Forum Moderators: skibum
I was just wondering how you guys cope with income taxes? Do they apply to AM or are commissions pre-taxed?
I have set up a dba for my affiliate business. My commissions are counted as income. All office supplies, computers etc. are my expenses. The way the cpa explains it is I am only taxed on the difference (if my income is more than my expenses for that year).
rfung, you are definitely correct that owning a business is the best way to reduce income tax. Your biggest single expense is income tax, for most people. Those who don't expense creatively are wasting money.
If you make more than $600.00 in a year from an AFF program or network, the IRS will know about it and depending on the amount and how late the payments are the tax man will rob you blind and naked if he can.
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)
I don't know in which dreamworld I gathered that wisdom ;)
So if you make $2k in revenue, and you have $2k in expenses, you're paying 25%(or whatever bracket you are in) on the difference.
I dont think there's anyone who owns a business who doesn't creatively find ways to deduct expenses in order to reduce the profit. That's probably why the IRS set taxes so high come to think of it :)
I report all my earnings. I think it's foolish to take a chance that the IRS won't catch you. If they do, you'll wish you had claimed it all.
wellzy
Also, I find that most CPA's are too expensive to handle all the bookkeeping, and they often have their associates or employees doing the actual work anyhow.
The best approach is to have an experienced bookkeeper set up your books, do the journal entries, balance your accounts, and file the monthly payroll taxes. Then you can take your books to the CPA at tax time.
Dave.
Income - hosting - PPC ads - some misc stuff - publications - conferences and travel - home office if you have an extra room dedicated to it or you can make it look like it when the IRS folks come out to see the "home office" and there are some other deductions as well.
Once again, it's an accountant who can show you how to take advantage of the loopholes without falling foul of the Inland Revenue.
Question: Can you deduct phone bills/Internet bills/electricity bills if it's not in your name, but you pay for it? Or would you have to change it to your name?
For expenses in another name, write a check to that person from your business account and note what it's for. Then expense it at tax time. Example: our business auto and personal auto insurance is on the same bill. The check to the insurance company is written for the full amount for both cars from the personal account, and then I invoice the business for the insurance on the benz, and the business reimburses our personal account with business check. The business portion is expensed.
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.
You can expense home office supplies (coffee, paper towels, fish food, etc.) Be creative.
Oh, get a separate business account.
It's tricky getting your own home classified as a business expense in the UK, and ideally you would have a company agreement where the company pays you rent for the office space at a "market rate".I've heard of people doing it in a simpler way than that, but I can't remember what it was. We badly need to see our solicitor about wills etc and I also think we are supposed to own the house as "joint tennants" if we are working there.
Had a burst of enthusiasm for getting an accountant a couple of months back but none of them got back to me and I lost interest.
I'd second the recommendations for an accountant. I found one using accountantsworld.com in the US. Most will offer a free hour consultation and you can get a sense of whether or not you'd like to work with them.
If you are claimimg a proportion of rent/utility bills etc because one room in your house is used as an office, this may lead to complications if you sell that property.
In the UK, a private home is exempt from capital gains tax - but a business is not.
In the above example, you could find that you would have to pay tax on 1/7 of the capital gain in the value of your house - assuming you sell it for more than you paid for it.
For this reason, I don't bother claiming expenses for my 'office'.
