Paying Taxes & Online Income

lady doing taxesNo matter what method you use to make money online, you are required to report your earnings to the IRS.

You do not need to have a business name or license to make money online. You can have payments made out to your first and last name if you provide your social security number.

If you decide to become an affiliate like me and earn commissions or make money through ad programs like Google AdSense, Kontera, etc. most companies will send you a W9 form that you must complete before you can get paid.

The form asks for information such as your name, address, whether you're a individual, corporation, etc. and your social security number.

This is a completely normal procedure and most companies will not pay you until they have your completed form on file.

Incorporating

Some people choose to "Incorporate" their online businesses. Again, this is not a necessity, but if you begin making a lot of money then this is something you may want to consider so you can take advantage of some extra tax breaks.

Schedule C

If you choose not to incorporate, register a DBA, etc. then you can report all your earnings under your name with a Schedule C tax form.

You would file this in addition to your Form 1040 that you submit to the IRS every year. This is a small business tax form where you report all your income and expenses.

It's important to note however, that you must make a certain profit in order to claim expenses during tax time. For example if you spend $100 to start your website business but do not make a profit, you will not be able to claim any related expenses on your taxes.

Talk to a CPA

To get all your tax questions answered, you should really consult with a CPA that is familiar with applicable tax laws for your state, area, etc.

Be careful about obtaining information online because some of the tax info is not published by qualified individuals and you may obtain false information.

Not to mention tax laws change all the time so a CPA will have the up-to-date information on tax laws that will apply to you.

Be sure to check the IRS website or tax consultant for up-to-date info.

Companies Do Not Deduct Taxes From Commission Payments

When you receive payments from companies for your affiliate commissions, they will send you the entire lump sum. No taxes will be deducted. It is up to you to make sure your payments are made to the IRS at the appropriate time.

Most companies will send you a Form 1099 at the end of the year (or beginning of the following year) with the total amount that you've earned. However, you are still responsible for reporting this income.

Again, I cannot stress how important it is for you to consult with a tax professional so you know exactly how to handle your Internet income. Otherwise you could end up with a big tax bill in April, along with penalties for not paying your taxes on time.

Don't Be Discouraged or Frightened

Don't let this information about taxes intimidate you. Once you decide whether you are going to do business as an individual or a corporation, and understand the tax laws for your situation, you'll find it's not that big a deal.

Some people put a certain percentage of their earnings aside and send up estimated tax payments once every quarter. You'll have to find what is most appropriate for your situation.

Just make sure you consult with a professional and they can guide you.

 

 

Lisa's Tip:

If you can absorb the preliminary information on this site, you will have a huge advantage because most people rush and don't take the time to plan and educate themselves before they begin.

If your goal is to make money with a website or blog, absorb the content on this site like a sponge.

 

 

 

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