1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Business and the Tax Man

Discussion in 'Business & Tax Advice' started by ``Yousef, Mar 7, 2010.

  1. ``Yousef

    ``Yousef Power Member

    Joined:
    Oct 16, 2009
    Messages:
    534
    Likes Received:
    286
    Location:
    Cooking up the medicine.
    Home Page:
    Well, I have an enquiry so I thought to press it upon the fine gentlemen and women of BHW :).

    I set up a LTD company two months ago and of course while there's many benefits I also have to deal with HMRC for taxes and what not. What I want to know is, how do they actually track how much my business is making?

    I have a mainstream bank business account which money will flow into, but most of my actual buying and getting paid is done via PayPal online anyway.

    Now upon filing tax returns could I simply work with the money that goes into that bank account, or would I need to disclose the fact I have a lots of ins and outs running through my PayPal account.

    It just makes it simpler as I wouldn't have to note all my small expenses and only large bulk ones such as purchasing advertising credit at AdWords.

    What do you think? I apologize if my post doesn't make much sense, it's almost 2am here and I'm fucked ;).

    Night.
     
  2. suga051982

    suga051982 Regular Member

    Joined:
    Jul 22, 2009
    Messages:
    203
    Likes Received:
    29
    Occupation:
    marketing, virtual assistant
    Location:
    Here
    Do you withdraw money from paypal to your bank account? If you withdraw to paypal then you may have to mention it. I have never mentioned the fact that I use paypal to get paid and I have not had any problems.

    If you choose to go this route, then I would keep tabs on IF/WHEN paypal starts reporting funds to the IRS. Until then, I wouldnt.

    My $.02
     
  3. ``Yousef

    ``Yousef Power Member

    Joined:
    Oct 16, 2009
    Messages:
    534
    Likes Received:
    286
    Location:
    Cooking up the medicine.
    Home Page:
    Oh right, thanks for the information. I'm a British citizen, so the HMRC regulates my stuff here :).
     
  4. oxonbeef

    oxonbeef BANNED BANNED

    Joined:
    Jan 4, 2009
    Messages:
    2,242
    Likes Received:
    7,872
    Not declaring income is tax evasion. You are going the right route with the Ltd company
    but ask yourself "Is it worth the loss if I'm found out?" The best solution is to get yourself
    a good accountant. Pay yourself a minimum wage through your company buy assets through your company but remember you are an employee of your company. It isn't your
    personal money mine. If I fart I keep the receipt I rent the house that is owned buy my company and drive a car that is owned by my company. I grew up with tax investigators
    sitting outside our house after my dad and I ain't going through that.
    If you are going to deceive keep two sets of records because if you don't know your arse from your elbow when they start investigating they will take you to the cleaners.
    and the will start investigating if your figures don't add up. And if you think the tax mans bad wait until the VAT man is on your case.
     
  5. ``Yousef

    ``Yousef Power Member

    Joined:
    Oct 16, 2009
    Messages:
    534
    Likes Received:
    286
    Location:
    Cooking up the medicine.
    Home Page:
    I'm not trying to evade, I just don't understand how I'm meant to disclose my PayPal doings. Do I keep two sets of records? Because at the moment this is how it works as I'm not buying paid traffic off a big network so most my expenses go through PayPal. So I get paid into my PayPal account, my expenses are made their, then the additional money left is transferred to a physical bank account.

    I plan to start bank wiring after $7.5k because I wouldn't wanna trust PayPal, given the numerous stories I've heard.

    Do PayPal offer some kind of CSV export of transactions perhaps which I can print out to retain?
     
  6. savvypro

    savvypro Regular Member

    Joined:
    Jan 14, 2010
    Messages:
    211
    Likes Received:
    133
    I think the answer you're looking for is:
    No, you don't list every single transaction you make, you or your accountant provide an overview of *all* transactions (how much was earned, how much was spent, any deductions etc.) - but you keep the detailed records just in case.

    For paypal - you can export account transaction details .
     
  7. ``Yousef

    ``Yousef Power Member

    Joined:
    Oct 16, 2009
    Messages:
    534
    Likes Received:
    286
    Location:
    Cooking up the medicine.
    Home Page:
    Alright, so no listing of each and every single purchase? Just an overview of total revenue, total expenses, and total taxable profit?
     
  8. savvypro

    savvypro Regular Member

    Joined:
    Jan 14, 2010
    Messages:
    211
    Likes Received:
    133
    Yep, and get yourself a good accountant.

    If you don't know any, but know some high income earners - ask them who they would recommend.
     
  9. theconfidenceman

    theconfidenceman Regular Member

    Joined:
    Feb 24, 2008
    Messages:
    262
    Likes Received:
    57
    Location:
    New York
    Home Page:
    in the US paypal earnings are not reported. So you are on your honor to report the income received from that account. However, if you are audited, and paypal transactions show up on reported accounts such as interest bearing bank accts, or if you used the paypal account to pay for any expenses that are listed on your return, then that paypal acct will require submission and the entire account will be up for scrutiny.

    how do they track what your business is making? they have a formula for estimating the gross income and profit based on expenses. One example is a laundromat.. they can calculate how much you earned based on water usage/bill and electric usage/bill.

    Hope that helps
     
  10. theconfidenceman

    theconfidenceman Regular Member

    Joined:
    Feb 24, 2008
    Messages:
    262
    Likes Received:
    57
    Location:
    New York
    Home Page:
    wanted to add that in the US anyone that pays you more than $x (think its 2k) amt per yr, must report that payment to the IRS (affiliate networks). And if folks are using your service and reporting it as expenses to the IRS for deductions on their taxes and they are audited, the IRS will look to see that you show the said payments as income.