Question about affiliate tax claim - 1099
- Thread starter Nellis
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So basically, if you purchased say a laptop but you are not incorporated, would that be tax deductible as a business expense? I understand that if you spent 1000 and made say 1200 dollars, you would be taxed on 200 dollars.
I need someone to shed some light on expenses on tangible goods such as computers, office furnitures, and etc.
Dan
I need someone to shed some light on expenses on tangible goods such as computers, office furnitures, and etc.
Dan
If you are using tax prep software, it'll ask you for business related expenses, things that are 100% for business you can deduct, you must meet the 2% minimum for a lot things.
Computer equipment, generally will be deducted over 5 years or so (can't remember exactly).
So for your example, you would be taxed on 1000 or so.
Computer equipment, generally will be deducted over 5 years or so (can't remember exactly).
So for your example, you would be taxed on 1000 or so.
What do you mean meet the 2% minimum?
I think cost of computer and the depreciation you talk about are two different thing? Although they both come off before your net gets taxed.
Say I made 5,000(total gross) this year.
My expenses:
Advertisement (PPC): $3,000
laptop:$500
office chair: $120
Hosting fees: $200
Custom script fees: $100
Customer landing page: $100
Total Expense:$3520
Lets not include utilities for the sake of simplicity.
Gross income: $5,000
Expense: $3,520
--------------------
Net Income : $1780
So don't you get taxed on 1780? or am I seriously missing how to add up expense?
I think cost of computer and the depreciation you talk about are two different thing? Although they both come off before your net gets taxed.
Say I made 5,000(total gross) this year.
My expenses:
Advertisement (PPC): $3,000
laptop:$500
office chair: $120
Hosting fees: $200
Custom script fees: $100
Customer landing page: $100
Total Expense:$3520
Lets not include utilities for the sake of simplicity.
Gross income: $5,000
Expense: $3,520
--------------------
Net Income : $1780
So don't you get taxed on 1780? or am I seriously missing how to add up expense?
You are missing something;
Frequently Asked Questions - Keyword: Computer
The cost of the computer and the depreciation are directly connected.
In addition, the 2% I was referring to was related to the fact that some deductions are *only* allowed if they exceed 2% of your Adjusted Gross Income.
It's not quite as simple as taxable income = (earnings - expenses) because the expenses are full of rules that have to be followed, basically conditions on when and how you can deduct.
That all said, if you only made 5k last year and your expenses were that high, you have nothing to worry about
Frequently Asked Questions - Keyword: Computer
The cost of the computer and the depreciation are directly connected.
In addition, the 2% I was referring to was related to the fact that some deductions are *only* allowed if they exceed 2% of your Adjusted Gross Income.
It's not quite as simple as taxable income = (earnings - expenses) because the expenses are full of rules that have to be followed, basically conditions on when and how you can deduct.
That all said, if you only made 5k last year and your expenses were that high, you have nothing to worry about
I'm wondering if I should get a different CPA. The CPA I went to didn't mention how strict they were about expense write-offs. He didn't state how it has to be 100% for business. He said I could write-off 30% of my cell-phone.
How do you know if you need to pay taxes quarterly or at the end of the year? Is it if you make over a certain amount? I mentioned to him how some people suggest to pay quarterly so you don't have a huge amount to pay at the end of the year. He told me that wasn't correct or something and I'm only going to pay at the end of the year.
Although I got an inquiry from another CPA yesterday responding to my ad and mentinoed, "If you have not made any quarterly estimated tax payments for 2007, the last payment is due January 15, 2008. If you owe more than $1,000.00 in taxes when you file your return, you will owe penalties for not having made timely tax payments. "
I'm not sure what I should do, it's taken me months to find an affordable CPA, I don't want to go to a firm so I've been posting on craigslist trying to find somebody that does this work on the side.
If I get audited, does the person that prepared my return also get auditted? Are they responsibile for any errors? How am I supposed to know the laws? I'm not a CPA.
How do you know if you need to pay taxes quarterly or at the end of the year? Is it if you make over a certain amount? I mentioned to him how some people suggest to pay quarterly so you don't have a huge amount to pay at the end of the year. He told me that wasn't correct or something and I'm only going to pay at the end of the year.
Although I got an inquiry from another CPA yesterday responding to my ad and mentinoed, "If you have not made any quarterly estimated tax payments for 2007, the last payment is due January 15, 2008. If you owe more than $1,000.00 in taxes when you file your return, you will owe penalties for not having made timely tax payments. "
I'm not sure what I should do, it's taken me months to find an affordable CPA, I don't want to go to a firm so I've been posting on craigslist trying to find somebody that does this work on the side.
If I get audited, does the person that prepared my return also get auditted? Are they responsibile for any errors? How am I supposed to know the laws? I'm not a CPA.
Here's something a lot of folks do. If you are an American living in America, your mileage will vary, but Canadians, UK'ers etc have good results with this strategy.
1. Form a corp (Inc, Ltd etc) in BVI, Turks & Caicos or Cayman (there are a lot of details to this and a lawyer can explain it to you, depending on your citizenship and your need for multiple shareholders, trustees etc.)
2. Open a bank account in BVI, Turks & Caicos or Cayman for the corp with a leading bank that has online banking and credit cards
3. Get a credit card connected to the bank account in 2. When you travel, make sure you can legitimately call it a business trip and use the credit card to pay the bills.
4. Host all your sites offshore in the Caribbean some place where they have no income tax, strict privacy laws and where only a Bahamas court order will make the authorities do anything about your hosting. Other hosting locations (like Germany, Netherlands, Malaysia, Hong Kong, China) are *not* offshore, have taxes, and have little or no privacy laws or will roll over as soon as a lawyer calls and makes a threat.
5. Sign up for your affiliate programs with the corp in 1. and have the affiliate wire the funds to your bank account in 2. Affiliates will require you to complete a W8-BEN which is for offshore/foreign corps. The W8-BEN means that they sent you all your commissions without any hold-backs.
6. Pay all your corp bills with the credit card in 3.
7. Pay yourself a salary from the corp in 1, declare it as self-employment and take as many deductions as you can get
8. Leave the rest of the money in the bank in 2. and invest it and let the corp make money, tax free, on the investments, interest etc.
9. Yes, you will want to repatriate all the money one day when you are rich and want to retire. Talk to an accountant who specializes in offshore on how to best limit the taxes, when that time comes. If you moved outside the USA by this time, your tax burden will be less. Canadians and UK'ers will pay no tax, Americans will have a tax bill.
Don't lie about your taxes, you will get caught. But with a strategy like the one above, you can limit your taxes and let the extra income grow offshore without tax interference until the time comes for you to cash it all out.
Regards.
1. Form a corp (Inc, Ltd etc) in BVI, Turks & Caicos or Cayman (there are a lot of details to this and a lawyer can explain it to you, depending on your citizenship and your need for multiple shareholders, trustees etc.)
2. Open a bank account in BVI, Turks & Caicos or Cayman for the corp with a leading bank that has online banking and credit cards
3. Get a credit card connected to the bank account in 2. When you travel, make sure you can legitimately call it a business trip and use the credit card to pay the bills.
4. Host all your sites offshore in the Caribbean some place where they have no income tax, strict privacy laws and where only a Bahamas court order will make the authorities do anything about your hosting. Other hosting locations (like Germany, Netherlands, Malaysia, Hong Kong, China) are *not* offshore, have taxes, and have little or no privacy laws or will roll over as soon as a lawyer calls and makes a threat.
5. Sign up for your affiliate programs with the corp in 1. and have the affiliate wire the funds to your bank account in 2. Affiliates will require you to complete a W8-BEN which is for offshore/foreign corps. The W8-BEN means that they sent you all your commissions without any hold-backs.
6. Pay all your corp bills with the credit card in 3.
7. Pay yourself a salary from the corp in 1, declare it as self-employment and take as many deductions as you can get
8. Leave the rest of the money in the bank in 2. and invest it and let the corp make money, tax free, on the investments, interest etc.
9. Yes, you will want to repatriate all the money one day when you are rich and want to retire. Talk to an accountant who specializes in offshore on how to best limit the taxes, when that time comes. If you moved outside the USA by this time, your tax burden will be less. Canadians and UK'ers will pay no tax, Americans will have a tax bill.
Don't lie about your taxes, you will get caught. But with a strategy like the one above, you can limit your taxes and let the extra income grow offshore without tax interference until the time comes for you to cash it all out.
Regards.
You are missing something;
Frequently Asked Questions - Keyword: Computer
The cost of the computer and the depreciation are directly connected.
In addition, the 2% I was referring to was related to the fact that some deductions are *only* allowed if they exceed 2% of your Adjusted Gross Income.
It's not quite as simple as taxable income = (earnings - expenses) because the expenses are full of rules that have to be followed, basically conditions on when and how you can deduct.
That all said, if you only made 5k last year and your expenses were that high, you have nothing to worry about
Your 2% DEDUCTION threshhold is something different. I could be wrong but I am about 99% sure your are referring to Itemized Deductions ( in lieu of Standard Deduction). This has nothing to do with your income. Deductions come AFTER Income is determined. I think most of this topic is considering business expenses that are deducted directly from Gross business income, then determining net income. The process for deductions and exemptions for determining the amount liable for Income ( not to be confused with SE which is determined before any deductions on the whole net business income) Tax is a separate issue.
Your AGI ( adjusted gross income ) is your personal income which is after all business expenses.
For example, you work at a W2 job, You make 50 grand ( or whatever). Thats your income. Your FICA was already paid. You have no business income or expenses. Now you figure out your Standard or Itemized Deductions. Here you have % rules and everything,etc. You take your deductions, dependent exemptions, you subtract and have a number for your INCOME tax liability.
BUT, if you have a business. Lets say you Bring-in 50 grand BEFORE business expenses. That is not your income, that is business revenue. Your income is after all biz expenses. You probably make significantly less after all expenses and thats BEFORE and unrelated to personal deductions. Last year my income was so low I didnt even need to bother caring about personal itemizations.
Does forming an S-Corp really reduce your taxes that much? When I spoke to my CPA based on my estimates I owe about $4K in taxes. After we spoke and he told me if I had an S-Corp and an IRA, my taxes reduced to $29. He did this on his computer with his tax software. Does that sound right?
He said he would do all the paperwork for an S-Corp for $400. He said the state fees and taxes is about $300 and his company charges a $100. Does that sound reasonable? If my taxes really do get reduced that much then it sounds really reasonable.
He said he would do all the paperwork for an S-Corp for $400. He said the state fees and taxes is about $300 and his company charges a $100. Does that sound reasonable? If my taxes really do get reduced that much then it sounds really reasonable.
If your corp is pass-through and you are the only owner, then it's the same as being an individual. That basically means all your business/personal income/expenses are applied to your taxes.
And to JohnCJ, I am indeed talking about itemized deductions, these have to exceed 2% of your "Adjusted" Gross Income. Your last two paragraphs mean the same thing, taxable income = (income - expenses and deductions), this is for business and personal.
As far as having an S-Corp making your taxes $29, that's not actually what's going on there, it's the IRA. What he's basically saying is that you will push any left over income into the IRA which is tax-deferred (you can also do this as an individual you don't need a company for that).
However, if you try and use any of that cash, you'll have to pay the tax on that money right away. (Basically you aren't saving anything technically if you actually need access to that money).
Tax saving tip without setting up your S-Corp, shoot down to the bank and ask them to open a Tax-deductable IRA, drop your money in there and as long as you do this b efore April 15th, you don't have to pay tax on that income.
Disclaimer, I'm not a tax pro and not saying getting a corp is a bad thing, in fact, it's good for many other reasons (liability and cleaner seperation of business/personal), in fact, I have a C-Corp.
And to JohnCJ, I am indeed talking about itemized deductions, these have to exceed 2% of your "Adjusted" Gross Income. Your last two paragraphs mean the same thing, taxable income = (income - expenses and deductions), this is for business and personal.
As far as having an S-Corp making your taxes $29, that's not actually what's going on there, it's the IRA. What he's basically saying is that you will push any left over income into the IRA which is tax-deferred (you can also do this as an individual you don't need a company for that).
However, if you try and use any of that cash, you'll have to pay the tax on that money right away. (Basically you aren't saving anything technically if you actually need access to that money).
Tax saving tip without setting up your S-Corp, shoot down to the bank and ask them to open a Tax-deductable IRA, drop your money in there and as long as you do this b efore April 15th, you don't have to pay tax on that income.
Disclaimer, I'm not a tax pro and not saying getting a corp is a bad thing, in fact, it's good for many other reasons (liability and cleaner seperation of business/personal), in fact, I have a C-Corp.
I spoke to him about just getting an IRA and he said that it wouldn't really help me unless I had an S-corp. He pulled up his tax software and was giving me estimates on how much I'm going to owe, with just an IRA it only came out to $600 reduced. Then he put in that I have an S-Corp with an IRA it came out to $29. I don't know what he's doing then, or why he's saying just having an IRA alone isn't enough.
Okay,
NASE - TaxTalk Q & A
That should explain a bit about what I was talking about before.
As far as the IRA difference, kind of hard to know without getting more details, ask your accountant why the difference because really, there shouldn't be ?
ie. If you are taking out $5k and putting it into an deductable IRA, that's simply 5k less income you'll be taxed on either way you do it.
NASE - TaxTalk Q & A
That should explain a bit about what I was talking about before.
As far as the IRA difference, kind of hard to know without getting more details, ask your accountant why the difference because really, there shouldn't be ?
ie. If you are taking out $5k and putting it into an deductable IRA, that's simply 5k less income you'll be taxed on either way you do it.
Thanks for the info., that make sense what's stated about an S-Corp and I do work on my own. Now, I'm really confused as to what I should do, not sure if I should get a different CPA since it seems the person I'm speaking to doesn't know what he's talking about.
yeah, sounds a bit odd. Now he could be talking about the 6% or so you can save in self-employment tax by drawn an employee-owner salary but I would wary of a CPA that can't clearly explain *why* you get the results.
Sadly, we assume these people are expert in their respective fields, when in reality they usually are not. I once had an attorney cost me nearly 50k with the IRS because they outright didn't know the law. Something I had to correct !
Sadly, we assume these people are expert in their respective fields, when in reality they usually are not. I once had an attorney cost me nearly 50k with the IRS because they outright didn't know the law. Something I had to correct !
I have found that in my situation which sounds more or less like yours forming the S corp at this point would not save me much money. I owe an estimated 14k state and federal this year and if the corp was formed I would owe 13ish. Where I'm at it costs $500-$600 to form the corp. Then not only do you have your personal tax return but a corporate tax return which typically cost $300-$400 if you go to a reputable accting firm.
My accountant advised that when I start hiring employees, or have to invest a serious amount of cash into my business such as leasing office space or buying product at that point it would be advisable to form the corp. None of these which I'll do.
So in my scenario it didn't really play out in my advantage but all situations are different.
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