Question about affiliate tax claim - 1099

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Nellis

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Oct 29, 2007
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If an affiliate requires a 1099 to be filed, and you must claim your income as taxable, what is the best way to do this? Should you file it as income on your annual tax return, or should you register a business as a sole propietorship and claim it as business taxes? Im pretty new to this, if anyone has any advice or tips please post them.
Thanks!
 


Someone correct me if I'm wrong, but those two cases net the same results. If you are sole prop or an LLC, everything passes thru the "company" to you. So your tax liability would be the same.

I'd just claim it as self-employment and write off as much as you can. Get a CPA if you can afford it.
 
Create an S-Corp, hire an accountant, and write off as much as you can. Even if you don't incorporate this year, it will be beneficial in the long run. If your earnings aren't huge, just write off anything remotely related to your business (monthly internet bill, domains, adwords, computer hardware, office supplies, etc) to offset your earnings.

If your earnings are substantial you'll have to pay a good portion of it out as payroll (basically pay yourself a salary). Otherwise it will get flagged at the IRS and you run the risk of getting audited. If you don't have a separate business account to filter the money through, they can audit your personal accts as well, and that's never any good. The portion you're using as a salary will be subject to payroll taxes (SS, unemp, etc). An acct can tell you how to do this. The rest you can call "distribution" and will only be subject to normal income taxes.

I'm actually in the midst of doing all this myself, and most of this info comes straight from my accountant. If anybody has other tax tips for affiliates, I'm certainly all ears.
 
I just use an LLC and it passes through and I report in on my annual tax return. I also right off my business expenses.
 
I'm going to meet with a CPA this weekend hopefully to figure out how much I'll be paying. All this stuff just goes over my head, I really don't even make that much I'm sure many people make more than me and probably don't pay their taxes, but I don't want any trouble down the road being and being paranoid and all.

Hypothetically speaking, what if a merchant didn't have you fill out a W9 or require any kind of tax documents. If the amounts are not huge could you get away with not reporting it?
 
one more question, I guess my CPA could answer this but I'll ask anyway. If you're a sole propreiter does all your income and expenses count as part of your "business" even if you don't have any kind of corporation, LLC or anything established? For example if I profit a $1000 from a PPC campaign and then I invest a portion of that profit into another campaign and end up losing it, would I still be paying taxes on that portion that I reinvested and lost? Or would it count as an expense?
 
ubaidabcd

To answer some of your questions....

1) If the merchant did not have you fill out a W-9 (or ask for your ss#) then they do not have the required information to send a Form 1099 to you or the gov't. Even if they did, they are not required to send out a Form 1099 unless they paid you more than $600 during the year. Regardless of whether or not a Form 1099 was filed, you are required to report this income on your tax return. However, if you decide not to report it on you tax return the odds are low that it would be caught since it was never reported to the govt. Unless the merchant is in a foreign country, they will most likley have you fill out a W-9 or at least ask for your ss# upon sign up.

2) In your example, if you made $1,000 for the entire year from all your camaigns but you spent $1,000 for adversting then your taxable income would be $0 for the year and you would owe no tax.

Hope that helps.
 
Your income is your income net of losses and expenses, regardless of how you file.
You should absolutely be keeping track of every losing campaign, every book or subscription you buy with a legitimate purpose of trying to increase your income, every cent you spend if you go to a conference somewhere, etc.

Expense deduction is a great reason to outsource btw. If you can find better things to do with your time, you're getting back part of the money you spend in the way of reduced tax liability. So if you're paying Patel $6 an hour to handle part of your operation so that you can have some free time, and you're in say a 30% bracket, you're ultimately only paying him $4.20 an hour because of the deduction to your net (this is massively oversimplified, please consult a CPA, etc.)


Frank
 
Thanks for the advise. I'm going to see a CPA tomorrow. I'm just kinda frustrated and pissed right now about how much I'll be owing, people are telling me I'm going to be in a 30% tax bracket. I put so much time and energy into this to just be able to get by, and I end up owing close to half of my earnings, it's bullshit.

Does anybody here put their money in IRA's or RIRA's? I think I'll probably go this route so I don't have to pay tax on all my earnings at the same time. I'll put it into an IRA or RIRA and only pay taxes when I withdraw. I'd rather pay a penalty to withdraw instead of paying it all at once. I got a full time job just to help pay the taxes I'll be owing, with the amount of hours I put in it to this, it doesn't come out to much more than what I make at my day job. Also what pisses me off is that my day job is so much easier than this, and the money I make from this (IM) is supposed to be a reward for the amount of work and hours I put in. It would be easier if I was like many people out there and just be on welfare and shit and have hard working people pay my way. Bullshit.
 
Don't forget that you have to pay double the "employment taxes" (ie. Social Security and Medicare) so whereas you get 7.65% deducted from your paycheck for that, you're liable for the full 15.3% out of your self-employment. But hey, you'll be so glad you paid that when you're living off of your Social Security payments ...


Frank
 
And of course, you're really paying the full amount either way, since if your employer didn't have to pay taxes strictly for the privilege of hiring you, you might earn a little more. Of course, that might put you in a higher bracket ... heh.


F.
 
What happens (in theory) if your expenses exceeds your profits? (as most startup business do)
 
Well I got back from seeing a CPA, looks like I'm in that 35% bracket like everybody was saying.

I was advised to start an S-corp it's too late for this year, but it can help me save a bunch next year. I'm not sure exactly how, but I'm going to do it anyway. It's going to cost me about $450 for him to do all the paper work for an S-corp.

Then I'll be paying $200 for him to file my taxes, he works with a tax company does some of his own work on the side so I'm supposed to be getting a good deal. I think $200 was the going rate of offers I got.

I'm going to try and write-off anything I can think of, he even advised I could write off my utilities like electricity (just this particular room) since I work from home and if I use my cell phone whatever the percentage is, although I don't really use my cell phone unless it's to speak to an AM or Yahoo, well I speak to my web hosting company sometimes, but I guess I could put a percentage of that down.

Do all write-offs get completely written off your profit? If you spent $300 on an airline ticket to go to an AM conference. That entire amount is written off from your profit?

Any other suggestions for write-offs would be appreciate, although I think I got most of it.


Thanks!
 
You can claim up to a 1/3 of your house expenses (rent/power/phone etc) for business, if you use that 1/3 exclusively for business. ie. If you are asked and you say "mostly" or anything close to then you'll have the deduction denied and be fucked.

For these deductions to fly, you have to 100% be "for business use only", including your computers, you sometimes do personal shit on your computer ? Denied, your fucked.

Anyway, you get the picture, be careful if you own your house as claim part of the house for business does affect your capital gains tax later if you sell.
 
Any other suggestions for write-offs would be appreciate, although I think I got most of it.
Click to expand...

Almost anything you legitimately spent primarily for business purposes can be deducted. I'd get a second opinion on that power bill.

One more bit of Christmas cheer for you, in case you aren't aware, is that the self-employed are far more likely to be targets of audits than regular fork-and-spoon technicians who get their pay stubs policed before they ever get any money.
Why the Self-Employed Are Audit Targets

NOLO is an excellent resource on legal stuff btw.


Frank
 
BTW, hate to be a stickler, but, "primarily" won't cut it, it's black or white, you either use it 100% exclusively for business or not. The IRS don't let you 99% use anything for business, you even hint at %1, the deduction will be excluded.

So in simpler terms, you no longer use your equipment or part of your dwelling for any personal business, in any way.
 
Priority_Mail90 said:
BTW, hate to be a stickler, but, "primarily" won't cut it, it's black or white, you either use it 100% exclusively for business or not. The IRS don't let you 99% use anything for business, you even hint at %1, the deduction will be excluded.

So in simpler terms, you no longer use your equipment or part of your dwelling for any personal business, in any way.
Click to expand...

Anything you do on the computer is business. Isn't that is what you are doing?:D
 
fm1234 said:
Don't forget that you have to pay double the "employment taxes" (ie. Social Security and Medicare) so whereas you get 7.65% deducted from your paycheck for that, you're liable for the full 15.3% out of your self-employment. But hey, you'll be so glad you paid that when you're living off of your Social Security payments ...


Frank
Click to expand...

When you are employed you pretty much pay both parts as well, except you only see the one half. ( edit: didn't see the followup post)

And if you ever plan on living off Social Security you have either failed or are planning to fail at life. If you plan on requiring a retirement income and live any kind of life Social Security will be a fraction of it. it is like now how I have several streams of income, with a few being nice but not enough to live off.
 
I have heard that audit quotas are filled from early/initial filers, and that if you request an extension, and then file, you are more likely to NOT get audited, unless you raise some hairy-assed flags.


YMMV touugh...
 
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