Taxes

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makethatmoney

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I have been researching online about tax as well as searching here for information and I still have a few questions. I realize I will probably get a few "talk to a CPA" etc answers, but I can guarantee that many of you have more experience than me and I can learn something here before I spend the money on a CPA/acct.

1. Taxes are from 1/1/08 - 12/31/08, correct? (or could I establish my own "fiscal year" that I want to do taxes on?)

2. If taxes are done on the 1/1-12/31 basis, would it be smart to buy something for business (would a 32" monitor be out of line?) as a write-off the help the bottom line?

3. In the form of affiliate marketing (PPC), the only way you make income is from advertising. I understand that ANY dollar you spend to bring revenue to your business is a write-off. 100% of advertising, internet costs, etc etc?

4. As I have just started, I don't have an LLC/Corp, so will I get dicked hard when I file for this year? I haven't made more than 10k profit probably, but revenue for the year is 30k+.

If you could help me at all it would be greatly appreciated.

Thx in advance :)

NOTE: I'd post something *naughty* but I'm at work
 


The best advice I could give you is if your making 30k+ then I would definitely think about setting up a corporation or an LLC. I would definitely look into finding a CPA to advise you on what you should do. Its better to spend a few bucks on a CPA to get the correct answer to your question.
 
I realize that, and thank you for the response, but I am looking for some quick/free insight on the questions I have. I'm sure there are people here who have been in the same shoes I'm in and have either talked to a CPA and could share a little with me. I plan on going to a CPA shortly, but just want to make sure of a few things beforehand.

The thing is, the profit I made hasn't been consistent so I am just wondering what kind of money I will owe in taxes (question 2 and 3 above).
 
makethatmoney said:
4. As I have just started, I don't have an LLC/Corp, so will I get dicked hard when I file for this year? I haven't made more than 10k profit probably, but revenue for the year is 30k+.
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You only pay taxes on your profit. Expenses are tax deductible.

The answer to this question depends on the state you live in. For example, California costs $800 + % of profits/dividends/salary when you make a corporation. It might not be worth it until you are making $50k+.
 
I've been through your exact situation in the past, had $60k/rev in 2006 being a sole proprietor. Problem was, I didn't have any advertising spend or invoices to show other than hosting/domains as it was SEO (and creatively) generated traffic.

I filed personally as a 1099 and wrote off a bunch of shit, a few vacations, etc. I didn't come out too terrible but it also helped that I had a full time job, so the IRS kept my refund and applied it towards my balance. Either way, it was my money, but it definitely hurt less.

What I've done since and my suggestion for you, considering the $30k rev, is to setup an LLC and file the necessary paperwork to be treated as a S-Corp by the IRS. This allows you the benefit of corp, to payroll yourself and deduct taxes and everything.... as well as the benefits of an LLC such as no required annual meetings and all of that other jargon. I'm definitely not a pro with all of this and highly suggest you do see a CPA as they'll save you 10 fold on what they actually cost. Ask a CPA about this specific setup and they'll list the benefits.

To answer your other question, yes, the fiscal year runs from jan 1st to dec 31st. You can't change it -- but you can elect to pay taxes quarterly if you prefer that.
 
Spades said:
What I've done since and my suggestion for you, considering the $30k rev, is to setup an LLC and file the necessary paperwork to be treated as a S-Corp by the IRS. This allows you the benefit of corp, to payroll yourself and deduct taxes and everything....
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With an s-corp and LLC don't you have to set yourself a salary? If his earnings haven't been consistent as he stated then how is he going to be able to set himself a salary?

I'm in the same situation. So, I haven't done anything yet but, I'm probably going to be paying quite a bit in taxes this year.

I'll have to speak to a CPA and find out if you get an S-Corp and if you start making less than your salary what happens.

Also, I heard something about if you're the only person in your S-Corp you don't really save that much in taxes since you have to pay taxes on your corp as well? I'm not really sure about that.

I'm going to speak to a CPA at the beginning of next year.
 
I am not a lawyer or a CPA, just a normal US citizen who setup my LLC last year. I elected to be taxed as S-corp. The IRS approved this decision and I've been using my Federal Employee ID number on all affiliate sites and the business checking account instead of my Social Security number. This year 2008 I will actually have revenue numbers to post.

makethatmoney said:
I have been researching online about tax as well as searching here for information and I still have a few questions. I realize I will probably get a few "talk to a CPA" etc answers, but I can guarantee that many of you have more experience than me and I can learn something here before I spend the money on a CPA/acct.
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During your readings and research make sure you narrow down the rules for the state you live in. Somehow the IRS changes the law frequently so make sure you understand what has been disallowed or updated. Even if you don't hire an accountant or CPA you might be able to consult with them on an hourly basis to make sure everything is correct. You could expect to pay anywhere from $100 to a few hundred dollars to get your CPA to prepare and file your taxes.

makethatmoney said:
1. Taxes are from 1/1/08 - 12/31/08, correct? (or could I establish my own "fiscal year" that I want to do taxes on?)
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Sure you can establish your own fiscal year by filing Form 1128 with the IRS. No guarantee they will approve it. Most people just adopt the calendar year.

makethatmoney said:
2. If taxes are done on the 1/1-12/31 basis, would it be smart to buy something for business (would a 32" monitor be out of line?) as a write-off the help the bottom line?
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Okay so you are paying taxes on business profits. You have revenue and you subtract expenses. There are rules and percentage caps for certain items. Check with irs.gov but yes, if you need a computer monitor as office equipment (for example) then you list your purchase as an expense. It would help if you made this kind of purchase from your business checking account. Separating personal money from business money is a great idea.

makethatmoney said:
3. In the form of affiliate marketing (PPC), the only way you make income is from advertising. I understand that ANY dollar you spend to bring revenue to your business is a write-off. 100% of advertising, internet costs, etc etc?
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In my experience this kind of gets tricky to answer. The reason is because you want to include your monthly bills for DSL, but if this was at your home address and not a leased office space, there are rules to determine how much DSL was used for personal and how much was for business. You could keep records with timers and log files to prove how much of your DSL bills paid for business activities, or you could keep receipts for wifi access at a restaurant. Advertising is a good one, you probably won't get any objections there.

makethatmoney said:
4. As I have just started, I don't have an LLC/Corp, so will I get dicked hard when I file for this year? I haven't made more than 10k profit probably, but revenue for the year is 30k+.
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Depends on your tax bracket I suppose. The extra revenue will be added to your gross income, and that could push you into a higher bracket. Without the LLC you simply file a Schedule C and itemize everything. If you did setup the LLC there are other ways to get money (distributions) that are tax advantaged instead of simply drawing a salary or paying yourself directly.

makethatmoney said:
NOTE: I'd post something *naughty* but I'm at work
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When you're at home feel free to post some pics. Tax free.
 
Disclaimer: I'm no CPA. Take advice at own risk blah blah.

MentalyDisturbd said:
With an s-corp and LLC don't you have to set yourself a salary? If his earnings haven't been consistent as he stated then how is he going to be able to set himself a salary?
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Only the S-Corp. You need to be on a salary (which can vary from month to month if you want). With an LLC, unless you elect to be taxed differently, it is pass through income for a single owner.

While it is technically pass through income, remember you will still pierce the corporate veil (meaning unlimited liability) if you use corporate checks / credit cards for any personal expense. Instead you must write yourself a check from the corp and deposit into your personal bank acct.

MentalyDisturbd said:
I'll have to speak to a CPA and find out if you get an S-Corp and if you start making less than your salary what happens.
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I use Wells Fargo to do my payroll. Basically every month, they call me and ask me how much I want to pay myself this month.

If I had a good month, I pay myself a bit more. If I had a bad month, maybe slightly less. All you need to remember is that it needs to be a reasonable salary as according to salary.com or other websites. If you're making 100k profit in a month but only paying yourself 5k a month on salary and taking the rest as a distribution (which is where the big tax benefit comes from), then you'll probably run into a little bit of an issue with the IRS.


MentalyDisturbd said:
Also, I heard something about if you're the only person in your S-Corp you don't really save that much in taxes since you have to pay taxes on your corp as well? I'm not really sure about that.
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JUST going by hear say, but I hear 250k is the magic number where a single person S-Corp becomes more profitable.

There is not double taxation on the S-Corp like there is on the C-Corp.



I answered most of these questions in a post a while back:
Best Corporate Structure for Affiliates - Affiliate Marketing Blog
 
volknet said:
Disclaimer: I'm no CPA. Take advice at own risk blah blah.
If I had a good month, I pay myself a bit more. If I had a bad month, maybe slightly less. All you need to remember is that it needs to be a reasonable salary as according to salary.com or other websites.
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Just curious, which occupations salary guidelines do you choose to run with Volk? Maybe a web content executive? $120k average.
 
good thread as Im meeting with a lawyer this week to go over some of this. my biggest issue is that i live in california, but as soon as I can, may locate to another location. from a tax payers standpoint, california is not the ideal state to incorporate into. but if you reside here, are you forced to incorporate here?

I was looking at Nevada / Wyoming otherwise.
 
I'm in Illinois and I have no idea!

I hear it's pretty good, one of the lower states, but I've only done basic research.
 
blackhorse said:
good thread as Im meeting with a lawyer this week to go over some of this. my biggest issue is that i live in california, but as soon as I can, may locate to another location. from a tax payers standpoint, california is not the ideal state to incorporate into. but if you reside here, are you forced to incorporate here?

I was looking at Nevada / Wyoming otherwise.
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No, you're not forced to. Most people just incorporate in their own state simply due to ease.

You have to have a registered agent in the other state if you want to register there.

I think places like legalzoom can give you a registered agent for like 99 a year or something like that.
 
Another thing to keep in mind is that you might have pay your quarterly estmated taxes for 1/1/2009- 3/31/2009 around the same time as your yearly bill for 2008 in April 2009. Ugh.
 
And there's some great content for the thread!

Will the quarterly estimated taxes be equivalent to 2008 yearly tax / 4?
 
#1 Most individuals file their taxes on a calendar year basis

#2 Business expenses are broken down into categories, some (advertising, utilities etc.) are written off in their entirety the year they're incurred. Some (assets, etc) are depreciated, but may also be written off in their entirety via Sec 179. A monitor would be considered an asset; but, in the event of an audit, be prepared to prove 100% business use.

#3 Any costs you incur to produce taxable income are deductible. But again, some expenses, like your internet service, may have to be prorated between business use and personal use.
 
So the monitor would as well. Could I write off 75% of it if that's how my time is divided?

How would I "prove" 100% business use?
 
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