Starting a "business" question

[Beev]

If I run a website where people pay me for a service I do remotely, what kind of records do I need to keep so the government doesn't tax rape me later? The services would be random (not sexual, you deviants) and not even close to my full time job, just something fun for extra money.

 

[her209]

Is it sexual?

 

[dank69]

incorporate in bermuda

 

[dullard]

You need to keep track of the money that comes in and the money that goes out. I'm assuming you'll be a sole proprietor and thus you'll be filing this form: http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

It is a simple form to fill out and only takes a few minutes to understand and file. Look at lines 8-18 in particular. These are the receipts you need to keep and it is best to just sort them in folders with each folder representing one of those lines.

Line #30 on that form mentions home based businesses. Since this is also likely a home based business, you'll also have to fill out this form: http://www.irs.gov/pub/irs-pdf/f8829.pdf

On that form you would keep receipts for lines #9-#21 mostly. They are simple things like utility bills that you may already be keeping. But this is a more complex form and might not be worth the hassle depending on your particular details (I personally wouldn't fill it out to save a measely $50 for example).

If you drive for these services, you should also keep track of mileage on your car. In writing put the starting mileage, final mileage, date, and business purpose for the drive. Do that every time you leave on a business trip. Sign that piece of paper.

 

[Beev]

Thanks, dullard. That sounds really involved for something I might make $100 a month max on...

 

[dullard]

Thanks, dullard. That sounds really involved for something I might make $100 a month max on...

It isn't too difficult. It truely only takes a few minutes to fill out the first form, and that is all you need to fill out. The other stuff will just save you more taxes but might not be worth the effort. Even on the first form, most lines will be $0 for such a simple buisness. You just need to keep track of business money that goes in and business money that goes out. It isn't very involved at all once you read the form and know what can save you money on taxes.

For example, if you want a new office chair, then you can claim it as a business expense. Keep that receipt. Same with a new computer or new desk. Your internet connection is now a business expense. Keep those bills. Anything related to the business, keep. The catch is that you must use it mostly or entirely for the business. Buying a new gaming video card likely won't legally count as a business expense even if you put it into your business computer. So don't save receipts or bills that are mostly personal use.

 

[IceBergSLiM]

why would you report $100 a month

 

[Beev]

why would you report $100 a month

Could I just not report it? I've never come close to starting any type of business myself, so I don't know really anything about it.

 

[IceBergSLiM]

Could I just not report it? I've never come close to starting any type of business myself, so I don't know really anything about it.

100 income a month probably isn't even making a profit once you've deducted all over head and operating expenses you are probably taking a loss. If you plan on reporting such a loss on your taxes then you would want to track the income. If you don't plan on taking a loss on your taxes then no point in tracking it.

Others in here will kick and scream that its illegal blah blah ......they are full of shit nerds, everyone does this. Considering the amounts involved are so small any amount you end up under paying here is countered by another area where you are over paying and not realizing it, so let your conscience be clear.

 

[dullard]

why would you report $100 a month

I thought about saying that too. But then I thought about reality. What if that $100/month becomes $1000? What if that $1000 becomes $10,000? At some point he'll be in deep crap simply because he didn't want a divided file to stick a few receipts in. After reading the two page form (only one page needed if not filing car expenses), it is about zero more effort for life. There just isn't a good enough reason NOT to keep receipts for a business like this.

 

[Beev]

That would be great if it blossomed into a money maker...

What information do receipts need on them? I was planning for users to make a request, I tell them the price, and then if they agree they just _____ me the money. Something Paypal that isn't Paypal would be nice...

 

[IceBergSLiM]

That would be great if it blossomed into a money maker...

What information do receipts need on them? I was planning for users to make a request, I tell them the price, and then if they agree they just _____ me the money. Something Paypal that isn't Paypal would be nice...

If you keep your transactions online it should be all the business record you need.

 

[yllus]

I use http://invoicemachine.com/ to do my billing and to keep a history. Great site for pseudo-full timers who bill their sole clients twice a month, or for people who do very occasional contract work.

 

[paulney]

Generally, income of $1200 a year (your max) needs to be reported, but is a drop in the bucket in the grand scheme of things, so I wouldn't sweat it too much.

If you do work for businesses, you will need to fill out a W9 for them, and they report your income if they pay you more than $600 a year (that's what we do with our contractors). If you do work for individuals, it is solely your responsibility to report.

If you need a business name and everything associated with it - go ahead and file schedule C at the end of the year. Otherwise - just claim it as a hobby with irregular income and don't report it. At least for the first year. If it starts ticking up - make it proper and formal.

 

[Texashiker]

why would you report $100 a month

Ginger Lynn (the adult movie actress) made a $1,000 mistake on her income taxes, and the IRS wanted to put her in jail for the maximum the law allowed. That $1,000 mistake cost her $100,000 in legal fees to defend herself in court.

Some people say she was being made an example because she was an adult movie actress.

Other people say the IRS is overzealous in prosecuting people for simple mistakes on their tax returns.

$100 a month = $1,200 a year, $200 more then what the IRS went after Ginger Lynn for.