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, How Much Money Do You Usually Pay In Taxes?
post Mar 10 2012, 07:30 AM
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For those of you that are working from Method #2 and have been doing so for at least full calendar year (Jan-Dec), how much money do you pay in taxes?

If you don't mind sharing, please reply with how much money you earned from Freebie Trading, how much you paid in taxes, and the usually percentage payout you offer (i.e. 75% for paying $30 for a $40 site).

Also, what exactly do you claim as income? Do you just claim the amount you pay to referrals as commissions? Otherwise, I imagine the amount you actually profit from would all be going towards taxes (if not more). If not, am I able to deduct the amount I paid to referrals as a business expense (not income).

I have searched through many of the tax threads on here and haven't found anything that answers all of my questions. Hopefully some actual examples will help. I'm trying to figure out how much money I should leave untouched (for taxes) when I move to Method #2).

P.S. I know your not a tax professional and this is not considered as professional advice. I'm just looking for examples of how much you had to pay vs. the amount you earned.

Thanks!
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post Mar 10 2012, 04:20 PM
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the amount you will owe will be on the gross freebie prize amounts. you can deduct expenses related to this as a business, including payment to referrals. if you are in the US, you would use Schedule C to report income and expenses. then you calculate net profit or loss for your business for the year. note: the government likes to see some profitable years over time.

the actual tax rate will depend on your tax bracket, which will depend on your total net income from all sources for the year. I usually estimate that and then work up a "guesstimate" return using this year's forms or software. then after exemptions, all other deductions, etc., figure tax from the tax table. my numbers won't help you, but you can get a rough idea of % tax from looking at the tax table brackets. that way you can foresee several possible scenarios.

I think there is a worksheet for figuring estimated taxes, if you are going to have enough business/self employment income that you would end up with a penalty at tax time for not paying some each quarter. there is no withholding done by freebie sites.

hope this overview helps, even without specific numbers.


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post Mar 10 2012, 06:01 PM
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What can I deduct? I have a mortgage on my home so can I deduct part of the mortgage, utilities, anything else?

I didn't make over $599 last year. I started in September. So I won't have to do taxes on this for last year. Hopefully someday when I GET REFERRALS, I'll be able to make some money.

Any suggestions would be appreciated.

Jackie (Jsm84) smile.gif
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post Mar 11 2012, 02:32 PM
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QUOTE (Jsm84 @ Mar 10 2012, 04:01 PM) *
What can I deduct? I have a mortgage on my home so can I deduct part of the mortgage, utilities, anything else?

I didn't make over $599 last year. I started in September. So I won't have to do taxes on this for last year. Hopefully someday when I GET REFERRALS, I'll be able to make some money.

Any suggestions would be appreciated.

Jackie (Jsm84) smile.gif


however much you did make is the good news! here's the bad news: even if it was only $1, it is still income and you should still declare it. you can declare as business income, or as hobby or prize income. it depends on whether you have expenses you want to deduct (business allows you to do this).

I don't know about mortgage, because I don't have a home office that is separate enough from the rest of the house to qualify. the obvious deductions are internet access, computer stuff (hardware/software), office supplies and phone calls that are relevant, referral payments and forum premium membership fees, plus any paid web hosting and advertising if you set that up for your freebie biz.


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l~US/International ~4 yrs Exp ~IM/Phone..>> Let's Trade! (TR>4)..>> Need a Trade Thread?l
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post Mar 12 2012, 10:33 PM
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Very good advice.

Using a In home 8829 form, you can use a part of your expense to deduct from net profit from business use that is reported on the schedule C.

if your self employed income is under $600 but over $400 you must use a schedule C. and then you may use the expenses... like paying your refs, internet, paypal fees, any advertising ie pins, and possibly more.

If your self employed income is under $400 you can report on line 21 of front page of 1040 as "other income." this can be business income, hobby, jury duty, bartering, alimony or almost anything... that is not on a w-2. and not subject to self employment tax.

Self employment tax is figured on net income from schedule C (or farm or rental) and is about 15% (roughly figuring).

I hope this helps.

I am a tax professional, but rules, regulations and publications are at www.irs.gov

Sharon


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post Mar 13 2012, 09:18 PM
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hey, Sharon! thanks for the professional information. do I understand correctly that the self-employment tax rate is around 15% no matter how much the net Sched C income? e.g., $500 vs $5000? and irrespective of other income, e.g., employment reported on W-2?

I'll go look up the details, but it would be handy to have a quickie rough estimate before I get around to that. (lazy wink.gif ).


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l~US/International ~4 yrs Exp ~IM/Phone..>> Let's Trade! (TR>4)..>> Need a Trade Thread?l
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............
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lGo Green on Consoles.FreebieJeebies or Pick2.CustomFreebies by April 28!
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post Apr 1 2012, 09:45 PM
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QUOTE (islaygirl @ Mar 13 2012, 09:18 PM) *
hey, Sharon! thanks for the professional information. do I understand correctly that the self-employment tax rate is around 15% no matter how much the net Sched C income? e.g., $500 vs $5000? and irrespective of other income, e.g., employment reported on W-2?

I'll go look up the details, but it would be handy to have a quickie rough estimate before I get around to that. (lazy wink.gif ).


I'm so sorry I didn't get back with you....

self employment tax is based on net income... not gross

then the net income is added to 1040 with other income... and then depending on your situation, it could result in more federal or state tax.....

the 15% rough estimate is just solely self employment tax.

I hope that helps more...

Sharon


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