Taxes are going to eat my soul in 2012

In italy there are no such taxes

yea but i hear Italy is pretty pricey to live in... that and I don't know any Italian

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.

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.

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

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?

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.

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

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.....

40% tax on the income earned is too hectic.Go with a well versed accountant stating your problem and it may get resolved.

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?

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.

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%.

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.

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.

.

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

Taxes Suck! GO with the LLC

Move up to Canada, 40% is nothing.



There should be flat tax with a cap on lifetime taxes paid.

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

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

I would go talk to a real accountant, I didn't pay anywhere near 40%

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.

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

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.

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.

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.

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.

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

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.

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...

Trust me taxes in the US kills, if you want to own a business go to Singapore.

Talk to a professional. Not the Tax Advice Firm of WF