesn't it? It is a horrible time of year, tax time that is. Don't forget though as much as they take, you still have several tax breaks others don't, take advantage of them.
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  • Profile picture of the author jwmann2
    Originally Posted by redstanford View Post

    just got back from HR Block. interesting experience to say the least.

    seeing as though I didn't really make much income until Nov/Dec 2011, I won't truly have to claim income until April 2012. i;m wi/ Amazon so i didn't get paid for November's earnings until January 2012.

    that said, I was pretty surprised to find out likely how much I'll end up paying.

    i was quoted around 40%. since I am a small business owner, not only does my "company" get taxed, but when technically i "pay the employee" - ie myself.

    even if i keep the $$ within the business and don't transfer it over to my personal account.

    that's some pretty hefty crap when I look at in numbers. If I make $1000, $400 of that belongs to the IRS. If make $100,000, i really only get $60,000.


    i'm thinking i should get an LLC. taxes will eat my soul if i don't officially segregate the two
    When you have employees, you get huge tax breaks so you can pay for their benefits. That's even more red tape though, I know you said you're the only employee. I know taxes are a headache but at the end of the day, you're your own boss and are likely doing something you enjoy doing. Kudos to you.
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    • Profile picture of the author IMMer1975
      Yikes...all kinds of rotten advice here (sorry fellow Warriors).

      The best advice was those who told you to get an accountant.

      And none of us know the full circumstances behind your personal situation which always has a tax implication. For example, whether you use cash based or accrual based accounting will determine whether you pay tax on the money when its earned or when its actually received.

      As for tax savings, yes, your accountant will give you all that.

      Good luck
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  • Profile picture of the author Lori Kelly
    This thread was resurrected from February ? ? ?

    I too would never use H&R Block.

    I started a business in 2011 as a sole proprietor to see the "benefit" of a home office deduction. It's close to worthless.

    I'll be forming an LLC this year. And taking the option of the pass through status to avoid the double taxation issue.
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  • Profile picture of the author Aeristilheartly
    As Monday will be marking April the 15th, I must agree about H&R Block. They state they have the best professionals but they clearly do not.

    Even TurboTax provides much better advice and a higher refund. For example, a friend of mine went to H&R Block every year for about 5 years. After hearing about the refund I got from TurboTax the previous year he came to me to help him do his own TurboTax account. He expected to pay little to none as he had done every year with H&R Block, but it actually provided him his first refund in those 5 years of filing. Needless to say, he doesn't go to H&R anymore.

    There charges are outrageous, they take a percentage rather then a fixed price and they're taught to talk smart, not be smart. Run away as fast as you can from them. Even a college student can do your taxes right for a low cost.
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    • I have a friend that pays the fee H&R block charges to get their money back quicker than those who don't pay this fee.

      They're loaning you the money, not speeding up your refund. The loan is repaid by your refund (eventually). You pay the fees, which work out to a high interest rate.

      fLufF
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      • Profile picture of the author capitalalchemy
        I will say this...in many states in the U.S. taxation was never recognized as official nor legal. And it still stands that way today. And regardless of whether or not you support the taxing of income or any, personal financial growth, almost everyone makes mistakes without even knowing it.

        Those items that are sitting in your house that you think are worthless, but actually are of value and deemed as collectibles? yeah...those are taxable too. How would you know? well you can't stay on top of everything...so it's really just a perceived threat in many underline cases of the tax code.

        If you know of the threat, then you will do everything in your power to stay within the guidelines, whether you view it as moral or not...but if you don't -- too bad...how could you know. You learn as you go.

        What cracks me up is that I could buy something, pay sales tax, then 2 years later sell it on eBay for a massively depreciated value, and if it's above $400 within a single tax year, I have to pay tax on that earning.

        So you basically lose twice over.

        You are also supposed to keep track of depreciation of items in your business. How is this possible? numerous companies, businesses and their websites will offer that same item at varying sales prices.
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  • Profile picture of the author thechoice1
    Offering my experience. Oregon, USA . I was an auto techician, self-employed for about 4 months. TAX preparer, professional said I would be paying close to 50% being self-employed. I have an LLC for my internet stuff, LLC doesn't matter she said. ( I tried to put all income under the cover of my LLC. (Can't mix automotive repair and internet under the same LLC I found out) She said I needed to earn over $100,000 to make it worthwhile to incorporate. NOT there yet.
    Got hired by an auto repair shop to escape most of the tax issue. Internet money is a bonus, not livelyhood... Best of Luck to you!

    Todd
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  • Profile picture of the author TiffanyVee
    I read the intro post and a few others - so forgive me if I am adding something that has already been mentioned.

    40% in taxes seems like a lot. My household had a six figure income in 2011 and we didn't even come close to reaching that tax bracket. Are you sure you're taking advantage of all your deductions?

    Taxes also ate soul this year and so my husband and I have hired a CPA. His FIRST recommendation has already saved us several thousand dollars on our 2012 taxes and he is WAY less expensive than I expected.
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  • Profile picture of the author econnors
    On this topic, I'm curious as to what the "going rate" is for CPAs in your respective areas? I've been doing my own Schedule C using Tax Slayer for the past couple of years, and I think it may be time for me to give it up. Business taxes are VERY complicated, and I just really hate even dealing with it all. I have the premise of deductions figured out, but a lot of stuff like depreciation, etc. is really foggy for me. I never finished my Accounting class in college...wish I had these days. But, when you make the switch from filing only a 1040 to filing business forms, it's too much of a headache...
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  • Profile picture of the author TMercT
    Trust me taxes in the US kills, if you want to own a business go to Singapore.
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  • Profile picture of the author FNHPWR11
    Talk to a professional. Not the Tax Advice Firm of WF
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