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.
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