TAX - How does It work With Online Income?

by Big JP
35 replies
Just wondering do you have to pay tax on income from affiliate sales, adsense, or any other ways to make money online? If so how do you go about it? :confused: can you avoid it?
#income #online #tax #work
  • Profile picture of the author Neil Morgan
    You need an accountant.

    Income is income.

    Cheers,

    Neil
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  • Profile picture of the author David Chamberlain
    Hi

    You can't escape the dreaded taxman. You are still trading and making profits.

    In terms of avoiding it, I wouldn't. If you get caught then you will have to pay back what you owe - plus interest.

    You just need to keep records - your income, your expenditure etc. I'd suggest a simple excel spreadsheet. When the time comes (October for paper returns and Jan for Online) You need to get your tax return completed - either by yourself or an accountant.

    If you need any advice on how to keep records - let me know!

    Hope this helps.

    David
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    • Well I guess this really depends on where you live, as each country is different when it comes to tax policies.

      I know here in the United States, we are a web development and Internet Marketing company and at the end of the year, we file to different types of taxes.

      Online Income which is earned as Taxable Income and we have to pay taxes on it , and contract labor, which the person who received this is reliable for.

      The best thing to do, (as told by our accountant) is to take 10-15% out of each piece of income you get online, that way you will have it set back at the end of the year when you have to pay it.
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  • Profile picture of the author Paul Ashbrook
    I see you are from the UK too. I declare all my earnings and expediture on my Self assessment form that I fill in for tax each year. These details are similar to running a traditional business such as being a plumber. Speak to your local tax office about getting the relevant forms.

    If you are serious about setting things up as a business rather than a hobby, you should get your tax situation sorted out. I'm not an expert in this area so you may want to speak to an accountant.
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  • Profile picture of the author Big JP
    Rite, still pretty confused??? How would I determine what I Owe? Would I take all the Income like commisions I recieved, and deduct things that cost me money, like adwords or advertising costs and tools etc. To find out how much is actually profit? I really don't have a clue, Im 19 years old and have never one any kind of taxing before, but I want to earn an income online? What can I do?
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  • Profile picture of the author pjCheviot
    Banned
    Surfbot

    My suggestion would be to visit your local Tax Office - they don't bite and they are there to help!

    Tell them what you are planning to do - and they will tell you exactly what records to keep and what allowances you will be entitled to.

    Hope that helps.
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  • Profile picture of the author David Chamberlain
    Right

    All the expenses that you incur to make a profit are business expenses

    You can also claim a small allowance from working at home.

    So if you ran an adwords campaign and it cost you $100 and you received $400 from it, then you have made $300 profit.

    You will get taxed on your profits, minus your personal allowance £6,475.

    I could write about 3 or 4 pages on this - so it is probably best to talk to me on Skype.

    Thanks

    David
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    • Profile picture of the author Big JP
      Originally Posted by dave_667 View Post

      Right

      All the expenses that you incur to make a profit are business expenses

      You can also claim a small allowance from working at home.

      So if you ran an adwords campaign and it cost you $100 and you received $400 from it, then you have made $300 profit.

      You will get taxed on your profits, minus your personal allowance £6,475.

      I could write about 3 or 4 pages on this - so it is probably best to talk to me on Skype.

      Thanks

      David
      Hi Dave,

      Im actually waiting on a new headset to arrive, as my old 1 has decided to stop working Would you be willing to chat about this once Im able to get back on skype? I would love to hear your comments, you seem to know your stuff about this rite? Thanks
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      • Profile picture of the author David Chamberlain
        Yeh, no problem.

        You can email me - or Pm me.

        I'm an accountant (for my sins), well i'm training anyway, so I know enough!

        Just get in contact and I'll help you out!

        Regards

        Dave
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        • Profile picture of the author RyanLeisure
          I just filed my business taxes this past year for the first time (first year in business). I found a local accountant, and it just so happened she needed a website and some other graphic related stuff. So I bartered with her. She does my books each month and I manage her website and some small IM stuff. Remember to track every little expense. In the US you can deduct stuff like mileage at something like $0.52 per mile. So every time you go to the store to get paper, or run a deposit to the bank or anything, just record your miles. Plus I was surprised to see how many other deductions I had, that I just hadn't thought about or put on paper before (stuff like aweber, hosting fees, blackberry, etc, etc)
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  • Profile picture of the author Tyrus Antas
    If you make money you gotta pay. Some countries however don't tax money earned outside the country which doesn't look like it's your case.

    Can you avoid it? Yes. Start an offshore company that fuels all your projects. Pay yourself from the offshore company. You still have to pay tax on your monthly income but you don't need to pay tax on all your company profits.

    Tyrus
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    • Profile picture of the author hangtimenino
      Originally Posted by Tyrus Antas View Post

      If you make money you gotta pay. Some countries however don't tax money earned outside the country which doesn't look like it's your case.

      Tyrus
      True. I know some third world countries don't have a way of tracking your earnings online and especially outside the country. as long as you dont bring in goods, or export, or get the customs involve, they dont have a clue of your earnings. But then again, you cannt apply for government loans with super low interest rates, if you have not contributed (TAX). and other benefits you get from paying your tax.
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  • Profile picture of the author AmyKay
    Adsense and places like clickbank will send us a 1099 at the end of the year, right?
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  • Profile picture of the author ildarius
    can you avoid it?
    You should declare all your business expenses. This will lower your income and thus the amount of taxes you need to pay.

    Good luck!
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  • Profile picture of the author fan994
    Yep, you have to claim every penny you make. I know a person that makes a living doing rummage sales all year around. And she has to claim the income.
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    • Profile picture of the author Richard Tunnah
      Neil gave you the best advice - get an accountant. It's really as easy and straigh forward as that. Trying to work out your taxes yourself (without qualifying in accountancy) is shear lunacy to be honest. Get your tax wrong and at best you could be overpaying...at worst you'll lose everything and end up in a 6 x 4 for tax evasion.
      Do the right thing now. Call a few local accountants, many will give you a free or cheap intial consultation.

      Rich
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      • Profile picture of the author Hannah McNamara
        I agree - get an accountant, but not just any accountant - one who understands what you're doing and the international aspect of it. Things can start getting complicated when you have to juggle what income has come from where. Also, if you're thinking about becoming a limited company at some stage or you start earning mega bucks, you might have VAT and Corporation Tax to think about as well as income tax. VAT is a whole different ball-game *sigh*
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  • Profile picture of the author PLRwithAlex
    It has been said by accountants:
    "It's not illegal to owe the IRS money, but it is illegal to evade paying them"

    Get an accountant and make sure your business is set up the most beneficial way for you and your situation BEFORE you file your first tax return.
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  • Profile picture of the author Neil Morgan
    or you start earning mega bucks, you might have VAT
    ...or if it's beneficial to register for VAT anyway, depending on certain factors.

    Your accountant can explain that to you also.

    Cheers,

    Neil
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    • Profile picture of the author Alan Mc Donald
      just q question for all you guys who use accountants to calculate tax:

      say for example you pay a writer to write articles and you want to claim it as an expense, will a paypal receipt do as a record of your expense?

      cheers
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    • Profile picture of the author Richard Tunnah
      A wise man (actually my dad - a lawyer for 40 years) once told me a good accountant will save you many times the cost to use him. How right he was! Remember there's all sorts of legal things you could be claiming for that will reduce your taxes that an accountant will advise.

      Rich
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    • Profile picture of the author Hannah McNamara
      Very true Neil - I have been registered for VAT from day one. Various reasons as you say, but as I also do work for large companies they tend to raise an eyebrow if you're NOT registered for VAT.

      Pattaya-Addict: My accountant takes PayPal receipts, but they don't always show the tax element to what you've paid for, so you might need your writer to send you a 'proper' invoice. I normally print out the PayPal Invoice AND the PayPal Receipt, plus make sure they show the currency conversion if you've paid in US Dollars for example.
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  • Profile picture of the author bechelle
    Hmmm, taxes can be tricky, but they can also be simple. I agree an accountant or tax preparer can best advise you on your particular situation. Glad to see Dave helping out. Best of luck.
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  • Profile picture of the author David Chamberlain
    Hi Everyone

    I am getting lots of people wanting tax advice at the moment, so if I don't get back to you straight away then I apologise.

    It may be an idea for me to create a small e-book letting everyone know what allowances they have etc.

    I'll look into it!

    Also, would anyone benefit from some simple excel templates to record their income/expenditure?

    Thanks

    Dave
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    • Profile picture of the author Nahar
      Originally Posted by dave_667 View Post

      It may be an idea for me to create a small e-book letting everyone know what allowances they have etc.

      I'll look into it!

      Also, would anyone benefit from some simple excel templates to record their income/expenditure?
      I think that would be really helpful. I already learned a lot from this thread but I am sure there is much more.
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  • Profile picture of the author Neil Morgan
    Include information on handling the multiple currency situations that we face (for tax and VAT) and that would be useful information for new people.

    Include suitable disclaimers

    Cheers,

    Neil
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  • Profile picture of the author Kishor Karsan
    Hi

    Do you have to be earning a minimum amount to be taxed on it?

    Also I have a Paypal premier account, I am assuming I have to declare my income

    My friend advised me that if I am to run a membership site with a Personal PayPal account then I don't have to declare anything, is this true?
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  • Profile picture of the author Neil Morgan
    Do you have to be earning a minimum amount to be taxed on it?
    We don't know where you live.

    Also I have a Paypal premier account, I am assuming I have to declare my income. My friend advised me that if I am to run a membership site with a Personal PayPal account then I don't have to declare anything, is this true?
    Try it and write to us from jail to tell us what happened.

    Cheers,

    Neil
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    • Profile picture of the author Richard Tunnah
      Originally Posted by Neil Morgan View Post

      We don't know where you live.



      Try it and write to us from jail to tell us what happened.

      Cheers,

      Neil
      LOL...but so true Neil. At the end of the day every western government takes a strong line on those that avoid taxes and it's usually a sure way to end up in a 6 x4. Set your business up right with professional help at the start!

      Rich
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  • Profile picture of the author TerryTelford
    Hi

    Talk to an accountant. There are only 2 certainties in life...death and taxes. You can't avoid them, but an accountant will help you defer or pay as little taxes as possible.

    Enjoy your day!
    Terry
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  • Profile picture of the author mr.schutz
    Tax is tax. You need to pay them, even if you go away or far.

    You still need to pay it.

    Good luck!
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    • Profile picture of the author Kishor Karsan
      Originally Posted by mr.schutz View Post

      Tax is tax. You need to pay them, even if you go away or far.

      You still need to pay it.

      Good luck!

      Even if you are getting affiliate commissions, still working on a product of my own, also doing this alongside my Full Time Job?


      I am not trying to avoid it at all, thats the last thing I want to do..just looking for advice.. btw I am in the UK

      Kish
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  • Profile picture of the author Josh Spaulding
    Just like anything else. You have claim what you earn and pay taxes on it. When you get to a certain point you need to pay quarterly.

    Is there a way around it? lol that's not a question you should ask in a public forum
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    • Profile picture of the author Richard Tunnah
      Originally Posted by Josh Spaulding View Post

      Just like anything else. You have claim what you earn and pay taxes on it. When you get to a certain point you need to pay quarterly.

      Is there a way around it? lol that's not a question you should ask in a public forum
      Oh go on Josh......there's only 100,000 odd on here!

      Rich
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  • Profile picture of the author Sam Rodrigo
    Take it from a shirtless guy -- the key is to maximize business expenses into ones daily life, often leading to travel, electronics, etc. that are business expenses.

    Then minimize personal expenses and keep great records on both sides. There is some nice software that helps to keep track of things (Quickbooks, MS Money, etc.) Quickbooks is wonderful, as its integrated with bank records and even authorize net. And at the end of the month just hand a file to your accountant over a coffee. That coffee is also deductible.

    Warren Buffet started out delivering newspapers and took a $35.00 deduction for his bicycle! There are several books on Amazon that are worth their weight in gold when it comes to saving money on taxes as a small business.

    Sam
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