***Disclaimer***

I am not an accountant, nor do I pretend to be one. My intention is not to give you accounting advice.

My intention is to make you aware of various issues that becoming a business owner brings about, so that you know what questions to ask and try to get answers to from a person who is more qualified than me and knows your individual situation better than me.

***End Disclaimer***

As I mentioned on the description page internet marketing is a business. Although some people treat it like a hobby(I'm probably the guiltiest person of all for doing this) it is in fact a business.

You might be wondering:

How is it a business if I'm not making any money?

This is a fair question and the answer is relatively simple. You're in "start-up mode". You are in start-up mode up to the point when you make your first sale/commission. It doesn't have to be a profit it just needs to be income from your business.

How can it be a business if I don't have an LLC, C-Corp, or S-Corp?

While those are some traditional corporate entities that people form when setting up a business, there is one form of business that you get automatically without doing anything and that is called a sole proprietorship.

What It All Boils Down To

When you make money the governement wants to tax it. Doesn't matter where it came from, how you got it, they want to take your money. ;)

On the next page I will talk about three different types of taxes you need to be aware of.


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maray07611 Premium
Is there anyone familiar with Turbo tax? And where in there would you claim your Wealthy Affiliate expenses, does anyone know?
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HowardJaros Premium
Are you running your business as a sole proprietorship, that is using your social security number for tax purposes instead of an EIN?
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maray07611 Premium
YES
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HowardJaros Premium
Then you would enter that information in a schedule C. Depending on your other deductions that you can come up with on that form, the standard deduction may still be better than your itemized ones.
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stephhill Premium Plus
Yes. Howard is right and that is what I have been doing every year and what I will be doing this year. I will be using Schedule C and doing standard deduction. That typically is the best way to go. And you don't need to use TurboTax. You can use any software. Just as long as you use Schedule C for self-employment and do a standard employment. For occupation on your taxes, I put web designer or you can Internet Marketer.
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maray07611 Premium
Thank you
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maray07611 Premium
Bit also, have a regular job either W-2's, does this still apply?
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amfc Premium
Thanks for the info.
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ThomasPaul Premium Plus
You're welcome. :)
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Shawn Martin Premium
Thanks
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ThomasPaul Premium Plus
Your welcome :)
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k1nl1 Premium
That is indeed a really good and helpful article. I have a question thou. Do you have an idea how it goes if you are constantly traveling? I am not in that position yet, but my idea is to focus on internet marketing and other similar ventures and be able to travel while doing so possibly for more then 3-4 years. This means constant moving from one month to the next and I can imagine that would complicate things.
I see you have experience with cross country income tax situations as you were a Colorado resident officially, but had to register as well in Hawaii while conducting online business there. Do you think that I have to register in every country as a sole proprietor to be able to operate or is there another possibility?
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ThomasPaul Premium Plus
For my situation I was living in Hawaii for the entire time I was there. Due to my military status and Hawaii state laws it let me keep my Colorado residency until I decided to officially change my residence to Hawaii.

I think it all depends on how long you are in each area. If you are bouncing around from place to place without staying too long you probably don't have to worry about it. If you stay in one place for an extended period of time you probably want to consult an accountant.

Then there's another aspect of "how is the state going to track you down and prove you were in their state and made income while in that state?"

In most cases it may totally be a non-issue if it's an online business. You could always briefly researxh on the state tax office website things of that nature.
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kiya05 Premium
Great, just did my taxes, but I'll need this next year for sure. I'm putting it in my "things I need to know" file for later. Ha, real high tech, aren't I? Well, maybe I will bew by next year, you never know.
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ThomasPaul Premium Plus
I'm a big fan of "whatever works for you". Everybodies different, if you have a system that keeps you organized and you like it and it works for you then I'd say keep doing what you're doing. :)
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nathaniell Premium
Do you know if we could be required to pay the 'sales tax' portion considering we're not actually SELLING the product? I mean, as affiliates, we are intermediaries making a commission off of a transaction where we are neither buyer nor seller.

Great tutorial, and it's got me thinking about tax season coming up.

My method is that I only use my Paypal account to pay for things related to my business (99% of the time). I have my Paypal connected to Outright, which is not connected to any other financial accounts. That way, Outright tells me how much I'm making, how much I'm spending, and all transactions are listed. It was a life saver last year when I had to look over where I spend money and on what.
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ThomasPaul Premium Plus
Hmmm, I'm never heard of outright I'll have to look into it.

As far as paying the sales tax portion, I really do not know the answer. I see your point because we're just essentially "advertising" the product which further complicates things.

The best advice I can probably give is to consult an accountant in the state you live, preferably one who know's about internet marketing.

The whole sales tax thing is just a big can of worms.
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nathaniell Premium
Yeah, I figured I'll have to ask a professional for most questions, because when it comes down to it, if my taxes are wrong, I can't really say THOMASPAUL TOLD ME! haha.

Outright is pretty basic, but good for business. If you're looking for organizing all finances in a major way, Mint is the way to go. It's also free, but is more for all-in-one type budgeting.
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