Income taxes

Do they apply to AM?

[johnnie]

Hello,

I was just wondering how you guys cope with income taxes? Do they apply to AM or are commissions pre-taxed?

[disgust]

"Ya gotta make estimated tax payments throughout the year if profits amount to much, otherwise you can get hammered for paying taxes at the end of the year but not as the income was earned. (In the states anyway)"

is this really accurate? I've never heard that before. I just started in AM recently, and I'm making a decent bit (over 100K/year if it stays where it's at), but I haven't filed taxes yet. I figured I'd do it at the end of the year. how often are you supposed to, if not yearly?

also, how extreme can the expenses be? I bought a car recently- I needed it for personal use as well as business. I don't make giant trips or anything, but I do need it from time to time (get to the bank, best buy, etc). can I write something like that off?

[fclark]

"hammered" is not quite accurate. You pay some interest an a little penalty. Many businesses would rather not make the estimated payment -- using the cash to make more money instead, which can more than offset the interest and penalty.

Definitely ask an accountant about this, but don't accpet an off-the-cuff answer, such as "you never want to pay the interest and penalties." Instead, he or she should run through a couple of tax scenarios for you under some of your profitability and witholding assumptions.

Very few things in taxes are black and white.

[gopi]

Disgust , basically you have to pay estimated tax when the tax withholded this years is less than the total tax paid last year .

So if you just started AM this year and also have a day job (so tax is withholded from your salary) generally you dont have to pay estimated tax this year!

[webmastertexas]

Ugh. I'm not looking forward to tax time. I've made enough from AM and ads that I'll be up to my ears in paper. Thankfully I got a little smart and saved all my receipts, but I wish I had done that earlier. :(

[disgust]

thanks gopi. actually, though, I don't have a regular job (never had one, in fact). I'm 18 and a college student.

also, I've just been saving my CC statements as a form of reciept, is this acceptable usually or not?

[rfung]

disgust: if you buy turbo tax or similar program, they can guide you to expensing your car as a business expense - it's all about percentages between personal use and business use.

BTW, if you're making $100k profit, congrats!.. you say you just recently started? how long ago is that?

[conroy]

If you are making that much you should go see a CPA. Otherwise at tax time you may be in for a not so nice surprise. Start reading about small business taxes - they are your biggest expense. Minimizing them should be a priority.

[disgust]

thanks, I'll set up an appointment.

as far as how long ago I started... I started working on a site that at the time I thought was a non-profit deal. it got really popular, tried adsense, eventually started making decent money with that... from there I found some SEO forums/WebmasterWorld and got into more AM stuff and launched some commercial sites. probably about 4 months into things so far (before that I had done work on some sites, but it wasn't with the intention to make money)

[rfung]

let me get this straight..you started 4 months ago and you're making $100k? how many websites would that be?

ok..I feel like such a loser now :)

[Porkchop]

From an earlier post:

Another example: you live at home with mom, who pays for the cable bill, which includes your 3-meg broadband connection ;) from her checking account. She invoices you for that portion, and you write her a check from your business account.

Wouldn't this screw mom and throw up red flags for her. She invoices you? Shouldn't she show income for this so called invoice? What is an alternative solution?

[fclark]

No porkchop, your mom is not in the cable business. She simply has an expense, and you both split it. The business check / invoice is just proof that you paid your part of the bill.

The only way this would be bad for the mom is if she has a business of her own and cannot expense the whole cable bill herself.

Besides, the only red flags are in the form of 1099's you send to your contractors. You don't file one on your mom, I hope.

Same thing happens in our office: one person leases the suite from the building for, say $4k / month. We sublease half of it from them for $2k / month. We're not screwing them, by asking for an invoice and writing a check. While it is cash into their account, it's offset by the cash out to the building.

[disgust]

"let me get this straight..you started 4 months ago and you're making $100k? how many websites would that be?
ok..I feel like such a loser now :)"

eh, like I said, I've really been working on the site for more like a year- but the money just started recently. before four months ago, I wasn't earning a cent. (I had no idea how much my traffic was worth and had no advertisers)

I've got one "flagship" site (100,000+ pageviews a day), then a bunch of smaller ones... probably about 15 or so total, 5 of which are fairly well developed

I've still got a lot to learn, and I'm trying really hard to diversify and not rely on my flagship one. It's working, but I'm not doing nearly as well elsewhere ;)

[rfung]

I've got one "flagship" site (100,000+ pageviews a day), then a bunch of smaller ones... probably about 15 or so total, 5 of which are fairly well developed

I've still got a lot to learn, and I'm trying really hard to diversify and not rely on my flagship one. It's working, but I'm not doing nearly as well elsewhere ;)

Cool, what would be the percent of profits for the flagship vs the other sites? 90-10?60-40? and are these other sites in the same industry as the flagship one?

Just trying to paint a better picture :) not that it will help me much in mine.

[disgust]

it's probably around 90-10 at the moment, yeah. some of the other sites fall into the same (or closely related) niche, but most I try to keep seperate, since I want a stable income from this

I got very lucky with the site. the EPC increased about 5 to 7 times over since I first started, and it's stayed high.