Forum Moderators: LifeinAsia
Called the IRS and they said I had to start filing quarterly taxes immediately, with the first quarter taxes due July 15th 06.
Went to a tax agent for help filing (figured I could get them to show me what's needed along with my 2005 stuff) and they said no, no, no, I don't need to file quarterly until NEXT year -- quarterly taxes are not required until I've made enough in one year to need to pay taxes on a business. They said I'd need to pay a lump sum for 2006 in 2007 and THEN start paying quarterly in 2007.
Who's right? I'm confused. Do I need to find another tax agent or was the IRS wrong? A couple of hours on the IRS web site did not help enlighten things. (Having a slow dialup doesn't help either.)
I'd rather pay in a lump sum -- I'll just take the money and set it aside and earn a little interest on it. :)
Oh, the IRS agent was completely clueless when I asked if I needed to submit any paperwork such as 1099's for prizes in the $5-25 range given to members on my site. I'm thinking "no" unless the prize exceeds $600 in value which is out of my league at the moment. But I believe I can claiming prizes awarded to members as a business expense. Am I right?
Leva
It sort of depends on your overall tax situation. If you didn't owe any taxes for 2005, then the tax agent you visited is somewhat correct, although the advice is risky in general. See [irs.gov...]
Are you doing the AdSense as a self-employed person or do you have a separate company (corp, LLC, partnership)? Self-employment taxes must be paid quarterly. Quarterly payments (for income & self-employment taxes) are due April 15th, June 15th, September 15, and January 15th, so the advice you got from the IRS rep was bad as well (unless you have filed to use a fiscal year different from the calendar year).
1099s are for when you pay more than $600 to an individual throughout the year. (If you make $500 payments to 15 people, you do not need to file/send 1099s for any of them, unless you made other payments during the year that would put them over $600.) Based on what you said, I would say the prizes are deductable.
The IRS is concerned that it get a continual flow of money. That's why people have to pay quarterly and can't just pay in one lump sum at the end of the year.
The first year I did Adsense, I owed the IRS money (I did not file quarterly) but if you have never owed before, and if you owe less than a certain amount, you won't get a penalty. I did not have to pay any penalty at that time. Check out the IRS's website to make sure, but this is how I did it for 2003's taxes.
Since then, every year I estimate my Google income, run some calculations (the IRS's website has a pretty good calculator for how much to have taken out) and I have extra taken out at my "day job."
Problem solved.
If you don't have a "day job," I'd suggest filing quarterly by the deadline, especially if you're going to end up owing more than, say, 500 or 1000.
I am not a lawyer or a tax advisor: just someone who's been dealing with this for a bit, and this has worked great for me.
JK
This waiting period would be a good time for research and tax planning. You might even think about purchasing capital equipment with the money put into savings. I was able to purchase a heavy duty pickup for my business and depreciate the whole amount the very first year. So instead of owing I received a check from the government to help pay off the truck.
I was able to purchase a heavy duty pickup for my business and depreciate the whole amount the very first year.
