Forum Moderators: martinibuster
What else do you write off against it? I made a decent amount from AdSense this year and will need to bring the taxable income portion down if I want to prevent myself from crying myself to sleep.
Obviously, nothing from this thread can be misconstrued as tax advice, but it'd be nice to have perhaps a few new ideas to throw at my tax adviser this year. Last year was bearable, but I'd like to improve on it for '07.
Let's throw some ideas around!
However even on the short form you do have to declare earnings (if any) from employment and these are combined with your self employed earnings to see if you've underpaid (or overpaid) tax & NI.
Yes, you declare both. But there are no fields where you can enter the combined amounts. Things may have improved since I used the short form (2005-2006), but it appeared to me that a clerk merely entered the amounts into their computerised system, and there was no automatic mechanism for combining the two. I was expecting a tax rebate, but instead the computer generated a demand for underpaid tax plus a demand for part-payments for the current year. It took months to get it sorted out.
The program is well organized, so I can plug in various expenses for my Home Office - it calculates the percentage of everything I can deduct by the square footage of the office space.
When I am done with the tax return, the program offers to "compare" my figures with those of other taxpayers filing in the same "income range." I always seem to be far below the "average" on expenses/deductions, so I guess my "creative accounting" is not so good yet.
On the other hand, as long as I am below the "averages" this will probably not set off the alarms with the Income Removal Service for an Audit.
The program is well organized, so I can plug in various expenses for my Home Office - it calculates the percentage of everything I can deduct by the square footage of the office space.
That sounds wonderful. Back in summer 2006, I decided that an accounting software wizard would be just the ticket to help me work out what I could legally include as a business expense which I could then write off against my income.
I bought the most basic Sage software package. What a total waste of one hundred quid. The first question it asked me was: enter your plan of accounts. (<em>Damn it, I bought you to design a plan of accounts for me, not to process one I already had - that much I can do with Excel!</em>).
Does anyone know any UK software which has a wizard which interviews you and then tells you what you can legally subtract from your turnover to come up with your income? There must be something available which could reasonably mimic a human accountant, no? (I just don't like being forced to rely on other people and their work hours, when it comes to running my business).
Does anyone know any UK software which has a wizard which interviews you and then tells you what you can legally subtract from your turnover to come up with your income? There must be something available which could reasonably mimic a human accountant, no?
To be honest in the respect of overheads Her Majesty's Revenue and Customs puts it extremely clearly as to what they class as an allowable business expense (with examples) on the page about it on their website [hmrc.gov.uk]. I'm pretty sure similar things are stated with the guidance notes sent out with each tax return too.
As to what you can "legally subtract" - that to be honest is a matter of opinion and really just making sure your interpretion of what an overhead is is the same as Her Majesty's Revenue and Customs. As to software mimicing a human accountant - well human accountants have to train for 3 years to achieve chartered status (passing a lot of exams along the way) and keep up to date with changes in the law. Each year they change things (eg personal allowance, NI thresholds etc) so any software would only be applicable for one financial year.
(I just don't like being forced to rely on other people and their work hours, when it comes to running my business).
Well feel free to study enough book keeping and accountancy to be your own accountant then. *grins* ACCA (Association of certified and chartered accountants) could probably put you in touch with somewhere locally that has courses on accounting or you could get books out of the library or try evening classes. Accountants aren't really a 24/7/366 profession and to be honest there's the old saying "If a job's worth doing, it's worth doing yourself".
One thing I wonder is, if you travel to a certain desination, take notes and hundreds of pictures, then come home and build an informational web site about said location...can you write off your travel expenses?
According to my CPA, "absolutely." That said, the business needs to be your primary purpose for traveling (and not just a tack-on to a vacation).
Also, I'd assume the income you're writing off against needs to come from the travel-related business, not some unrelated source.
Usual disclaimer: I'm not a CPA, this isn't professional tax advice, YMMV, etc...
Business phone (it is separate from personal phone and cell phone)
Business PO Box
Script to add functionality to my website
Article writer fees
Hosting fees
Domain Names
Advertising costs
Laptop Computer & Accessories
Local business tax
If you are making that kind of money, then why are you not paying yourself a modest salary, and reinvesting the rest in your business?
So you earned $120k with Adsense or for your online business total from all revenue sources. Does that put you in a tax bracket to pay $48k in taxes? If it does, you need some serious financial advice. Seek help immediately!
1. Find a high priced accountant and spend as much time racking up an hourly rate with him asking an endless stream of questions to save you dollars on your tax bill, next year. You just racked up the first and most important tax deduction of the year.
2. Why not put another $20k - $40k into advertising? With the higher earnings, you can spend even more time with the accountant getting tips.
I don't see your dot com on billboards or in newspaper print ads. Nor am I hearing them on my office radio station or seeing them on the television. Of course I only have the weather channel, news channels or Bloomberg on. But, surely you can find SOMEPLACE to advertise where I might see you, and browse your pages, and maybe click a few relevant ads as I search for my own new trading partners.
3. Why not attend more industry conventions, trade shows and seminars to better educate yourself on matters that apply to your business?
Are you attending business courses at night, part time during the day? Why not? Do you have any idea at all what it costs to attend two university courses a week, three semesters a year? Take some marketing courses, art courses, even some more computer courses. If you knew everything about computers and marketing, you wouldn't be sitting here reading this thread. Get hopping. You can never learn enough.
When was the last time you stopped by your trading partners offices and shook hands to further cement your relationship, impress them with your fine social skills and ensure your face and website(s) stay fresh in their mind? That is at least a 2000 mile trip for me, involves a rental car, meals out, and an overnight stay of at least one night, except when I decide to meet and greet everyone, end to end :)
I am thinking about going across the pond to the UK. There is a company over there eager to add their ads to my largest site. Maybe I need to eyeball them?While I am at it, maybe I should hire a private investigator to check them out. There is so much fraud out there, you can never be too safe. Bad neighorhoods can be the kiss of death in Google search.
Also, can you really afford not to make partnerships with other small businesses and large corporations, in order to increase your traffic? Why are you not scouring the web for potential partners, and setting up meetings to shake hands, get an eyeball, make a good impression and rough out some trade deals no matter where they are, how far away, and how much it will cost you to travel to those meetings? Good seeds for great harvests are not cheap.
4. Why not expand your home office or add an additional outside office and throw a pile of money into making it the great office others only dream of?
You could sink $15k into a custom designed office aquarium with surround sound music throughout, all for relaxation and creative inspiration. Take some photos of it, use them for desktop wallpaper, and maybe even offer some prints or downloads of the great photos on your website with your web address at the bottom of each one. Don't forget, that designer will have to come maintain the aquarium for you, for a nice monthly deduction.
While you're at it, why not set up a webcam that puts your aquarium on the web 24 hours a day? Others could benefit from the calming movements of your fine, finned, frolicking fish. It will have to be a great setup, hire the best.
5. Why not upgrade equipment. I can multi-task on six computers at one time and of course I need the fastest machines and other hardware money will buy, so I can earn to my most potential... and that means upgrading it all every year, with technology racing ahead at warp10 speed.
That means I need 6 desktops and 6 laptops for when I travel, and now that I am much older than most of you, I need HUGE monitors so I can see what I am doing. Since I travel several months a year, all working business trips, there is no problem justifying it all.
Tax deducted to the max for 2007, on January 1, 2008 I went out and bought three more computers and two new office chairs. The last two I purchased on December 31, 2007. There is no time like the present to spend and invest in the future of your business. The office chairs get worn out quickly when you spend 18 hours a day in them rocking back and forth, spinning around... they take a beating. Each year they get more expensive, hoping they will last longer.... and they do.
6. Hire the best internet law/intellectual property rights attorney you can find, and use his services frequently. Knowledge is power.
7. Everyone of you has a website with graphics, at least for your template, have you really purchased every single piece of software to see what might work best for you? I just spent $50 for one image software collection that had only one graphic I will ever use. But, it is ADORABLE.
8. Last year, I hired a graphic artist and I keep him busy every month, creating some nifty little pieces of artwork for me that I can use on my dozens of websites. He is NOT cheap. But, it keeps the websites looking fresh, interesting, and I get some great compliments from partners. I wish I had of thought of this long ago.
9. Last year's business cards were blue, and really not me. Partners stared at them, wondering what they meant. This year I ordered new sets, though I had plenty of blue cards left. The new ones are pretty pink, eye catching, and already I am getting oohs and awwws.
People remember the pink ones, me and my business. I shredded the old business cards, blended them with water, turn that out on window screen to dry and now have lovely blue note pads. . . that will also get shredded after I use them, and around we go again.
10. One day soon, I am going to have to load up all my old cellphones (I buy new ones every year) my old hardware (a truck load) and take it all to a recycler. There are none within a days travel of my office, so I will have to get a hotel, eat out... maybe even hit a trade show on the way home. That is a deduction I can feel good about. Those laptops and desktops are surely needed by some less fortunate.
11. Speaking of the less fortunate. How much did you spend on the less fortunate this last holiday season? Did you help fire victims in California? Did you dig deep, or just heap more money in the federal tax coffers?
12. You can't deduct unless you earn. I am going to quit now, so I can work, and you get back to work as well. Earn, earn, earn, deduct, deduct and deduct.
If anyone tells you that you are paying alot of tax because your business is a low overheat business model, they are simply ill informed or you are stuck in that dark, dingy garage attached to your parent's house sucking up Cheetos and Cokes. GET AN OFFICE.
Some particular issues:
- Not everyone can deduct home office expenses: this has a lot of qualifications and is one of the most abused deductions and often raises a red flag that could lead to an audit. If you qualify for it, by all means deduct all that you are legally entitled to. If you don't wualify, proceed at your own risk.
- Not everything you pay for is an "expense." Capital equipment (like computers, office furniture, software, etc.) must be depreciated over the expected life of the item. In SOME cases, you can use accelerated depreciation and deduct the full amount in the year you bought it (and placed it into service).
- Likewise, the value of depreciated items decreases over time. Once it's depreciated down to 0, that means it's value is just that: $0. So if you then give the item to charity, the value of the donation is $0. If you sell it for $100, that's $100 of revenue.
Living in the EU (Belgium) and having a company getting the adsense earnings, my accountant takes care of it. And I'm convinced he earns me more in taxes not having to be paid than he costs me.
I'm pretty sure an individual out here might get in very bad water if he gets caught with adsense revenue. I'm convinced it's easy for the fines to mount to (a lot) more than what you earned (one of the possible fines equals 309% (yep: 3times!) the undeclared revenue). And there have been cases out here where they caught people not being (part-time) self employed with adsense revenues to their name.
