| 12:59 am on Jan 25, 2005 (gmt 0)|
I woulden't class Adsense income on it's own as self employment. However it is an income stream of a website and to a lot of people their website is their business, and their source of self employment.
| 1:45 am on Jan 25, 2005 (gmt 0)|
I'm not a tax advisor, so there may be other ways of dealing with AdSense revenue, but--if you live in the U.S.--the usual way would be to declare your it as business income, using Schedule C. With Schedule C, you add up your business income, add up your business deductions (hosting fees, for example), subtract the deductions from the income, and transfer the result (i.e., your profit or loss) to the appropriate line of Form 1040. You might be able to use the simpler Schedule C-EZ, depending on your business expenses and several other factors.
The best way to figure all this, if you don't want to hire an accountant, is to use a program like TurboTax or TaxCut, which will ask you a series of questions (the "interview") and do all the form-filling and calculations for you. The process is fairly easy, and it has one advantage over sitting in the office of a human tax preparer: Whenever you realize that you need to dig out some more records, you can save the interview and return to it when you've located the materials that you need.
The IRS has a "Small Business and Self-Employed One-Stop Resource" at:
| 2:10 am on Jan 25, 2005 (gmt 0)|
You should receive a 1099 in the mail from Google. You can then use it to report your earning on your personal income tax return.
| 2:14 am on Jan 25, 2005 (gmt 0)|
Adsense income is NOT passive income subject to capital gains taxes. It is regular income that will be reported to you on a 1099.
| 2:22 am on Jan 25, 2005 (gmt 0)|
In fact I received my 1099-Misc from Google in the mail today. Generally it should be reported as SE (i.e., you must pay the extra taxes that weren't withheld) unless you are set up as business.
| 8:59 am on Jan 25, 2005 (gmt 0)|
I am getting the feeling that there are many thousands of people Worldwide who are starting to sweat because they have not been declaring their Adsense earnings for the last couple of years. Naughty ;)
It really is a bit of a no brainer. If it is income it is taxable. I am in the UK but I would assume that this applies just about everywhere except Outer Jibrovia.
| 4:31 pm on Jan 29, 2005 (gmt 0)|
On a related note, if you get income from Adsense you are probably now a business if you weren't one before.
Most municipalities require almost all businesses to get a yearly liscense. You might also be required to get a one-time zoning approval.
| 5:35 pm on Jan 29, 2005 (gmt 0)|
|Most municipalities require almost all businesses to get a yearly liscense. You might also be required to get a one-time zoning approval. |
"Most" is probably an overstatement, and in any case, blanket advice isn't very meaningful on a forum that reaches people in thousands of cities and scores or hundreds of countries.
Depending on the country, state, and community, some types of businesses may be regulated while others aren't. (For example, a city might require licenses or zoning approval for businesses that are visited by the public or that have employees working on the premises, but work-at-home freelancers might be exempted. Also, in U.S. cities, writers and publishers may be treated differently from other home-based businesses, depending on local interpretation of First Amendment rights.)
| 5:44 pm on Jan 29, 2005 (gmt 0)|
efv, correct me if i'm wrong: are you saying that using schedule c to report adsense income is an alternative to paying self employment taxes? pardon me if it sounds like i'm mangling concepts. i will probably get a copy of turbo tax and/or see an accountant in the near future. pair seems to work fairly well, by the way. their techs actually have the ability to answer questions versus just picking up the phone after an hour long wait.
| 5:47 pm on Jan 29, 2005 (gmt 0)|
If your only business income is from Adsense and affiliate programs, I would think twice before getting a business license. Otherwise, many local governments will then look at you as a revenue source from many angles - from property taxes to use taxes to employment taxes. If you are not storing and shipping a product and don't have a facility open to the public, then you should be able to claim that you are a commissioned sales agent rather than a business. It would be best to check with your local accountant or tax advisor first.
| 6:05 pm on Jan 29, 2005 (gmt 0)|
|efv, correct me if i'm wrong: are you saying that using schedule c to report adsense income is an alternative to paying self employment taxes? |
No, you'll still self-employment taxes (the self-employed person's version of Social Security/FICA taxes), but they'll be based on your profit--if any--as calculated on Schedule C.
Let's say you've got a job at a company that pays $50,000 a year. You pay Social Security (FICA) on that $50,000.
During your spare time, you create a Web site that earns $10,000 in revenue from AdSense, affiliate sales, or whatever. You declare that $10,000 on Schedule C, on which you also list $1,000 in legitimate business expenses: domain fees, hosting fees, related software, the "How to Become a Web Millionaire" book that you picked up at Barnes & Noble, home-office expenses (though these can be trickier), etc. The net after deduction of expenses, or $9,000, is your profit. You pay self-employment and income tax only on that profit, not on your gross revenues before deduction of business expenses.
Again, TurboTax or TaxCut will make it very easy to figure all this out. You just answer questions in an interview, and the program does the calculations on the proper forms.
| 7:18 pm on Jan 29, 2005 (gmt 0)|
Don't forget to deduct your subsciption fee to WebmasterWorld!
| 12:30 pm on Jan 30, 2005 (gmt 0)|
thanks for the elaboration efv!
| 4:01 pm on Jan 30, 2005 (gmt 0)|
I don't really understand the reactions to my post about local taxes and regulations.
It seems to me that people who all of the sudden are earning revenues from their websites (presumably earlier run on a part-time or hobby basis) and are wondering how to record it on their national taxes might want to consider that they now also have local liabilities.
I never said or meant that every locality will impose taxes and regulations on these ventures. I never said or meant that if the locality does impose taxes or regs everyone should adhere to them.
My main point is that it should be a consideration if you are starting to generate some significant revenue. If you live in an isolated rural area, or tax liberal country, give it about three seconds of consideration. If you live in a highly taxed or regulated locality, give it more consideration.
There definately seem to be people out there who in 3,5, etc years time or going to find that they have outstanding local tax liabilities from their websites which include hefty penalties for backtaxes. Thought some of these people might want to try to avoid this.
| 8:05 pm on Jan 30, 2005 (gmt 0)|
In the United States for it to be considered a business and not self empoyment don't you need an EIN number?
What we did is we made our company an s corp, takes away most personal liabilities, and you get a tax advantage on the portion of income you claim as profit as opposed to salary. Also you don't get penalized by having to claim any of it as self-employment and pay those extra taxes.
I would suggest going to a lawyer like we did to set it up though, definately worth the cost for us.
| 8:46 pm on Jan 30, 2005 (gmt 0)|
|In the United States for it to be considered a business and not self empoyment don't you need an EIN number? |
A sole proprietorship (self-employment) is a business. Normally a Social Security number is all the taxpayer needs; for information on whether an EIN is required, see: