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

Taxes and JVing

Discussion in 'Business & Tax Advice' started by Monkehx, Aug 5, 2012.

  1. Monkehx

    Monkehx BANNED BANNED

    Joined:
    Apr 17, 2011
    Messages:
    207
    Likes Received:
    103
    Me and an online acquaintance of mine are JVing. We are using my Ebay account and Paypal to sell products. Both of us are expecting to make a substantial amount of money, roughly 5k-10k a month. I foolishly forgot to equate taxes into the picture. I will be paying him his share through Paypal. Understandably he's reluctant to give out personal information such as his social and name to me in order to do a 1099. So my question is, how do I equate taxes into the picture? Specifically for California. I understand we have a self-employment tax? If our split is 50/50, what should his split be to offset my own personal costs of paying 100% of the taxes? Thanks in advance. One thing I'll never do is blackhat the IRS. :boink:
     
  2. joshweaver9

    joshweaver9 Senior Member

    Joined:
    Nov 23, 2010
    Messages:
    847
    Likes Received:
    1,030
    Occupation:
    Marketing Consultant
    You have three options.

    1) He coughs up the information. Personally if I am doing 5-10k in profit with someone every month..I have no problem giving them my info for a 1099. Perhaps I am more trusting then most.

    2) You pay your taxes first and then do the 50/50 split. He's likely going to be out some money but if you are handling the financial side and he won't give you information...this is the fairest way.

    3) You do the 50/50 split before taxes. You are going to get screwed on this.
     
  3. Monkehx

    Monkehx BANNED BANNED

    Joined:
    Apr 17, 2011
    Messages:
    207
    Likes Received:
    103
    Normally I would too. Option #1 is a no brainer. But to each their own. Option #2 could be discussed with the partner. And option #3 is what I want to avoid. Thanks for the fast reply. What about changing the split? 50/50 to 20/80? What would be fair in this case.
     
  4. phatzilla

    phatzilla Supreme Member

    Joined:
    Apr 9, 2009
    Messages:
    1,366
    Likes Received:
    1,017
    well figure out how much you'd be losing to taxes, calculate the corresponding new split %, and proposition it to him.
     
  5. hawgbert

    hawgbert Jr. VIP Jr. VIP Premium Member

    Joined:
    Jun 13, 2012
    Messages:
    101
    Likes Received:
    14
    Assuming that this will be an ongoing business, you probably want to pay out no more than 25% to your partner. After your filings, you can send him the balance. He's much better off doing this the right way (by agreeing to the 1099), though. If you are on the hook (on paper) for 100% of the revenue, this will put you into less favorable tax brackets as you become more successful. If you each filed seperately, your individual tax liability will be less.
     
  6. neobboy

    neobboy BANNED BANNED

    Joined:
    Jun 20, 2012
    Messages:
    119
    Likes Received:
    11
    The Simple Solution is, to just pay taxes first, then share each other the rest profits into 50-50. That is the best option, because why you pay taxes 100% when he is taking profit alone 50%.