3 Components of Taxes For Online Business Owners
Taxes for online business owners do not have to be complicated
. All you need is proof of gross income, proof of expenses, and signed W9s. As long as you are not trying to pull a fast one, everything should go just fine. Here are some tips to get you headed in the right direction.
Proof of Gross Income
Anytime anyone pays you anything, you need a record of that payment. Some businesses want to get sneaky and try to slip some income under the table. While this may work for a bit, eventually you will be found out. Remember, Gangster Al Capone was not convicted on his mob activities nor his numerous murders. Al Capone was caught on tax evasion.
Track everything you get paid and report every penny even if you do not receive proper notice on some payments. If you try to fudge the numbers, you will be found out eventually.
Proof of Expenses
Expenses are both straightforward and complicated at the same time. However, it does not have to be difficult. It really comes down to asking yourself honestly, "Is this a business expense?". If so, then you need to keep a receipt.
It is also helpful to write down the expense and why it is a business related expense. For example, you attend a seminar on Internet marketing in Las Vegas. The seminar is no doubt a business expense. The hotel and travel is also a business expense. Taking in a show while you are there is not an expense, unless it is related directly to your business.
The final expense will be independent contractors. These have special regulations that must be followed. At the end of the year, any independent contractor you paid $600 or more will need a 1099-MISC. If you are unable to send the IRS this information, then you will not be able to claim the pay as a business expense. The same goes for affiliates and W9 forms.
Obtaining a Signed W9
The last thing an online business owner needs is a signed W9. In the past, owners had to get a physical signature. However, the IRS has taken Internet marketing into consideration and now accepts digital signatures. This means as a business owner, you can require your affiliates to sign the W9 digitally and it will work the same as a physical signature. This also makes it easier to keep track of and easier to obtain.
To make tracking affiliate info even easier, business owners can use free affiliate management software. The software will make sure every affiliate has the appropriate documentation before allowing payment to be made. This means you will always have the tax information you need to send out 1099-MISCs at the end of the year and you will always be sa
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