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Minimize taxes for my side online business?

Discussion in 'Business & Tax Advice' started by johnc1, Mar 25, 2015.

  1. johnc1

    johnc1 Junior Member

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    As a single guy living in high tax state, usually 30% - 35% of my salary goes to the government (Federal, State, Medicare, Social). As if that's not enough, they also go after my investment gains. Any short-term investment gain, bam! there goes another (25% + State) to the government. Then all the extra hard work I did to build this business, they want me to pay tax for that too.

    Now I've launched a online business last year. It's not much, I've gained about 4k last year. I think I'll gain 5k this year. It's not incorporated, LLC, or anything. I am the sole owner. I use a payment processes, whom didn't give me 1099 last year. it's not Paypal.

    I didn't report my income last for my business in year 2014. Which was about 4k (minus 1k expenses). Did my tax return and everything went through. However, my dad warned me "since you're making so much money overall, they'll always be coming after you. If you don't report, within 2 - 3 years, I'm sure they'll find out and penalize you a lot for it". The money gets deposited to my bank account so that's the only clue they have.

    What do you guys think I should do? Should I start reporting it? I'm starting to feel it might not be worth the risk. I used to think they'll never find out, but now I'm starting to think they'll do whatever necessary, like intrude my bank account and figure out "where this extra deposits are coming from".

    Most of my purchases comes from other countries, not US. About 30% of my income comes from US, rest from European counties. Is it possible I only report the income generated by US customers?

    What would you guys recommend?

    P.S. I was thinking of making another bank account and moving money there, but then again, all banks require my SSN so I feel that won't help much anyway.
     
    Last edited: Mar 25, 2015
  2. DonnieBrasco

    DonnieBrasco Regular Member

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    Occupation:
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    The Income is in your bank account history, if they do a tax audit you have to justify where you paid taxes for that income.

    You need an anonymous debitcard or some other solution to cashout your money anonymous, you can send me a pm if you want, could help you with it.

    Regards
     
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  3. ignotus

    ignotus Junior Member

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    You should consult with a CPA and or Tax lawyer.
    But mainly since earnings aren't anything to extraordinary it will probably be best to incorporate as an LLC in a LLC friendly state (Nevada, Delaware ect) since your business is mainly online. It's best to do this to shield your assets. As of now, if you get sued by another business, your personal assets are on the line. By filing an llc your personal assets will be protected in such case.
    Different states have different LLC laws for protection, but Nevada has the best Single Member LLC protection (Excellent Partnership Protection to). Delaware has great Partnership protection and LLC laws.

    Once you increase your revenue a bit, and got an understanding or whenever you want, you can file your LLC to be taxed as an S corp. Basically cutting taxes in half. A little more formalities and paperwork is involved though at the end of the year.

    Now once you get an LLC you get your EIN (free) from irs. With that you can open up a bank account in the llc name. Any revenue or contributions that are made goes to that bank account. Make sure to of course keep personal and business accounts separated. The CPA will help you out.

    Creating multiple banks in your name wont help anything besides protect deposits up to $250k.

    i could be wrong
     
  4. John953

    John953 Newbie

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    can i get a pm as well please. i am having similiar issues