Tax Tips for Online Businesses – An Internet Income Opportunity
So, you’ve set up an Internet business. Maybe it’s a social media site. It could be a portal to sell your goods and services. Or, it could simply be a blog about one of your hobbies or interests that’s made some cash from selling ad space. No matter the business, if you made any income you have to file or efile by April 15th. However, before you file your taxes you should be aware of some tax advantages and challenges that are unique to owning an online business.
To begin with, the IRS has four general types of business taxes you may have to pay depending on the nature of your business. The first type is income tax. All businesses, except partnerships (who file an information return instead) must file income tax which is a pay as you go tax. The forms you need to fill out depend on how your business is organized. Typically, employees have income tax withdrawn from their pay. Estimated taxes are the regular payments you make on income, including self employment tax. Self employment tax is a social security and Medicare tax that contribute to your social security, which provide you with retirement, disability, survivor, and insurance benefits. Lastly, if you have people working for you then you have to file employment tax which includes social security and Medicare, federal income tax withholding, and federal unemployment tax.
When paying these taxes and filling the various forms, don’t forget the deductions that an online entrepreneur can make. If you work primarily from home,you can deduct things like portions of your property taxes, utility bills, as well as mortgage and rent. You can calculate these deductions by completing a Form 8829 which is available on the IRS’s website.
One more thing to consider when completing your taxes are the people you’ve hired for your company. You have to report on your taxes how much you’ve paid employees or independent contractors. With independent contractors you don’t have to pay the employment tax I mentioned above.
It probably goes without saying, but, any business owner, especially online entrepreneurs, should maintain detailed records throughout the year. Many small businesses keep an envelope, shoe box, or safe where they store their receipts and records. Not only is this unorganized but it’s easy to lose things and hard to keep track of how well your business is doing. You may want to consider investing in an accounting system or software to help maintain your books.
Some of the most successful businesses, like Google, of the past two decades have been Internet based. There is no reason you cant take advantage of an internet income opportunity or even start a business online yourself, just be sure to properly file your taxes, so you can save yourself a visit from the IRS, and make appropriate deductions so you can save some of your hard earned cash.