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When and How do I pay taxes for adsense?
chopin2256




msg:1353303
 3:46 am on Mar 29, 2005 (gmt 0)

I am new to adsense. I got my first check for under $200. I have made around $500 total ever since I started the program. I don't have to pay taxes for the $200 do I? When and how do I begin paying taxes? Can I do this through the adsense member login?

 

dbar




msg:1353304
 4:06 am on Mar 29, 2005 (gmt 0)

Disclaimer - This is not tax advice, see your tax professional.

If you are in the US and run a cash basis entity (most likely if you are a sole proprietor or small business) then the $200 received (assuming it was received in 2004) is taxable income for 2004. If it was received in 2005 it will be taxable income for 2005. However you may have expenses to offset it (e.g., hosting, advertising, etc.) which could reduce the taxable income and may even create a taxable loss.

See a tax professional and/or take a look at some IRS publications - [irs.gov...] FYI Keep track of all income/expenses as you go.

JamesR3




msg:1353305
 4:08 am on Mar 29, 2005 (gmt 0)

See [webmasterworld.com...] Technically, yes you have to pay taxes on the $200 unless offset by expenses. Same disclaimer applies as in my post in the other thread.

dbar




msg:1353306
 4:18 am on Mar 29, 2005 (gmt 0)

When and how do I begin paying taxes?

For $200, most likely when you file your personal return (and a schedule C and/or Sch. E). If you have a corporation or it's a little more complicated. If you continue earning money you may have to pay estimated taxes on a quarterly basis. Check out the IRS website for more info, do some research on running a small business, and/or talk with a tax professional.

chopin2256




msg:1353307
 4:27 am on Mar 29, 2005 (gmt 0)

So technically, I have to pay taxes for the low income, however, it would be stupid to do so, is what you are all saying, unless I make more than $5000/year or so? Basically I fill out a tax form, (the one from adsense?)

incrediBILL




msg:1353308
 5:19 am on Mar 29, 2005 (gmt 0)

It would be stupid NOT to pay taxes on the amount, even a LOW amount, because Google sends in a document to the IRS for each and every one of us at the end of the year. If you fail to disclose this amount and the IRS computers flag you for failing to report, you may find yourself getting a full blown audit just for giggles.

Audits are not fun, a trip to a proctologist is less stressful.

JamesR3




msg:1353309
 5:24 am on Mar 29, 2005 (gmt 0)

Where did you get $5000/year? The limit is $600. Google is required by law to report your income to the IRS if it is at least $600. So, there is no question above that limit. Under that limit, why risk being audited for the tax on $200 (which, after expenses, since you could deduct hosting, web design, many things business-related, is probably basically nothing)?

dbar




msg:1353310
 5:45 am on Mar 29, 2005 (gmt 0)

Aside from the legal issues of "reportable income", it's good to build a history (especially if you plan to continue building your business). It doesn't matter if you have a loss for the year (which you may be able to offset against other taxable income) or low income, it still builds your history.

Say for example you had $200 in 2004, $5,000 in 2005, and $50,000 in 2006. Then assume you are full time and want to buy a house or car. You now have a history of business income (which is increasing), which can really help getting a loan. Those loan officers love tax returns for business owners with increasing numbers and two or more years worth.

chopin2256




msg:1353311
 5:49 am on Mar 29, 2005 (gmt 0)

In general, if self employed, I thought if your income was less than $5000, there is no need to do taxes, because that is not that much. Where can I read the info about the $600 dollar minimum?

Who do I send the taxes to? Do I have to tell Google my tax reports? When do I submit my taxes? How often? The check for $200 do I keep it all or do I need to submit taxes for every check I get?

I am new to doing taxes on my own (usually the company you work for takes care of it), and as a new guy who knows absolutely nothing about doing taxes, I dont think Google provides enough information about how to go about doing these taxes. The only thing I can really find is how to submit the tax information, and a link to the IRS website. Why does Google need my tax information if they do not take care of the taxes?

Curiosity




msg:1353312
 6:30 am on Mar 29, 2005 (gmt 0)

In general, if self employed, I thought if your income was less than $5000, there is no need to do taxes, because that is not that much.

Anything over $600 is subject to self-employment taxes. Now, if your total income for the year is $5,000, that's another can of worms... but since that's probably not the case, you're going to have to report your AdSense income. You'll need to pay state and federal taxes on it, including Social Security--which is going to be twice as much as it normally is because when you're an employee, your employer foots half the bill. Under a certain level of income, you can send your self-employment taxes to the IRS and the state government along with your tax return. Over a certain level--which I don't know, sorry--you'll need to send estimated future taxes to the IRS quarterly. The schedule is probably set, and with some digging you should be able to find it on the IRS site. You don't need to tell Google anything about your returns; their involvement is done when they send you a statement or a check.

To answer your other questions, it would be best to find several good books or sites about self-employment taxes. (The IRS site has info that can get you started, but you might wind up even more confused.) Taxes are a big, hairy, complicated pain in the tuckus, and even the lengthiest and most erudite answer on this board isn't going to tell you everything you need to know. Better to start from ignorance and get the right answer than to get a little of the wrong information and go off thinking you know something.

Why does Google need my tax information if they do not take care of the taxes?

So that they can report your earnings to the government.

incrediBILL




msg:1353313
 6:37 am on Mar 29, 2005 (gmt 0)

Why does Google need my tax information if they do not take care of the taxes?

Q1: Who do you report it to?

A1: The IRS and the STATE, just like your other taxes at the end of the year. You will get a 1099 that details your "MISC INCOME" and you file it with your taxes.

Q2: Why does Google need my tax information if they do not take care of the taxes?

A2: You are not a Google employee so they don't have to take care of this. You are considered an "independent contractor" or some such, and the IRS requires any company that pays anyone commissions, referral fees or other income to report it to the IRS.

Here's the Google info on TAXES:
[google.com...]

Let us know if you have any more questions

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