Adsense year-end reporting to IRS

Adsense and Uncle Sam

[my2cents]

I have a question about Google’s Adsense. At the end of the year, I would imagine that Google will report my earnings to the government – what is the best way to write off some of this income.

The only source of income I have is from Adsense – has anyone had to deal with this and if so, please advise.

Thank you!

[TheNige]

If you bought any equipement related to your website activites, office supplies, business lunches, etc. If you didn't do any of that then get ready to have some of it taken away.

[mack]

Declare your site to be a business. Work out all your expenses. PC, web connection, domain names, hosting hardware etc. class that as your expenses. Then call adsence your income.

Income less expenses = profit.... or loss :(

Might make the number easier to crunch then.

Mack.

[Web Footed Newbie]

Welcome to WebmasterWorld, my2cents!

I'm assuming your in the USA, right?

If Adsense is your only income, better go back to January 1st and get every receipt of expense you can get your hands on.

The IRS, with it's Section 179 deduction - allows up to $25,000 of immediate right off for tangible assets purchased in the year - desks, chairs, computers, hard drives, printers, etc. used in your business.

Unfortunately, being self-employed means you will owe self-employment taxes - about 15.3% of net profits. If you did not pay as you go quarterly (like you are supposed to), you will absolutely have to pay no later than January 15, or get socked with a penalty - so file early! Of course, all this depends on your income - you've got some reading to do on the irs website.
Hope that helps, WFN

[cyberprosper]

Get some good tax software to do your taxes with or get an accountant.

You will not have to pay any penalties. Pay your taxes by the 15th. After that, though, you will have to pay quarterly. If this is a part time source of income, you can elect to have your full-time employer withhold more from your paycheck next year (or this year too).

You are going to hate doing your taxes. If you are making a lot of money, you will see how unfairly the tax system in the U.S. really is. Just think, if you are lazy and do not contribute to society, you are taxed at 15%. If you try to make something of yourself, the Man still tries to keep you down by taxing you 38%.

[Blue_Fin]

Wouldn't this topic be better placed on:

"Professional Webmaster Business Issues
This forum is for the business end of doing business."

since it really has nothing to do with AdSense specifically?

[my2cents]

First, let me say thank you for all the advice!

When I stated that this is the only source of income, I was referring to the income from the website. I do have a full time job and I like the idea of having more withheld from my full time employer.

A few more questions if you don’t mind –
1) Do I still have to file quarterly?
2) Should I do a sole proprietorship, LLC, incorporate, etc?
3) Google has never asked for my social security number, so I am wondering how they will know to report my taxes. I have yet to receive my first check, but I can tell it will be substantial enough that I need to do this right from the start! – I have been using Adsense a little over a month now.

Again, thank you all for your advice and tips!

[Jenstar]

A few more questions if you don’t mind –
1) Do I still have to file quarterly?
2) Should I do a sole proprietorship, LLC, incorporate, etc?

When it comes to tax advice, you are best to discuss it with an accountant to determine what is the best decision for you. Even the state you live in can make a difference when it comes to these issues.

Sometime before the end of the year, Google AdSense will prompt you for tax information.

Please take a moment to read the AdSense terms:
[google.com...]
and take note of section 12, which has much more detailed tax information and what Google will be requiring from you.

[cornwall]

I suspect "my2cents" is one of our regular posters, who normally posts under a name that could be "traced" and want anonymity on tax questions ;)

[Whiffle]

I'm curious if being a sole proprietor vs self employed will allow me to avoid the 15% tax mentioned in this discussion? Thanks!

[kevinpate]

> .. if being a sole proprietor vs self employed will
> allow me to avoid {the taxman}

In a word, no

[br33526]

If google doesn't have your SSN yet, I don't think they can report your earnings to the IRS.

[miles]

I had this same problem with CJ. At one point they would not pay me till I sent in my W-2 and other informaion for getting robbed....ahem...I mean taxed.

[Jenstar]

From the Google AdSense terms:

To ensure proper payment, You are solely responsible for maintaining accurate contact and payment information associated with Your account, including without limitation a valid tax identification number and/or Form W-9 in the case of U.S. taxpayers and a fully-completed Form W-8 in the case of non-U.S. taxpayers.

I would take this to mean that once they decide to ask for this information, that you will not receive any more payments from them until you give it to them ;)

[yoyo8]

So if I'm not registered as a business, there is absolutely no way for me to write any expenses off? That's not fair. Adsense offsets my hosting costs almost perfectly. I should be able to write off my hosting expenses at least. Any workaround?

[alika]

Yoyo ... you need not be registered as a business, but you must be able to prove that your business is for profit, and not just a hobby.

Below is IRS' guide on business expenses. Read them before Apr 15 so you can understand what you can and cannot deduct as expenses
[irs.gov...]

[jrstark]

You don't need to prove you are not a hobby if you aren't claiming a loss. If your adsense income covers hosting fees, just claim those. Talk to an accountant obviously, but if you are showing a profit you are in business.

If you start claiming ISP, phoneline, rent etc. to show a loss, that will get complicated and you will have to look at percentages for business vs. personal use etc.

[kwasher]

I'd swear it says that paying taxes in the US is voluntary, and was a short-term law to offset the costs of WW2 or something. Ha Ha Ha... just try to NOT pay them. Bloody robbers... I mean IRS.

[JollyK]

For what it's worth, I claim hosting fees, domain registration fees, Adwords advertising, eFax fees, and anything else that is directly related to the generation of the Adsense (and other) income from my sites.

I don't claim home-office use (that would be a nightmare, especially since I work from home on my regular job), vehicle use, or anything of that nature.

For income, I claim donations (from "support the site/donate with Paypal" or whatever) as well as documented income from Amazon and other places that I get money from whether or not I get an actual 1099 or other tax form that shows it. (I put it under "miscellaneous income.") A lot of people say that if you don't get a 1099 or W2 for the income, you shouldn't claim it, but in case of an audit, I figure they could find it out, so I go ahead and claim it anyway. That's an individual decision, though.

You might also go to the IRS's Withholding Calculator:

[irs.gov...]

I estimate how much I'll make on Adsense, affiliate commissions, and donations, and plug it in there. (I count website income as another job for the calculator.) Then, I have extra withheld from my day job's check. That way, at the end of the year, I don't end up owing money, and I don't have to file quarterly. As I understand it, as long as you pay enough tax to cover the extra throughout the year somehow, you don't have to file quarterly for the extra. I'm not a tax accountant, though, so you might double check this to make sure.

Regardless of what people say about giving the government a free loan by withholding too much, I *always* try to have at least a little too much withheld and I try to overestimate the yearly total of what I'll make on my sites by at least a couple hundred to a couple thousand dollars, depending on what the income stream looks like. It doesn't make that much more come out of my check, but I also don't get hit with a big tax bill at the end of the year. Also, keep in mind that if you owe taxes over a certain amount, you may have to pay penalties for not filing quarterly and paying enough, so it behooves you to either pay quarterly on what you actually have, or have enough extra withheld to cover it.

As a side note, the reason they want you to show that it's intended to be a for-profit business is that if you have a business loss, that gets taken off the top of your regular income. That's before any other deductions to your regular income, and whether you can itemize or not, so you could have a massive loss from your "business" and end up owing no tax from your "day job." That makes the tax man suspicious. :-)

I've also been using some kind of tax software (Quicken? Turbo Tax? I think Turbo Tax) because even the cheapest edition has all the Schedule C, Self-employment, and other extra forms to do a business on top of your regular job. If you can't afford an accountant, I've found that paying the 20 or 30 bucks for a decent tax program is totally worth it.

<disclaimer> I am not an accountant! Or a tax lawyer. Or anything even close. I don't even play one on TV. I'm just a person who's had a certain amount of side income from websites for a few years and who does their own taxes. </disclaimer>