Paying Taxes On Your Online Earnings

TAX TIME!One thing that a number of people who are making money online tend to neglect or maybe ignore is the issue of paying taxes on their online earnings. One of the reasons for that is that they do not see the amounts they are making online warranted enough to pay tax. Truth of the matter is, there is a high chance you need to pay tax on your online earnings if you are earning a substantial amount of money.

When it comes to earning money via various publisher networks and affiliate programs (a lot of which are based in the US), people are asked to enter their tax information when they sign up. If the new sign ups are not based in the US they generally do not need to provide any information. I got into discussions on forums a while ago and from there on in, the general consensus is that a lot of people start earning, get paid out and forget about paying taxes.

A number of people are also turning to auction sites such as eBay and Amazon to sell goods for a few extra dollars and experience more success than they expected. With that being the case, it is not long before these people find themselves investing more time into selling more and more stuff online and making more and more money and more often than not they are going to receive payment via a service such as PayPal. Last year in the US, legislation was passed that requires the processors of third-party payments (such as PayPal) to report to the IRS individuals who receive at least $20,000 a year in credit or debit card charges from 200 or more transactions. When this legislation is put into place it will make it that much more difficult to evade the taxman.

As already mentioned, the tax laws are different from country to country. For example, if you are selling goods here in New Zealand on a site such a TradeMe, you should declare your online earnings if; you acquired the goods you are selling with the purpose of on-selling, the purpose of the activity is to make a profit or your business involves dealing in these goods. The tax department (IRD) is also said to work closely with TradeMe to make sure people meet their tax obligation.

What I am getting at is, if you are setting out to make a bit of money online it may be a good idea to check what tax laws apply to you. Leading on from that, it may also be a good idea to keep track of your earnings and this can easily be done with finance software such as Quicken, Microsoft Money and QuickBooks. You never know just how far you will get with making money online and if you get to the point where you really need to report your earnings you should be well on the way to being set to avoid the hassle of being chased around by the taxman.

Get an IRS approved 6 month tax extension with no excuses needed. Visit FileLater.com.

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8 Responses to Paying Taxes On Your Online Earnings

  1. NetBizSavvy March 27, 2009 at 10:36 pm #

    Very interesting blog.

  2. Anonymous March 31, 2009 at 10:09 am #

    Good call on FileLater for the tax extension… that was EASY! Goodbye, April 15. See you in October, Uncle Sam πŸ™‚

  3. Anonymous March 31, 2009 at 11:34 am #

    Quicken is the name of the company that makes Quickbooks… They aren’t two seperate products.

  4. Gerri March 31, 2009 at 6:53 pm #

    @ anonymous #1

    No worries on the FileLater heads up. I hope it works out well for you.

    @ anonymous #2

    I disagree with you there, Intuit is the company that owns Quicken. If you go to http://quicken.intuit.com/ you will notice that the products for sale there are Quicken Deluxe, Quicken Premier and so on (you can get it free online as well). If you go to http://quickbooks.intuit.com/ you will notice that Quickbooks is marketed as a product on its own. Both products are Intuit brands. Thanks for stopping by and point that out though.

  5. Clement April 1, 2009 at 4:57 pm #

    Well thought out article! Governments have to collaborate in order to come up with innovative tools to track income that is made online.

  6. Gerri April 2, 2009 at 7:24 pm #

    @ Clement,

    Very well made point Clement. But government being government, trying to reach some sort f agreement may be a major sticking point. Thanks for stopping by.

  7. TriNi April 6, 2009 at 1:49 pm #

    Hey nice blog!

    I’ve often wondered about “paying taxes” since I recently started earning online.

    I know the rules as far as the amounts go but I guess I have to wait til next year to see how much I earn in total and how much.. if any.. I have to pay.

    Great post tho! It’s something alot of people probably wondered about!

  8. Gerri April 7, 2009 at 7:40 pm #

    @ Trini,

    Thanks for stopping by. I’m glad you enjoyed the post. I hope to see you around sometime soon and make sure to keep on top of your earnings.

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