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Most of those of use who run a company and are based in EU-countries will have to have some sort of invoice for their AdSense earnings to be able to put AdSense earnings though their company (which they are required to by law). This invoice has to state certain things, like the name of payee, payer, date, earnings amount, description of earnings type, VAT-code etc, similar to the payslip regular employees get form their company.
As far as I can see, AdSense does not provide anything that even resembles an invoice. Do companies in the US not do this?
I guess I could attach a copy of the bank receipt for the cleared cheque to my invoice just to be safe. Yeah, that would probably work.
Thanks for the suggestion. I don't really think creatively when it comes to accounting (which is probably a good thing...).
An "invoice", at least in the US, is what you send people who need to pay you. I don't invoice Adsense, they pay without a reminder from me. Each of their checks come with a statement you tear off of the check. However, I get checks from some companies without such paperwork, and direct deposit from other companies, with no papper work. In the US companies who pay us money (that is not salary to an employee) supply a "1099" form with the amount we earned during the year (it comes in late January). That form contains all the information the Tax people need.
As for Adwords (and similar advertising), since my web business is just me, that fact that there is no paperwork isn't a problem. I don't have an accounting department to ask for proof that I paid it. I don't know what larger companies do for paperwork to keep their accountants happy.
...put AdSense earnings though their company ...
I do mean AdSense, not AdWords.
I meant the invoice I would send to a client when I ask for payment for work my company (that's me) have performed.
I mean my company. If I didn't put it through the company, I would have to declare it as personal income, which means higher tax.
The 1099 form sounds great! It's really complicated over here, we don't have that, and most companies pay an accountant to do everything that has to do with taxes (and when I have the money, so will I).
Do companies in the US not do this?
No, it is not necessary for any of this information to be provided by Google and U.S. tax law doesn't require it. It does require that Google file information returns with the U.S. Internal Revenue Service (IRS). The IRS then compares these information returns with the actural tax return filed by the company to ensure that the income is being reported. In the U.S., we have no VAT. "Sales taxes" are only imposed and managed at the State and local level.
We the check comes in from Google, our bookkeeper just has to record it correctly on our books and deposit it. Keep in mind I'm being pretty general in my comments.
I don't have to prove to anyone that the money was business rather than personal income. But, since I am my own bookkeeper, just staple the bank deposit receipt and the paper attached to the check to a sheet of paper with the information about where the money came from, and file it.
As long as can get a correct total at the end of the year that is all I need.
I have other income (credit card purchases) that are direct deposit to my bank. So they are listed on my bank statement, along with everything else to do with the business, for my records. It sounds like things are more complicated in the EU.
Remember that the services to countries out the EU don't have any IVA (or VAT in anglo countries), only your personal or business tax (in Spain, the IRPF -personal income tax- or the IS -corporation profits tax-).
And still more, if your Google payments are of a certain (good) amount, be careful because the banks must send a report about the operations in other currencies to the tax service (in Spain, the AEAT, something like the IRS on the USA).
P.S.: if someday I receive a cheque from Google of more than 5000$, the first thing I will do is keep some english lessons; this way I will not spend a half hour writing four lines like these above.
The Google slips with each cheque detailing the amount in dollars however are useless for the tax return as they detail the amount is a foreign currency (US dollars).
When I pay that foreign currency cheque into the bank I get a piece of paper (and the stub on my paying in book) which state what the amount in pounds is. This is the figure I use for tax purposes.
Of course if you are an actual company and trying to get away with paying less tax it would be slightly different. If you have to pay VAT it would be slightly different again - although as a previous poster wrote - I think that payments from outside the EU are AFAIK not subject to VAT. They're subject to local taxes (eg IRS in America)....
Here in the UK you have to keep financial records for seven years in case the Inland Revenue ever question anything. However every year I only need a very few pieces of information to complete my tax return:-
1) Unearned income - bank accounts, dividends - that sort of thing
2) Turnover, expenses and profit.
Of course if you're making more than £15,000/ year I think they require a little more.
Yes, but isn't that about to change or maybe it has already changed? Or is it still only stuff you (in the EU) buy from non-EU-countries that is subject to VAT? It seems strange that it only works one way.
By the way, thanks for all your replies. It's a lot clearer to me now.
What I'd do in this case is after the check arrives, make up a monthly statement listing the amount that had been payable for the given month as an "amount due", the payment information including the date paid, check number and the amount, as the "amount paid" which would leave a zero balance due, then either send off the statement or not.
I'd then staple the AdSense check stub and a photocopy of the entire page we get (including check) with a paid rubber stamp or written in pen with "date deposited" to a copy of the statement and treat it all as a paid invoice.
1) The little invoice in the envelope from Google detailing the amount in dollars
2) The paying in book stub detailing the amount in pounds
3) Roughly an A4 sized sheet that you get when I pay in a foreign currency cheque which details the actual amount in pounds (as well as the amount the bank charges to pay it in). If you get something similar from your bank - couldn't you use that as your "invoice"? It'd save ripping out a paying in stub....