Forum Moderators: martinibuster
Thanks,
Chris
Quite simply, AdSense is income and must be declared on your tax return. It is the same as wages from a job, and thus subject to the same tax tables.
Income from Google isn't the same as wages; it's self-employment income, which normally would be calculated by filling out Schedule C. The good news is that expenses that are directly connected with generating revenues are deductible on Schedule C; the bad news is that the Self-Employment (Social Security) Tax on Schedule C income is higher than the employee contribution to the Social Security Tax on wages.
If the above comments read like gibberish, don't worry: Just buy TurboTax or TaxCut, answer the tax program's onscreen questions, and let the program worry about which forms to use and how to calculate the numbers.
(Note: This advice is for publishers who pay taxes in the U.S.)
Income from Google isn't the same as wages;
True to a point.
It's income. It must be declared. If we go Schedule C then we are starting a business, aren't we? I'm not sure that was the question.
While technically you are correct that it is not the same as wages (thus subject to social security withholding, and everything else), it still must be declared as income.
While I cannot answer specifically for those in NY like yourself, I would encourage you to review the state literature.
While I am certainly not an expert on taxation, I would advise you to put some money away. While additional self employment taxes may apply, I think it would be safe to assume that you should cover the following tax rates:
2004 FEDERAL TAX RATES
Up to $7,000 - - - 10% Tax Rate
$7,001 - $28,400 - - - 15% Tax Rate
$28,401 - $68,800 - - - 25% Tax Rate
$68,801 - $143,500 - - - 28% Tax Rate
$143,501- $311,950 - - - 33% Tax Rate
$311,951 or more - - - 35% Tax Rate
2004 NY STATE TAX RATES
0 to $8,000 - - - 4.000% Tax Rate
$8,000 to $11,000 - - - 4.500% Tax Rate
$11,000 to $13,000 - - - 5.250% Tax Rate
$13,000 to $20,000 - - - 5.900% Tax Rate
$20,001 to $100,000 - - - 6.850% Tax Rate
$100,001 to $500,000 - - - 7.375% Tax Rate
$500,001 + - - - 7.400% Tax Rate
*** Please note though, this is based on information I found online. Certainly not set in stone. Still, it could serve as a guideline for you.
Finally, if this continues to be your sole source of income for more than a year, you could consider paying estimated taxes quarterly. At first, I was not a fan of the idea -- but laws are there for reasons, and it actually has helped tremendously.
Good luck!
I suggest you send some money to IRS so it eases April 15th.
I suggest you send some money to IRS so it eases April 15th
How do you go about paying taxes prior to April 15th. What is the procedure and what form(s) would you use? (U.S.-based business, sole proprietorship)
While technically you are correct that it is not the same as wages (thus subject to social security withholding, and everything else), it still must be declared as income.
Paying attention to what's "technically correct" is a good idea when you're dealing with the IRS. :-)
Again, the best way to avoid problems is to use a program like TurboTax or TaxCut, unless you're having a preparer do your taxes.
Then you would just punch that number into TaxCut or TurboTax when you do your taxes.
If Adsense is your only income, and you made less than $4,750, you probably won't be paying any taxes anyway.. since a single filer's standard deduction alone is $4,750.
I'm not an expert on this... consult your tax adviser.
At the worst marginal rate, you're only a little over 50% tax. Welcome to the real world.
MQ
Welcome to the real world.
Here's another perspective.
A few years ago, my church sponsored a refugee family from an African country. One day, some of us took them to a restaurant for lunch. When the bill came, the woman wanted to know what the extra amounts at the bottom were for. This led to a discussion about Canada's "sales tax" and "income tax" and some of the infrastructure they pay for.
Her response: "What a GOOD idea!"
You could also get ahold of 2003 tax forms and figure out your estimated income for this year and assume you made that last year and fill out the form. That'll give you a good idea of what to expect come the end of the year.
You mentioned being a minor, which means you are probably a legal dependent on your parents. You don't get to claim yourself as a deduction and you will pay taxes on all of your income.
1. Go to the IRS website and get form 1040-ES [irs.gov...]
see page 15 for an example... you just need to fill in one line (how much you earned) and they step you through 2 more numbers on the form. Sign and mail with a check.
2. Go to the NYS revenue page and get form [tax.state.ny.us...]
If you also live in NYC, there is still more tax but it is included on the NYS form.
Every quarter, send in the proper form with a check. Use this calendar to make sure you send it in on time:
[irs.gov...]
When you file your tax return next April, there is a Schedule C which asks those same earnings questions again, but for thenetire year. It calculates howmuch tax you owe. It asks how much you already paid on these quarterly payments, and figures the balance (or refund).
It is super easy and doesn't get any harder for the same kind of business as it gets bigger.
Good luck!
It is super easy and doesn't get any harder for the same kind of business as it gets bigger.
I find the opposite to be true - the bigger the checks, the more painful they are to write ;-).
MQ
What if you have a full time job and your employer already takes out taxes? Do you still have to pay self-employment and Medicare taxes?
What if you have a full time job and your employer already takes out taxes? Do you still have to pay self-employment and Medicare taxes?
Several years ago I had a similar situation where I had two jobs. One was a regular job that held out all appropriate taxes and a bit extra on the income tax per my request. The second job was a part time job as contract labor and I was paid a straight hourly amount with nothing withheld. The IRS made me pay the appropriate amount for medicare for the contract labor income, but nothing for self-employment since the contract labor job was not my main income source.
However, since some of these "taxes" have a maximum required yearly amount (such as social security), and many people achieve that maximum by virtue of their salaried job alone, it couldbe you end up not having to pay those particular taxes on that extra side income.
Whynot just keep it simple - pay your quartlery taxes based on your earnings, and when April comes around file your annual return. If you overpaid it will show, and you get a refund. The downside is the gov't gets to keep the 0.01% interest onyour overpayment - I wouldn't worry about that until interest rates return to reasonable investment levels....
