Profits & Government Intervention?

Just out of curiosity to those who make extra income through site flipping, or to those who generate revenue through their website through advertising, sales, or etc, assuming you live in the United States, is it mandatory for you to report your profits to the IRS?

Let's also assume all your withdrawing options come from PayPal. Wouldn't withdrawing even $1,000 a month from your revenues or whatever prompt PayPal to monitor you for taxing purposes? Does this also apply to other forms of payment as well?

I'm fairly new to site flipping so don't mind my newb-ness. I'm still in the learning process and in the future when I do earn profits, I want to avoid all legal issues at all times as much as possible.

If anyone can answer my questions in a very friendly manner without bashing me for asking such basic questions, that would be great

you are right in your corner... think this is mandatory for being available for further criteria....

Yes, you have to pay taxes and do all your duties as you would with a normal day job. PayPal will report you to IRS if you reach a certain limit, so I'd say if you are getting in site flipping, it's better to report now than being caught later. If you wanna do tax evasion, it's up to you.

darkhat99 said:

you are right in your corner... think this is mandatory for being available for further criteria....

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wtf are you trying to say? I'd like to see those $32,947 you are making, preferably a video of you logging in.

You must report income to the authorities in most countries of the world. They want their taxes!

A friend of mine has never declared taxes. If they ever catch up with him he's totally fucked, will owe tens of thousands at least.

you will be issued a 1099, even if you were born in the u.s. and do not live there. the 1099 will assume all your income is 'income', and you will deduct your business expenses as usual.

Best thing to do is follow my lead, become a Canadian citizen if you are currently not (I was born there), and live in China. lol The Canadian Gov. doesn't chase me because I legally don't have anything connecting me to Canada (stuff like real estate, among other things listed on their tax site), and the Chinese Gov. doesn't chase me, because I am "importing" USD into the country, which is all gravy in their book, and no taxes for me. :beach2(2)

Thanks guys for your answers! Since I live in the United States, I guess I will report all future income made from my business ventures. However, I do not have the slightest clue on how to do that.

Do I just save all proof of transactions, preferably in picture form, and then at the end of the year when my taxes are due, do I just submit them to my Accountant and they'll take care of everything?

Also, just out of curiosity again, for those who do business via eBay or Amazon, like selling goods and stuff, they have to report to the IRS too right?

BUMP!

Looking for serious answers to the questions I've posted in my previous reply!

You do realize that filing taxes in the US is complicated even if you don't run your own business? At least, that's what I've heard you need an accountant at minimum.

But in simple terms, you report your income and, if queried, you should be able to produce proof of income and expenses.

Don't forget expenses! Tax is only charged on net income which is income minus expenses.

Correct you need to keep all those invoices Flippa sends for payments and download all your PayPal info once a month or whatever suits you. The easiest way to do all this is Quickbooks. Enter all your listing fees when they're paid as expense. FVF fee as expense. Domain and hosting fees as expense and everything else down the line. Now don't get crazy and list a local trip to the steak house to celebrate as an expense.

What I use to keep all my PayPal accounts correctly entered in Quickbooks is an online program called Simpleport. It costs you $10 a month and you export your transactions from PayPal, run them through Simpleport which converts the PayPal txt file to an iif file and then import into Quickbooks. Nice and tidy so all your income is done in just a couple minutes.

Once you lay out the income and expenses correctly then any Accountant can tell you the right course of action. Be forewarned, if you're netting more than $1,000 a month or so then you need to hook up with an Accountant quick. In the USA if your tax liability is over a certain amount you have to pay in estimated tax returns every quarter. While the Govt loves to hold your money if you don't owe as much as you're paying in and they return it in a lump sum at the end of the year, it doesn't work the other way around. If you own a large lump sum at the end of the year then they're going to demand estimated returns where you pay in every quarter what you owe in taxes and then settle with little difference at the end of the year.

AceOfDreams said:

Do I just save all proof of transactions, preferably in picture form, and then at the end of the year when my taxes are due, do I just submit them to my Accountant and they'll take care of everything?

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Yes, you should keep proof of all transactions and expenses.

If you work from your home, a lot of your everyday stuff is a right off, like rent/mortgage, insurance, car payments, power, phone, equipment (printers, ink, software) etc..

So kvmcable, if I were to net more than $1,000 a month flipping websites, how much do I usually get taxed? Would reporting this income to the U.S. government right away prompt me to pay the IRS tax money every quarter? I thought we only had to pay our taxes when we file our taxes. Like after the Accountant prepares everything and sends it in and then we get a bill if we owe anything right?

Does it help that I'm a student too? I heard that all students get their taxed money returned after their taxes are filed and then that changes once they're no longer a student.

Hiya there OP!

It would be best to pay taxes rather than facing IRS in some court this days. Being honest to what we are earning will not harm our ways of earning. As the internet freely gave us adequate information, it would be best if we can help our government by giving back through paying taxes.

Here is a link if you want to read some IRS issued cases.
(Click on the "link" word to open the page)

AceOfDreams said:

So kvmcable, if I were to net more than $1,000 a month flipping websites, how much do I usually get taxed? Would reporting this income to the U.S. government right away prompt me to pay the IRS tax money every quarter? I thought we only had to pay our taxes when we file our taxes. Like after the Accountant prepares everything and sends it in and then we get a bill if we owe anything right?

Does it help that I'm a student too? I heard that all students get their taxed money returned after their taxes are filed and then that changes once they're no longer a student.

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The first year you have nothing to worry about. When you file your taxes you claim all your business income and expenses and you'll owe 20-30% of the next profit you earned. What happens is the first year if you owe a lot of money you're given a pass (you still owe the taxes but you're not hit with penalty for not filing estimated returns) but you trigger with the IRS that you need to make estimated returns filed quarterly. The IRS doesn't like you holding their tax money all year until the filing date. If you owe them very much money at the end of year one then they'll demand estimated returns so you're paying into them every quarter what you estimate you owe in taxes.

Student exemption works great when you work a real job and that job withholds taxes from your paycheck. The IRS will refund much of the taxes withheld if you're an active student.

In running a business, they could care less whether you're a student or not. You will owe taxes on your net profit and if it's substantial you'll be required to file quarterly estimated returns after the first year so the IRS doesn't have to trust you to have their money at the end of the year.

Thanks for the information kvmcable. I think regardless of my status, I'll just keep a receipt of all my expenses and profits. If I do need to report it in the future, I'll at least have it all prepared. I'd rather not get involved with the IRS. If I make a decent amount of money, I might just open up a bank account that's solely for holding tax money. So perhaps I'll make a sale, and then store like 30% of that amount into the bank account and just leave it alone to collect interest or something.

From your previous post, however, I was just wondering how much is a "substantial" amount that the IRS will chase after me for tax money every quarter? What happens if I stop flipping websites or stop earning profits online? I just stop reporting my income quarterly right?

AceOfDreams said:

is it mandatory for you to report your profits to the IRS?

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Yes. It's mandatory. Those that say no, haven't been caught yet. I have been audited by the state and the IRS and can tell you without a doubt you are supposed to report your income. No matter what that income is or where it came from.

Hope that helps.

Thanks for answering my question Comic!