Only Made $8 with AdSense in 3 Months - Taxable Income?

Does it Have to be Reported on my Taxes?

[Ethan_j]

Im new to google adsense i have a question. Do i need to file google adsense on my taxes i only made $8.00 this year so far i been with google adsense about 3 months now.

Thank you,

Ethan

[ThatsBoBo]

Technically you should report it as income, but Google will not submit anything to the IRS or to you unless you make at least $600 that year.

[ember]

but Google will not submit anything to the IRS or to you unless you make at least $600 that year.

The $600 will be reported by Google if you are an individual (sole prop). If the earnings are generated by a corporation, then they are not reported. This is in the U.S.

[StoutFiles]

It's too late to report it Ethan, the IRS will be knocking down your door soon. They know you've been hiding that eight dollars from them! Jail will be rough of course, but if you can make a shiv you'll be okay.

...

You need to make $600+ for them to care.

[Ethan_j]

Thank you every body.

[buckworks]

At that income level it would probably be considered a hobby rather than a business. The net income is likely quite a bit less than zero once related expenses are taken into account.

However, if your intent going forward is to turn this into a proper business, it would be good to take the most business-like approach now, and declare both the income and expenses.

If your country is like mine, you wouldn't be allowed to claim a loss, but you'd have no trouble getting the net income down to zero once costs such as domain registration, hosting, internet connection, etc. are deducted.

Going forward, be sure to keep a good paper trail to document all related expenses (including home office costs) so that as your business grows, you can claim every deduction you're entitled to.

[Clarence]

@Ethan_j

Legally you have to claim all income, even the $8.00!

But the Best Part is you don't have to worry about paying taxes for the $8.00 The $8.00 of income will allow you to write off at least a couple of hundred to a couple of thousand dollars in taxes.

The fact that no other member mentioned this concerns me!  Maybe member aren’t really making any money, or maybe don’t know what they are doing?


By earning you first bit of business income as a sole proprietorship, you can write off all the expense you had to incur to earn that income.

Example
1.Hosting Fee
2.Any Software You purchased
3.Any Money you spent on Advertising and Marketing
4.1/2 Your Internet Fee
5.1/2 The cost of your Computer and any back up gear
6.Amount of Space you use in your Home or Apartment "example 1/4 the cost of all expense to maintain you house of apartment"
7.Any Gas “or public transit” you spent solely dedicate to driving somewhere for your website "Starbucks, library, event, conference, clients, etc.
You’re in the First year stage of starting a business venture, and losses are to be expected!

You should easily be able to write off a min $1,000 in taxes for you first year "if you work hard you get to pay $1,000’s the next year"


So yes Claim that $8.00 from Google as your business Income, then claim your business expenses from creating and maintaining your website.


Do some research on tax write offs, and Home based business write offs, and then talk to an Accountant.

[Lame_Wolf]

But the Best Part is you don't have to worry about paying taxes for the $8.00 The $8.00 of income will allow you to write off at least a couple of hundred to a couple of thousand dollars in taxes.

The fact that no other member mentioned this concerns me!

That's because the OP wasn't asking about that. More of a point, where is the person residing? I very much doubt the OP is living in the USA.

[StoutFiles]

Better be careful with that advice Clarence, doubt the OP wants to be audited. $8 does not sound like a business, just a hobby that made some money.

[ken_b]

Ethan_j

Has Google actually sent you $8.00?

I thought the minimum paymemt was $100.00.

[Clarence]

@Lame_Wolf The same laws apply in the UK and most other countries that have business. Profit - Loss

@StoutFiles A business can lose $1,000 and still be considered a business. First year losses are always to be expected. If the OP was trying to make money in his online business, spent money on hosting, domain name, software, plugins, computer, internet and only made $8.00 in revenue, then the business operated at a loss for the year, and is legally due a tax write off for those expenses incurred.

@Ethan_j Sit down and talk to an accountant in your country/state, and Review your tax code.

[LifeinAsia]

The $8.00 of income will allow you to write off at least a couple of hundred to a couple of thousand dollars in taxes.

The fact that no other member mentioned this concerns me!

Actually, your post concerns me. :)

In the U.S., trying to write off thousands of dollars of expenses against $8 in income is just asking, no- begging, to be audited.

Yes, if you do have a serious business and operate it like a business instead of a hobby, you can probably win in an audit. But the burden of proof is on you to show that it's a business and not a hobby. To me, only $8 of revenue sounds like it would be extremely difficult to show.

2.Any Software You purchased
5.1/2 The cost of your Computer and any back up gear

These need to be amortized over their useful life.

6.Amount of Space you use in your Home or Apartment "example 1/4 the cost of all expense to maintain you house of apartment"

The IRS has very strict rules/requirements about claiming the home office expense and claiming it can increase your chance of an audit.

Note: these comments are based on U.S. tax law and your local tax authority may have different rules.

[Clarence]

@LifeinAsia A lot of things can trigger an audit!

To prove the claim the OP has to show expenses "Domain Receipt, Hosting Receipts, Internet Receipts, etc" and expenses are easy to prove.

If the OP goal is to earn money online "business", then these expenses are able to be deducted.

If you want to be paranoid, you can, but if you want to follow the law, get in contact with an accountant.


Matter of fact the only response I would have given the OP is: "Talk to an Accountant, and Review your local Tax regulations".

The first thing an Accountant would have done is determine the source of the income "Online Business", and started to total all expense directly related to the business, and then total revenue.


Fear of an audit << An audit only verifies your claims against your proof.

If you want to give the Tax man free money out of fear, then that's your personal choice.

FYI: I've been audited about certain expense, sent the proof "receipt and reasoning", and the deduction were found valid! All of this was handled through mail with the US IRS.


So, I say all that, to say this:

Ethan_j: NO BODY ON THIS FORUM IS QUALIFIED TO GIVE TAX ADVISE! PLEASE CONSULT WITH AN CERTIFIED ACCOUNTANT IN YOUR LOCAL JURISDICTION.

[LifeinAsia]

the only response I would have given the OP is: "Talk to an Accountant, and Review your local Tax regulations".

Completely agree!

To prove the claim the OP has to show expenses "Domain Receipt, Hosting Receipts, Internet Receipts, etc" and expenses are easy to prove.

Actually, to prove the claim, the OP would have to demonstrate intent to run a viable business and not just a hobby. There are a number of ways one could try to do this (e.g., having a written business plan showing a reasonable attempt to make a profit, incorporating, showing a profit in future years). In the end, it comes down to being able to convince the particular auditor, and some are more difficult to convince than others. Simply showing receipts will not always prove that you have a viable business instead of a hobby.

FYI: I've been audited about certain expense, sent the proof "receipt and reasoning", and the deduction were found valid! All of this was handled through mail with the US IRS.

This happens all the time. But there are many different types of audits. In your case, the auditor was only interested in the validity of those particular expenses. I was involved in one audit where the auditor was only about the flow of money in and out of a foreign bank account- no interest whatsoever about U.S. expenses.

If you want to be paranoid, you can, but if you want to follow the law, get in contact with an accountant.

Being paranoid and following the law are not necessarily exclusive. :)

FYI- before returning to the IT world, I was an Enrolled Agent and spent a number of years preparing tax returns. My comments come from my experience working with other tax preparers, attending numerous conferences, and studying the U.S. Tax Code. Some preparers may be willing to take more risks and push the limit. Others are more conservative.

That said, general tax advice is for reference only. ALWAYS discuss your particular situation with a professional who knows your local regulations (and preferably, has at least a basic understanding of your particular industry).

[ThatsBoBo]

Business or Hobby?

From the IRS:

In order to make this determination, taxpayers should consider the following factors:

•Does the time and effort put into the activity indicate an intention to make a profit?
•Does the taxpayer depend on income from the activity?
•If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
•Has the taxpayer changed methods of operation to improve profitability?
•Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
•Has the taxpayer made a profit in similar activities in the past?
•Does the activity make a profit in some years?
•Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

[irs.gov...]

[piatkow]

My first thought was the same as Ken_b's. $8 would be accrued at Google but wouldn't have been paid. What is the tax point in the OP's jurisdiction, when G reserve the money or when they pay it? Remember that G reserve the right to suspend the account and keep the money if they decide that you have been naughty.

Small amounts like this are more likely to be significant if you are claiming some kind of social security benefit.

[Clarence]

My experience: IRS Employee from 2007 to 2009. I create my first site while I was an IRS employee, and built most of my site while on the clock. The IRS has a code freeze starting Jan 1st to April 16th where no major systems can be touched; giving us employee’s a ton of free time LOL.

One of the hardest cases for the IRS to prove is Business vs. Hobby. This isn't usually proven after 1 year of losses but 3 years of consecutive losses"

If your intent is to make money, you are running a business, whether you're profitable or not is another question, and after running for a few years at a lose that could bring scrutiny from the IRS. To prove a hobby, you have to be seen as actually not trying to make money.

But 9-10 business suffers loses in their first year of operation and it's pretty normal.

The IRS is pretty familiar with Online business model, and the common expenses associated with them

Common Website Business Expenses:
•Domain Name Registration
•Web Hosting/ Server
•Server Software
•Desktop/Laptop Workstation
•Desktop/Laptop Software
•Internet Connection
•Telephone Line
•Marketing Cost (Online/Offline)
•Common Services: (Support/Email/Misc)
•Labor (Web Design, Administrative, etc)

Nothing along these lines would smell fishy to the IRS for a website business.

And loses in the first year wouldn't raise red flags with the IRS either. And by losses I mean $2,500 in expenses and not making a single penny.

But I have noticed different business owner treat taxes differently (Online and Brick and Mortar). And it's a matter of personality on how far you go in tax reduction.

Me, I'm pretty extreme and will take all deduction, and even donate to charity to reduce my rate even further. I even get a list of item you can earn Tax credits for buying to find ways to reduce my taxes even further.

I don't believe in paying a single penny more in taxes then I'm legally obligated to pay. And If the IRS wants to waste time debating a few $1,000 in expense that I will prove in my favor, then let them waste their time.

One very successful business person told me: If you need it to run your business, write it off and let the IRS prove you don't need it, worse case scenario you have to pay the taxes any way.

[LifeinAsia]

worse case scenario you have to pay the taxes any way.

Not quite- you have to pay the taxes anyway, PLUS any interest and penalties. :)

[Clarence]

Not quite- you have to pay the taxes anyway, PLUS any interest and penalties. :)

All negotiable!

If you claim $1,000 in Expenses, you save $150 (In US, under corp with 15% tax rate).

If the deduction is rejected you can Appeal.

If the Appeal doesn't work, you have to pay the $150.00 plus interest.

You can also request to negotiate the interest and have it reduce or completely eliminated.

So, at most you will pay a few years of interest on $150 dollars.

More then likely you won't even get audited.

I'll take the risk!

And Your expense must be super extreme to get denied, most of the time they will only approve Part.

So, the $1,000 is for Gas for a business car, and they reject it for a personal vehicle usages, and only allow you to deduct $500 dollars for business usage. So that means you owe the IRS $75 (Half of the $150) plus a few years interest.

And again you can negotiate "might not work" but you can try.


And if you feel the agent is really being to hard on you, you can go to Court.

If your expenses are really related to your business, then you shouldn't even worry!

But again I understand this mentality I've seen it 100's of times. When it come to the IRS some people think in complete FEAR.

I seen people register there C corp in their own state "with highers taxes and less asset protection" instead of Delaware, and not claim a ton of deduction out of fear of "WHAT", the IRS might do.

Then I see other people who do the research to see what's available and use everything they can, and even consult De-Tax consultants to save more.

Some people are bold and willing to take a chance, while some people are fearful and scared to take a chance.

They call it caution, I call it FEAR.

You see the same type of behavior with Google and Adsense.

Sorry for going off topic, I'm done posting.

[Clarence]

We're completely Off Topic.

OP: Don't listen to us, consult an Accountant.

This is Webmaster World, Not Tax World LMAO!

[Clarence]

For Any US Webmaster: [irs.gov...]

All Deductible business expenses.

[lucy24]

Calling it a business seems to be begging the question. I'd have assumed it was self-employment income. There's a line for it on the 1040. If you get more than $400 you have to file the long form like all the rich people. But it counts towards the Earned Income Credit. (I have filed the long form for just about as long-- haha --as I can remember.)

If you get more than $600 in self-employment income from a single source, that source (not you) has to file a tax form whose number escapes me at the moment. But that's for google's computer to deal with.

The horse's mouth [irs.gov] (this is of course last year's info) says you have to file if, #1, your income is over $9500-$16450 --the number depends on your age and your filing status-- or #2 you had over $400 in self-employment income, or #3 you owe assorted kinds of taxes that you can look up for yourself. There are some others but those are the likeliest ones. Can we assume you are not anyone's dependent? There's a whole separate set of rules then.

<o/t>
My favorite line in the 1040 instructions has always been the one that says you are only allowed to deduct gambling losses if you are a professional gambler. Win $1 more than you lost, and you are sitting pretty.
</ot>

[HuskyPup]

Why the heck are you all getting so het up about this?

USD 8.00 in 3 months ...

Mininimum payout USD 100.00

At this rate another 3 years before a pay out .!.!.!

[lucy24]

:: returning from detour to AdSense fine print ::

You'd think there would be an alternative minimum, where they have to pay you at least once every {some time period}. At most it's a year. But I couldn't find it.

[Clarence]

@ lucy24 the form you're talking about is 1099. And the form you want is schedule c [irs.gov...]

Also don't confuse Self Employed with Business. Two totally different things. Business is Self run entity "Sole Proprietorship", Self Employed usually refers to contractor working in an employee capacity. Adsense income doesn't fall under Self Employee Income.