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Tax time, how much have you been able to expense?

     
9:32 pm on Apr 11, 2006 (gmt 0)

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Adsense being what it is, you can kinda sit on your butt and just collect the money. Meaning (in my case) I don't have that many expenses, compared to the money I've made!

So, just throwing it out there, and trying to avoid pundits who think 'the more taxes, the better', strictly speaking of _real_ expenses compared to your real income what kind of ratios are you getting? I'm basically paying 20% on the income I've made, which is kinda of, well, a lot, and no matter what expenses I'm coming up with (single guy, no investments) I'm really going to pay through my nose.

9:50 pm on Apr 11, 2006 (gmt 0)

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How much?

Not enough!

9:55 pm on Apr 11, 2006 (gmt 0)

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i've been waiting for someone to bring up this topic..

i'm new to adsense as of 2006, so i wont need to know the answer until i file next year -

Lets assume i make $1,000 from Adsense in all of 2006 (hey, i'm new.. and realistic).
I plan on deducting my hosting fees, and some minor advertising fees.. Now, lets say that i needed to purchase a new computer for my "online business" (i really do need one).. and let's say this new computer costs $2,100 (Apple iMac 20") - can i deduct that cost even though it's more than i actually made? will this set off any red-flags with the IRS man?

9:59 pm on Apr 11, 2006 (gmt 0)

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Can't give you an exact percentage. AdSense is just one revenue stream for us and many of our expenses overlap (e.g., server co-location/bandwidth, AdWords, interest, domain name renewals, etc.) as they apply to several revenue streams. We've also got the usual overhead expenses (salaries, retirement plans, insurance, etc.).

We're on extension as we haven't compiled all the numbers for last year, but it looks like another year of income/expenses more or less balancing out so we don't have to pay taxes. :)

10:02 pm on Apr 11, 2006 (gmt 0)

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Tearabite,
You have to depreciate capital items and spead the "expense" over several years. Within limits, you can elect to take up to the full amount in the year purchased. But if, like in your case, you're not making a profit, it often doesn't make sense in taking it all at once. (Many, many other factors can influence that, so discuss your specific situation with a professional tax advisor.)
10:10 pm on Apr 11, 2006 (gmt 0)

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well when i say adsense, i also include some affiliate income, etc.

But the basic bottom line is, no matter how much you spend on hosting (say, $50/month * 12 months), if you hit the proverbial jackpot, that hosting will bring ya 10 hits or 10,000 hits.

To the exception of some minor adverstising on adwords/overt while I was experimenting with it, hosting is pretty much the only expense I can honestly claim as a consequence of my business.

Of course I also have a new laptop, a 19" screen, etc, but these are as much just expenses I would have made and not fully because of the business :)

Am I the only one who spends very little and collects a ton of money (relatively speaking)?

10:22 pm on Apr 11, 2006 (gmt 0)

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Of course I also have a new laptop, a 19" screen, etc, but these are as much just expenses I would have made and not fully because of the business :)

They're for the business.

Repeat after me:

They ARE for the business.

10:27 pm on Apr 11, 2006 (gmt 0)

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15% of my new drive way, water bill, trash bill, electric bill, new chair, new rug,etc.
10:34 pm on Apr 11, 2006 (gmt 0)

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My biggest expense is travel (i.e., researching the places that I write about for my travel-planning site). It's a fairly small percentage of my gross revenue, but it still adds up to a significant amount of money over the course of a year.
11:01 pm on Apr 11, 2006 (gmt 0)

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Am I the only one who spends very little and collects a ton of money (relatively speaking)?

I'm the same. Hosting costs, broadband connectivity, and of course business-related hardware are my only expenses. Like you're saying, hosting costs are relatively fixed. $50/month could bring you $1,000/year, $10,000/year or $100,000/year in revenue. That's one of the things to love about this business.

Who else out there is getting stung for not having paid their estimated taxes? I'm staring at a TurboTax screen telling me I owe quite a bit this year. =(

And if anyone cares to share, what exactly are those penalties I've heard about? =/

11:52 pm on Apr 11, 2006 (gmt 0)

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Who else out there is getting stung for not having paid their estimated taxes? I'm staring at a TurboTax screen telling me I owe quite a bit this year. =(

I knew I was in trouble in December, so I went out and bought a $60,000 Heavy Duty Pick Up and was able to depreciate the whole amount. The down side is that I am stuck with it for 7 years. I also have a brick and mortar company to where the truck will work out nicely. I wouldn't have been able to buy the truck if it wasn't for Adsense. I still owed for the year but I was able to wipe out 1/3 of my taxable income.

ann

12:00 am on Apr 12, 2006 (gmt 0)

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Ahhhh, those sat hookups! Cost an arm and a leg to get on them and 2 toes to pay monthly fees....wyweb---it IS for the business!

I have had it all of 30 minutes and couldn't be happier. :)

Ann

12:21 am on Apr 12, 2006 (gmt 0)

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15% of my new drive way, water bill, trash bill, electric bill, new chair, new rug,etc.

Why only 15% of the new chair? Assuming it's in your homw office, you're using it 100% for your business.

so I went out and bought a $60,000 Heavy Duty Pick Up and was able to depreciate the whole amount. The down side is that I am stuck with it for 7 years. I also have a brick and mortar company to where the truck will work out nicely.

Um, are you actually using the truck for your AdSense business? Is your AdSense business the same as your B&M business? Comingling assets creates an accounting headache and is usually just asking for trouble.
12:49 am on Apr 12, 2006 (gmt 0)

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Who else out there is getting stung for not having paid their estimated taxes? I'm staring at a TurboTax screen telling me I owe quite a bit this year. =(

And if anyone cares to share, what exactly are those penalties I've heard about? =/

My penalties for not paying the estimated tax for 2005 aren't that bad, compared to the actual taxes I owe. Something like 2% of the taxes I owe, this according to Turbo Tax...

12:54 am on Apr 12, 2006 (gmt 0)

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You can deduct a new computer purchased outright in one year if used for business. You don't have to spread it out over several years.

Other businesses expenses include hosting, domain renewal, Internet account, postage, phones and advertising.

2:09 am on Apr 12, 2006 (gmt 0)

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I have a hobby site so I can deduct books for research, classes, hobby supplies, national meetings on the topic and so on. If you enjoy your topic it's great to be able to pursue your interest and deduct expenses.

If you don't have any expenses like this for your site what about going to things like PubCon. That's deductable isn't it? It could certainly help your business.

2:29 am on Apr 12, 2006 (gmt 0)

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Tax time, how much have you been able to expense?

Funny you should ask this. My wife answered this for me today:

"not a damn 'nuff" :)

Hopefully she's just missing some receipts. I already paid quarterly taxes to the IRS, but I have a feeling I'm' going to owe more.

3:29 am on Apr 12, 2006 (gmt 0)

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Um, are you actually using the truck for your AdSense business? Is your AdSense business the same as your B&M business? Comingling assets creates an accounting headache and is usually just asking for trouble.

That's one advantage of staying a sole proprietor. One schedule C and One Tax Return. There are many who would probably disagree; however, for me the advantages of a sole proprietorship outweigh incorporating.

3:37 am on Apr 12, 2006 (gmt 0)

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Small business retirement plans are a good way to defer taxes. If you are married and you and your spouse each have your own business then you can each have your own plan.

Most of the major brokerages will help you set them up. I checked around last year and found Fidelity to have the best assortment of plans and the most helpful advisors.

3:42 am on Apr 12, 2006 (gmt 0)

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That's one advantage of staying a sole proprietor. One schedule C and One Tax Return. There are many who would probably disagree; however, for me the advantages of a sole proprietorship outweigh incorporating.

You can set up an LLC and in most cases have even better liability protection than a corporation. Yet you are still treated similar to a sole proprietorship for tax purposes (if you elect to have your company treated as a pass through entity.)

4:19 am on Apr 12, 2006 (gmt 0)

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My question is what classification Hosting should be put under? Is this an Equipment rental? Utilities? or Just a basic office expense?

Internet run businesses just don't fit into the "tax forms" as printed --grrr.

1:51 pm on Apr 12, 2006 (gmt 0)

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If you're referring to IRS Schedule C, you can put Web hosting wherever you think it fits, or you can create a custom item. For example, you could combine your Web-hosting, ISP, and domain-registar expenses under a single heading like "Internet and hosting," which might be wiser than bundling it under a general (and easily abused) heading like "office expense" if you're working from a home office.
1:58 pm on Apr 12, 2006 (gmt 0)

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The company is poor, the company pays everything

90% of car related expenses
30% of energy costs im my apartment
80% of telephone fees
100% of internet ISP, hosting and domain names
100% notebooks and digital camera
What I pay my wife for translating

2:00 pm on Apr 12, 2006 (gmt 0)

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My question is what classification Hosting should be put under

I mad a sub account under "telecommunication expenses"

2:52 pm on Apr 12, 2006 (gmt 0)

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Adsense is a revenue source. It has nothing to do with your expense side. You can offset all "legal" expenses that your business generates. If you are buying assets like computers then you have to depreciate them over 3 to 5 years. Best to talk to a CPA or tax person before doing your taxes for there are special requirments for home office and home office deductions. Also many home office tax returns are reviewed (audited) by the IRS.
3:07 pm on Apr 12, 2006 (gmt 0)

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One schedule C and One Tax Return.

Again I ask, is the B&M business the same as the AdSense business? If they're not related, you should be filing separate Sched Cs.
7:52 pm on Apr 12, 2006 (gmt 0)

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They are related enough to fall under the same DBA name.
7:57 pm on Apr 12, 2006 (gmt 0)

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Thank goodness for self employment 401K. It has higher contribution levels than normal SEP-IRA. I was able to stash maximum allowable level + 25% of business profit. I'm 60 so has no worries regarding penalties when withdrawing the money.
9:22 pm on Apr 12, 2006 (gmt 0)

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Thank goodness for self employment 401K. It has higher contribution levels than normal SEP-IRA. I was able to stash maximum allowable level + 25% of business profit.

hmm...I didn't think about a 401k for self employed. Didn't even know they existed.

Gonna have to look into that. Thanks!

11:18 pm on Apr 12, 2006 (gmt 0)

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This link has some good charts comparing the self empoyed 401k to a SEP contribution limits.

[personal.fidelity.com...]

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