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hmm, so for the purchase of links per say would that be a 1099 required purchase if over $600 to an individual over a year?
Then theres the can of worms when the person is not in the US?
this is why I dont spend any money lol.
I would like to see a real discusssion of affiliate tax issues set up on CAP Chat , PAP Radio, CAP TV or the upcoming CAP Radio. This is a topic which gets very little attention despite its deep implications.
yes would be very nice to cover all basic issues an affiliate would encounter.
Professor:
I would be glad to participate. Please pm me to discuss details.
Good topic for sure. I have a good relationship with my CPA and rely on him a lot to get me every tax break he can.
I still remember the month that I made enough money to “scare” me into incorporating my business to an LLC, paying my taxes and sending 1099’s to my staff. :whipper”
Im prertty much a do it yourselfer event if it cost me 20X to do it that way I like to learn crap so I have really no expenses to write off. Less than 2% of my earnings I can say are expenses including link buying, web hosting, Software purchases. I do however spend over $600 to people for certain things but I would never have thought the requirement for a 1099 as most of these people are out of the US. Thats the confusing part I guess!
All I know is expense the stuff you can prove in a second and forget the things that would take a lot of explaining. And do not ever go for a home office deduction as that causes a lot of issues when selling your home as well as raising questions on use.
Oh no dude, you should take more deductions than that and you do need to have your home office as a deduction if you have one. I’ve not worked outside the home for almost four years and even took the deductions that applied to home office when I was renting.
I use to only report stuff like you do and then I realized all the deductions that I was not taking that are perfectly legit and I do 1099’s for everyone as I have a tech in India that I often use or consult with that does not believe in giving free advise. :sarcasm:
You can do gas reimbursment for trips to get supplies, postage, and other stuff that I didn’t realize and since I hope to never work outside the home I need to it.
Steve S I think by the wide array of responses we could sure use a CAP chat session I am going to ask Yvette to set this up with you.:hattip:
Allfreechips:
Gametrak is right in that you should take all expenses you are entitled to. For instance, being a businessman (person), you need to keep abreast of new developments and changes in the business climate. Watching news broadcasts on your television is a way to keep up on things. As such, part of you cable/satellite bill would be deductible as a legitimate business expense. Same with the newspaper. Think along those lines and try to deduct every legitimate expense. Same with the mileage reimbursements. Claim those too. But, you are required to keep a log of your mileage. Many auditors will tell you, no log, no deduction.
You are correct about the home office deduction in that you need to add back into your income the depreciation deductions taken for home office expenses when you sell the house. This includes depreciation that you were allowed to take, whether you took the depreciation deductions or not.
Gametrak:
I am not a fan of the LLC. One reason is that all income earned in an LLC is automatically categorized as income from self employment. As such, it is all subject to self-employment tax at 15.3%, in addition to federal income taxes. The cap on social security taxes is $102,000 for 2008 at 12.4%. There is no cap on the medicare portion at 2.9%. – Both of these numbers reflect the employer and employee contributions as you would have to pay both if you are self-employed.
By incorporating your business, you may be able to legally reduce the self-employment tax you pay. I have achieved tax savings ranging from $1,500 to $9,000 for some of my clients. However, you need to consult your tax advisor about your specific circumstances.
Obama and the Democrats have talked about significantly raising or altogether removing the ceiling on income/wages subject to social security taxes. Now that they will have almost free reign to pass what legislation they like, you may want to take another look at the form of organization you operate under.
Second, I recently attended a seminar by a Law firm here in Dallas that represents businesses and CPA’s in regard to tax issues. It seems that individuals that file schedule C are a big audit target for the IRS right now. Single member LLCs are usually treated as disregared entities for tax filing purposes and therefore a schedule C would be filed for that entity. You may want to bring up these issues with your tax advisor and get his/her opinion.
Those of you who operate as S-Corporations should know that the IRS is also taking an increased interest in S-Corps whose officers and/or principal shareholders do not earn a salary from the corporation. My advice would be to pay yourself a salary or face the risk of the service assessing you for unpaid payroll taxes on the salary the think you should have drawn.
Last, claiming the home office deduction can invite additional scrutiny of you return. This deduction is not the slam dunk many think it is. If you own your own home, you can already deduct all of your interest and real estate taxes. That leaves you with insurance and utilities, for the most part. If you own 2,500 sq ft home and you have a 12 X 12 office you are looking at deducting 5.76% of these numbers from your taxes. Let’s assume your insurance is $1,600 and your utilities average $400 per month. That is a total of $6,400. 5.76% of this number is $368.64. This would be your additional deduction (outside of depreciation). If you are in the 25% tax bracket, your tax savings from this deduction is $92.16. You would probably pay that much more in tax prep fees for that form (8829) and the calculations alone. Many of my clients do not take the office in the home deductions for this reason alone. When you add in the fact that you have to reclaim the depreciation deductions allowed, it may not be worth it.
Exactly my point.. I’ts worth $92 to me to feel no burden in filing for an office space. I work full time and run things on the web so taxes get complicated. I file a sced C with no incorporation at all, although I feel i should seperate my business online from my family some time soon.
Thanks for the advice Steve S,
I will look in to it. When I got my home I did the interest only and pay what I can on the principal so I hope that was the route to go.
When I hear or see numbers my brain turn off and I tune out so I admire you for being able to do what you do! :hattip:
Nice post, Steve S!
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