Is the Taxman clueless to goings on of the online kingdom?

42 replies
I am starting to earn my first wages from the internet due to everything I have learned here(thank you WF).

Wether it be some money from eBay sales, a cheque from a local business you helped or affiliate commisions - do people get around to paying ALL your tax?

Not that I am not paying tax or anything, it's just that when you've just sold some ps2's on eBay and made a decent £300 profit, it takes a very honest person to inform the tax office. Furthermore, I am not even sure whether I need to pay tax for it. I have saved some money to be paid as tax but I am so temped to spend it.

I want to know, how people on WF organise themselves to be able to pay tax. Do you calculate and deduct as soon as you get your money?

Also do you need to keep a cash book like a small business owner?

I am really confused and I came to the assumption that no-one on WF cares about this because there arent many threads about it.

I would like to here from successful IMers who have been on the seen for a while and find out how they get around to organising themselves.
#clueless #goings #kingdom #online #taxman
  • Profile picture of the author drewfioravanti
    I got tax forms from Amazon, Clickbank, Spreadshirt and I think LinkShare and someone else...I know I got 5 of them....maybe Google. I don't know but I know I have at least 5 tax forms sitting in a pile.
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  • Profile picture of the author shafto
    What you have to remember is that all online payments are recorded forever. So if at some point in time you get investigated then they will probably find all your income.

    My story is that i started making money online from 2006, started with a low amount that quickly became more than my regular income from a well paid job. Although the taxman never came after me, i realised that i had to declare it or i would be looking over my shoulder for the rest of my life.

    My advice, if it's a small amount like you mentioned then forget it, but if it becomes more and regular then declare.
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  • Profile picture of the author onSubie
    Hi

    It depends on the country so check with your tax office.

    Many countries (like Canada, don't know about the UK) get income reports from PayPal and eBay for citizens that pass a certain threshold.

    I think it is $5,000 or $10,000 but if you make that much or more through PayPal, that income is reported to Canada Revenue by PayPal.

    For smaller amounts, $100 here or $100 there, you are supposed to report it, but there may not be a mechanism to catch you if you don't.

    If you are making thousands of dollars online and not reporting it, you could get into tax trouble.

    The best way to be organized is keep track of your income and expenses so if you have to report anything or are audited, you have the paperwork to back up your claims.

    Mahlon
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  • Profile picture of the author Richard Tunnah
    Many of the online companies like paypal, clickbank, amazon can and do release details of your earnings to local tax authorities. So my advice as always is to get an accountant who will help you with your questions. Most do an intial consultation free anyway.
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  • Profile picture of the author danb12
    If you work online for yourself in the UK, you need to register as self employed.

    You then need to find a decent accountant that will help with your tax.

    Always put money aside, not 100% of the money in your bank is yours, remember that.
    You should be holding back at least 20% for tax (depends what your earning), so when your bill comes in, and its save 14% of your earnings for the year (coz your great accountant saved you loads) you will have a nice lump sum to play with. Its always in horrible January is self assessments, so I always use the money I've saved to go on holiday for a few weeks.

    My accountant is great, and yes as your working online, all must come into a bank account, so it will be seen. No cash in hand jobs online.

    You will get great tax savings for your office room, electric, phone line, gas etc...
    This will take your tax bill down by 6-7% if you find the right guy.

    He might cost you £500 a year, but can save you up to £3K+ depending on what your earning.

    Remember you don't need to pay tax if you earn under £8K.
    If you only declare your earning £8K per year, with no other earnings they will check you out because you can't live on 8k per year in the UK. Impossible and they know it.


    Or, move to Jersey - TAX FREE!!
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    • Profile picture of the author Alexa Smith
      Banned
      Originally Posted by danb12 View Post

      Or, move to Jersey - TAX FREE!!
      I'm afraid not. Jersey has had 20% income tax (flat rate) for many decades, and still does. (And Guernsey does, also. Sark has none, but then again it also has no mains water supplies, mains drainage, and a number of other services taken for granted elsewhere).
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  • Profile picture of the author salegurus
    Pay your taxes now and avoid any discomfort later.
    Besides, if the earners don't pay taxes how are the freeloaders going
    to get their monthly handouts?
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    • Profile picture of the author danb12
      Originally Posted by salegurus View Post

      Pay your taxes now and avoid any discomfort later.
      Besides, if the earners don't pay taxes how are the freeloaders going
      to get their monthly handouts?

      The BUMS of the world you mean... LOL
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  • Profile picture of the author seasoned
    Well, the way it SHOULD work, and the way it works in the US, is that you pay for what you MAKE! If you made £300, you have to pay for that. The UK MIGHT be ignorant of that but don't bet on it. They probably aren't in the US either. The IRS(US) is having every little avenue SHUT. If you don't report the income, they will come back.

    And if you entered your UK TIN anywhere on your account, your income likely WILL be tied to that and there is a good chance that it WILL be reported.

    Steve
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  • Profile picture of the author bluecoyotemedia
    thank goodness for business expenses
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  • Profile picture of the author talfighel
    Every year, I actually take all the money I earned and all the money I spent online and take that to my accountant. It is always a good thing to disclose how much money you made and spent if your money making efforts online are your only source of income.

    If you are doing this on the side and are earning small money then it is your choice to disclose to them that you made money.

    Everyone is different.
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  • Profile picture of the author Jeff Schuman
    In the United States the tax man is not clueless. It is the Congress that is clueless and spends about $1 Trillion a year more then they collect.

    Smart business people, including Internet marketers, incorporate in a state like Nevada, Wyoming, or Delaware where there is no state income tax. Then they and write off every legal thing they can. Until our congress mena nd women pull their head all of the way out, and gets a national sales tax or consumption tax, you have to play the game with the cards you have been dealt.
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  • Profile picture of the author tpw
    At the beginning of 2012, there were a number of threads about this topic, because starting in 2011, PayPal was required to report earnings that met a certain threshold to the U.S. Federal Government.

    I have so far received my tax statements from Google, Amazon and another 12 companies from whom I received commissions in 2012.

    Years ago, it would have been possible to dodge the tax man. These days, it isn't really possible at all.

    Since Ebay owns PayPal, I cannot imagine that you will not also receive tax forms from Ebay.

    Only a fool dodges paying the IRS, because tax evasion is a felony and getting caught could have a price to pay in jail time and fines.
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    • Profile picture of the author Jeff Schuman
      Originally Posted by tpw View Post

      At the beginning of 2012, there were a number of threads about this topic, because starting in 2011, PayPal was required to report earnings that met a certain threshold to the U.S. Federal Government.

      I have so far received my tax statements from Google, Amazon and another 12 companies from whom I received commissions in 2012.

      Years ago, it would have been possible to dodge the tax man. These days, it isn't really possible at all.

      Since Ebay owns PayPal, I cannot imagine that you will not also receive tax forms from Ebay.

      Only a fool dodges paying the IRS, because tax evasion is a felony and getting caught could have a price to pay in jail time and fines.
      I agree Bill. I would never dodge the IRS. The key is to legally take advantage of tax laws, deductions etc. I would rather lower my tax bill and give some of the savings to a couple of meaningful charities then give it to Harry Reid and company and have them waste it on things I do not believe in. That is just my personal feelings anyway.
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      • Profile picture of the author Farish
        I some things I like to add to this thread (United States wise).

        If you accept credit cards, all credit card processors are now required to send you a 1099K statement. This also includes payment processors like paypal.

        The statement must be used under 1 of 2 conditions.

        20,000 dollars or more in transactions or 200 transactions done in a single year.

        One of the reasons why this started was not about reporting your credit card income, but for the IRS to look at your Bank Records and compare what your credit income is with your other forms of income.

        Whole in the wall restaurants is a classic example of this because they are known not to report their cash income. Now the IRS can state well you brought in 100k in Credit Card income but nothing else. Your restaurant costs about 300k a year to run? Why did you not report that other income?

        This is start of a new trend to find out how much money you maybe hiding.



        Also about incorporating in Tax Friendly states may not be as viable as it use to be.

        California now passed a law that if you have any physical presence in their state even if your corporation is based on Nevada they can taxed you based on the income you generated within the state regardless of where your corporation is located.

        Other states are expecting to move to this system(some already have). So check the state of your living residence because they maybe able to tag you for this now.

        I do not know how this is attach to physical goods versus digital goods but this is something to consider this year.


        This above is just the tip of the iceberg and what I spent about 7 hours with a bookkeeper and CPA discussing just the other day.
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  • Profile picture of the author theaccountant
    Well folks I have been waiting for and expecting a post on this issue. Feels like a sting to me . Pay your taxes because the uk taxman / us IRS have you firmly on their radar
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  • Profile picture of the author MikeTucker
    You could also just pay your taxes because, you know, it's the right thing to do?


    "I like to pay taxes. With them I buy civilization."
    -- Oliver Wendell Holmes
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  • Profile picture of the author Michael Ten
    Don't lie on your taxes. Report all your income. Be honest.
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  • Profile picture of the author theaccountant
    The thought of folks hurriedly removing their website rule from their sig makes me smile
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    • Profile picture of the author theaccountant
      Too late if they are watching us which they are . Funny if people boasts about making a million in one month lol
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    • Profile picture of the author theaccountant
      Originally Posted by theaccountant View Post

      The thought of folks hurriedly removing their website rule from their sig makes me smile
      You will get link juice for sure then
      It will not only the google bots following the backlinks to your site

      Better to come clean of your own accord
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  • Profile picture of the author entry
    Originally Posted by Chris Kent View Post

    If you read the papers you will know that in the last few years, HMRC are clamping down on everything.

    Declare all your income. IM income is electronic and if you ever get investigated they will nail you.
    I heard this too.

    They are stricter, on internet marketing?

    HMRC can find out via paypal, if people are getting $$ into their paypal accounts, if they don't declare it ?

    can you show some resources of articles please
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  • Profile picture of the author pheonix44
    I am waiting at the moment to get my tax information from PayPal. I have a CPA to help me with taxes.
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    • Profile picture of the author 28pounds
      Within 3 months of trading, always declare self employed and record income and expense and put say 30-40% aside even though the tax in the UK is 20% because they like to take more than you think as an estimate what you may make the following year.

      I got into debt and defaults against me back in 2007 because I was late with tax.. took ages to sort out.

      Always do it properly as all they need to do is check who a merchant pays commissions to, and if you are not on their books then they WILL come after you

      Robbie
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  • Profile picture of the author MartinPlatt
    You're not really taking running a business seriously if you do not declare it - it's part of the cost of running a business.

    On the other hand if you do have things set up correctly - a decent business structure, an accountant, you can also claim again that tax that you might pay.

    It's also a bit odd that you would try to spend all your cash - that's another story though I guess. Maybe have a read of the richest man in Babylon...
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  • Profile picture of the author theaccountant
    The increasingly apparent line of attack against Internet traders by global tax authorities is if in your sales pitch/ wso you say that you made say 10000 sales and you are only declaring for 2000 and they see this difference in the claim and the tax declaration you will be investigated. You may be able to prove to them that your claims were a bunch of marketing lies but the hassle and inconvenience of an investigation is something you don't want to deal with and there is good chance they will dig and dig until they do find something on you

    All you need is some hacked off warrior to report you anonymously online and that surely will get the ball rolling
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    • Profile picture of the author seasoned
      Originally Posted by theaccountant View Post

      The increasingly apparent line of attack against Internet traders by global tax authorities is if in your sales pitch/ wso you say that you made say 10000 sales and you are only declaring for 2000 and they see this difference in the claim and the tax declaration you will be investigated. You may be able to prove to them that your claims were a bunch of marketing lies but the hassle and inconvenience of an investigation is something you don't want to deal with and there is good chance they will dig and dig until they do find something on you
      If you are selling a get rich quick scheme, management scheme, etc... and you imply that you are making a significantly greater amount of money than you are, but don't declare it as income, YOU ARE CLOSE TO A FELON, in the US! Pick your poison!

      1. OH, I was just kidding, marketing ploy, "EVERYONE DOES IT!"! FINE! You have violated FTC laws, and they are to SUE you! This may include up to and PAST paying back ALL income so derived, and giving up your customer lists.

      2. OOOPS, I just didn't report it! Well, they will likely audit you, charge you the difference with penalties and interest, and punishment could even include jail time.

      Of course, if you made $90K, and spoke of a six figure salary, maybe you could avoid #1. If you made $90K, and only reported $80K, maybe the IRS will take it easy on you as well. But a significant difference? Well, let's just say people may not be happy.

      Steve
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      • Profile picture of the author theaccountant
        Originally Posted by seasoned View Post

        If you are selling a get rich quick scheme, management scheme, etc... and you imply that you are making a significantly greater amount of money than you are, but don't declare it as income, YOU ARE CLOSE TO A FELON, in the US! Pick your poison!

        1. OH, I was just kidding, marketing ploy, "EVERYONE DOES IT!"! FINE! You have violated FTC laws, and they are to SUE you! This may include up to and PAST paying back ALL income so derived, and giving up your customer lists.

        2. OOOPS, I just didn't report it! Well, they will likely audit you, charge you the difference with penalties and interest, and punishment could even include jail time.

        Of course, if you made $90K, and spoke of a six figure salary, maybe you could avoid #1. If you made $90K, and only reported $80K, maybe the IRS will take it easy on you as well. But a significant difference? Well, let's just say people may not be happy.

        Steve
        I am on uk and your points are revealing there are in my opinion let us just say an increasing number of UK based presenters making extra ordinary sales claims.
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      • Profile picture of the author entry
        Originally Posted by seasoned View Post

        If you are selling a get rich quick scheme, management scheme, etc... and you imply that you are making a significantly greater
        amount of money than you are, but don't declare it as income, YOU ARE CLOSE TO A FELON, in the US! Pick your poison!
        You mean if you earn $80,000 , you can declare 'any amount' of it as an income?

        that everybody does?

        you mean many people say they are making $80,000, when they are actually making $50,000? why does EVERYBODY do this?

        or is it a loophole?


        and if you earn $80,000, Why do people declare LESS than $80k as income?

        and when do people declare MORE than $80K as income? in which instances
        ?
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        • Profile picture of the author theaccountant
          Originally Posted by entry View Post

          You mean if you earn $80,000 , you can declare 'any amount' of it as an income?

          that everybody does?

          you mean many people say they are making $80,000, when they are actually making $50,000? why does EVERYBODY do this?

          or is it a loophole?


          and if you earn $80,000, Why do people declare LESS than $80k as income?

          and when do people declare MORE than $80K as income? in which instances
          ?

          Do you work for hmrc or are playing dumb?
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        • Profile picture of the author seasoned
          Originally Posted by entry View Post

          [FONT=Arial][SIZE=2]You mean if you earn $80,000 , you can declare 'any amount' of it as an income?
          NOPE! I mean that if you fail to properly define a rather small difference, they won't immediately consider you a scam artist or evader. Otherwise, they WILL!

          that everybody does?

          you mean many people say they are making $80,000, when they are actually making $50,000? why does EVERYBODY do this?

          or is it a loophole?
          It is called the double standard! Make $60K, say you make $100K to the public, to get them to buy your product so THEY can make $100K, and tell the IRS you made $20K so you can maybe get a subsidy. Of course, try THAT and, if caught, they will likely throw you in jail to wait for trial!

          Steve
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        • Profile picture of the author theaccountant
          Originally Posted by entry View Post

          You mean if you earn $80,000 , you can declare 'any amount' of it as an income?

          that everybody does?

          you mean many people say they are making $80,000, when they are actually making $50,000? why does EVERYBODY do this?

          or is it a loophole?


          and if you earn $80,000, Why do people declare LESS than $80k as income?

          and when do people declare MORE than $80K as income? in which instances
          ?
          On second thought sounds like you are in the US and may need to contact your local CPA
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          • Profile picture of the author Snow_Predator
            Taxes are evil! Don't pay them!
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            • Profile picture of the author CyberAlien
              Originally Posted by Snow_Predator View Post

              Taxes are evil! Don't pay them!
              I have someone in prison I would like you to pass on a message to
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  • Profile picture of the author WallyKyle50
    Friend, I'm of the "End the Fed" breed...Fed who? Tax what?
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  • Profile picture of the author goodfella22
    usually you need 10k+ in income to file for taxes
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  • Profile picture of the author CindyPink
    i think you got to hire a virtual assistant. go to odesk or elance, that person will have to do all this work for you.
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  • Profile picture of the author JasonBennet
    For me personally, I will just report it to prevent any potential problems from happening. If you are paying more in taxes, doesn't it mean that you are making more money too
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