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The myth that Internet Marketing is a tax free industry is pretty much the worst and most dangerous belief in the market. People who get into it usually think that just because they are making money and being paid through, for instance, PayPal, they don’t have to pay taxes on what they earn. This is not true! More to the point, failing to pay taxes on this income could easily get you into all kinds of trouble! There’s no need to panic, though: Internet Marketing taxes don’t have to be stressful. Here are a few ideas that could help you.
1. Set up a visit with the local Small Business Association. Every community has some sort of small business "helper" organization (usually run through a community college) that has trained specialists available to help you both getting your business starting and making sure that all of your T’s are crossed and your I’s are dotted. Best of all, this resource is nearly always free of charge!
2. Track everything. Let’s say it once more: monitor just about every last detail. This is easy enough to do through Excel. Create a spreadsheet of each and every penny you earn through your Internet Marketing efforts and another that documents every single penny you spend on your Internet Marketing efforts. You should keep receipts and invoices for all of the money you pay out.
3. If you have money for it, hire an accountant. In this way you would not have to worry about the numbers and taxes part of your small business. You tell your accountant what you’ve earned and expended (you should have documentation for proof) and they do the rest.
4. Pay in toward the taxes you will end up owing at the end of the year. A good rule is to pay 30% of each and every sale. This can be done every 3 months or even on a monthly basis by making Estimated Tax Payments to the IRS. The IRS today has the ability to receive estimated tax payments whenever you think or want to make them. This will save you from coughing up a truly distressing amount of money all at once which, if you haven’t been saving up for it, can be incredibly stressful. What’s even better is that if you pay too much through your estimated tax payments, you will get a refund like you would by paying taxes with a normal job. You’ll want to speak with someone at the IRS so that you can get this set up the right way.
5. Find out which write-offs you’re permitted to take. When you run your own business from home, there are a number of things, including the money you pay in for utility payments, that become tax deductible–just like paying for other business related supplies. Your accountant or a rep from the IRS should be able to help you work out which deductions you can claim at tax time.
It is not all that tough to become intimidated by the idea of paying out taxes when you are an online marketer. The good thing is that there are plenty of resources to help you make sure you observe the law and keep a healthy share of the profit you make!