Your Affiliate Business and Taxes

Home
>
Affiliate Revenue
>
Your Affiliate Business and Taxes

Your Affiliate Business and Taxes

Starting a home-based business on the Internet is easy you say. You have your web page built, your affiliate links and you're ready to go. Not really, you need to make sure you have all your i's and t's crossed when it comes to taxes.

Getting Started

First, you will need to register your business name with the city government. When I registered my business name with the city I was charged $11 -- so expect to pay a small fee when filing this legal document with your local goverment.

Second, you need to apply for an Employer Identification Number with the Department of the Treasury (IRS). To file for an EIN,you will need to complete Form SS-4. You can find these forms in post offices, public libraries, online, or by contacting the IRS.

Once you receive this document, keep it in a safe place -- in other words, don't crumple, stomp, or throw away -- this identifies you and your business with the U.S. government and you will need this number when you file your taxes.

Third, you will need to check with your state government to determine if you need any specific licenses. Such as Retail Sales Tax Permit -- if you are planning on selling items offline or online.

Fourth, you may want to open a Business Account at your local bank once the money starts to roll in. Keeping your money separate from your family account -- helps you to keep your accounting accurate for your business.

What percentage of your income will go to your State and Federal Government?

You will need to pay the following taxes, at the following rate, on a quarterly basis:

States Taxes -- 3.7%

Federal Taxes -- 11.3%

Social Security -- 12.4%

Medicare -- 2.9%

The first year in business is difficult, because you have no idea what you will be making--You will need to make a conservative guess. However, you will only pay what you owe against that of your expenses (your net income). For example, if you believe you will have $3000 in expenses during the year -- and you believe in your first year,you will make $6000-- you would report the following:

$6000 (Money Made)- $3000 (Expenses) = $3000 (What you owe)

This amount would be divided among the four quarters within the year and paid to your State Government and the Federal Government. If you find that you will be making more and you have paid in for one quarter -- you will have to adjust the balance and divid it between the remaining quarters.

The following is what you will submit to the Federal Government:

1) Federal Taxes-11.3%, 2) Social Security-12.4%, and 3) Medicare payment-2.9%.

The State Government will receive only the 3.7% of your net earned income.

(Please note: If you are unsure about anything, you should enlist the help of a CPA, regarding tax matters).

Your estimated taxes are due on the following dates throughout the year:

April 15

June 15

September 15

January 15

To obtain more specific information you can read IRS Publication 505: Estimated Tax payments.

Note: You are not required to make estimated tax payments until you have income not subject to withholding on which you will owe tax. If you don't make your first payment until a later period, you must divide your entire estimated tax by the number of payment dates remaining. If, for example, you have three payment dates pending, you would pay one third of the total tax by June 15, the other third by September 15 and the last by January 15.

Typical Expenses To Deduct

Here is a list of some of the expenses you can deduct.

1. Your home mortgage -- If you use a room solely for conducting business then you can take this deduction. There are a couple of different formulas to determine the percentage of your home that is used for your business.

You can use the "number of rooms" method or the "area method". I would suggest using the "area method" because I can't imagine having a home where all the rooms are the same size.

With the area method, you would take the area of your home office divided by the area of your home. Example:

Your Office= 10' X 10' = 100 square feet

YOur home is 1000 square feet

Your deduction = 100/1000 or 10%

2. Indirect Expenses -- with indirect expenses you will only be able to deduct the area percentage (Note: use area percentage calculated above) of the total cost. These indirect expenses would include such things as:

House payment

Utilites

Telephone

Garbage collection

Internet connection (If other people are using the Intenet)

3. Direct Expenses -- these are expenses that relate only to your business.

Supplies

Advertising

Business account bank charges

Keeping Track of Expenses

To keep track of all your expenses. and you are comfortable working with a spreadsheet software, I would suggest purchasing a small business accounting package such as QuickBooks or Peachtree Accounting.

To conclude, this definitely is not an exhaustive list of what you need to know. However, this will give you a beginning as to what you will have to be aware of when starting a home-based business. As your business grows, your CPA will be able to assist you and keep you on the straight and narrow to your success on the Internet.

Vickie J Scanlon has a BBA degree in Administrative Management and Marketing. Visit her site at: http://www.myaffiliateplace.biz for free tools,articles, ebooks, and how to info or check her blog for additional insights to the Affiliate Business ? http://myaffiliateplace.blogspot.com

In The News:

Yahoo! News: Top Stories

Burris determined to take his Senate seat Tuesday (AP)

AP - Barack Obama's appointed successor is heading to the Senate to be sworn in as a member of the 111th Congress, but it isn't clear whether he'll get to take the oath of office.

Economic crisis, Obama response face new Congress (AP)

AP - The Democratic-dominated Congress convenes Tuesday to confront perhaps the worst economic crisis since the Great Depression and to grapple with a hugely ambitious agenda set by President-elect Barack Obama.

Palestinians say strike on 2nd UN school kills 30 (AP)

AP - Palestinian medical officials say the death toll from an Israeli airstrike outside a United Nations school in the Gaza Strip has risen to 30.

Obama stimulus plan boosts business tax refunds (AP)

AP - President-elect Barack Obama's proposed stimulus package would provide businesses with billions of dollars in refunds on taxes they paid several years ago.

Franken on top in Minn. recount; Coleman to sue (AP)

AP - A Minnesota board on Monday certified results showing Democrat Al Franken winning the state's U.S. Senate recount over Republican Norm Coleman, whose lawyer promised a legal challenge that probably will keep the race in limbo for months.

Stocks pare gains following mixed economic reports (AP)

AP - Wall Street is paring some of its earlier gains following mixed readings on the economy.

Obama's intel picks short on direct experience (AP)

AP - President-elect Barack Obama's selection of an old White House hand to head the CIA shows a preference for a strong manager over an intelligence expert.

Travolta family returns to US with son's remains (AP)

AP - Actor John Travolta and wife Kelly Preston have returned to Florida with the remains of their 16-year-old son, Jett, who died at the family vacation home in Grand Bahama.

Islamic militants ridicule death of Bush cat (AP)

AP - Islamic militants posted sarcastic comments on an extremist Web site Tuesday ridiculing a recent announcement by First Lady Laura Bush that the family's cat had died.

Texas rallies past Ohio State 24-21 in Fiesta (AP)

AP - Left out of the national title game, Colt McCoy and Texas made the most of their trip to the Fiesta Bowl. They just hope they did enough to impress poll voters. McCoy hit Quan Cosby for a 26-yard touchdown with 16 seconds to play, lifting the third-ranked Longhorns to a 24-21 victory over No. 10 Ohio State on Monday night. The dramatic strike capped an 11-play, 78-yard drive that took only 1:42.

Israeli troops deepen push into Gaza (Reuters)

Reuters - Israel's offensive in the Gaza Strip killed more than 30 Palestinian civilians on Tuesday, medical officials said, and international efforts to secure a ceasefire focused on an Israeli demand to prevent Hamas from rearming.

New Congress set to convene with economy in focus (Reuters)

Reuters - The new U.S. Congress convenes on Tuesday under pressure to deal with a worsening economy by passing a stimulus package that Barack Obama could sign into law soon after being sworn in as president.

European data grim (Reuters)

Reuters - Dire economic data underlined the severity of recession in Europe on Tuesday, while Toyota Motor Corp said it would halt all production in Japan in response to plunging demand.

Russian gas disruption spreads across Europe (Reuters)

Reuters - Russia sharply cut gas flows to Europe via Ukraine on Tuesday in a dramatic worsening of a pricing dispute with Kiev that threatened to disrupt supplies as far west as Italy and Germany.

More Americans getting multiple chronic illnesses (Reuters)

Reuters - More Americans are burdened by chronic illnesses such as diabetes and high blood pressure, often having more than three at a time, and this has helped fuel a big rise in out-of-pocket medical expenses, a study released on Tuesday showed.

China seen facing wave of unrest in 2009 (Reuters)

Reuters - China faces surging protests and riots in 2009 as rising unemployment stokes discontent, a state-run magazine said in a blunt warning of the hazards to Communist Party control from a sharp economic downturn.

California gay marriage battle turns to court role (Reuters)

Reuters - The legal battle over gay marriage in California turned on Monday to whether the state's top court could strike down a change in the state constitution that was approved by voters.

China confirms woman died of bird flu in Beijing (Reuters)

Reuters - A 19-year-old woman has died of the H5N1 bird flu virus in Beijing after coming into contact with poultry, health authorities in Beijing and Hong Kong said on Tuesday.

Israel escalates offensive into Gaza cities (AFP)

AFP - Israeli tanks and helicopter gunships went blazing into towns across the Gaza Strip on Tuesday, attacking Hamas targets and searching for its leaders as the war death toll approached 600.

Russia, Ukraine trade blame as gas war hits Europe (AFP)

AFP - Russia and Ukraine traded blame Tuesday as a dispute between the two bitter ex-Soviet rivals triggered major gas cuts in Europe in a dramatic escalation the EU slammed as unacceptable.

Your Affiliate Business and Taxes

Affiliate Revenue Affiliate Revenue