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The Sad Truth: You Still Have to Pay Taxes If You Make Your Money Online

pay your taxesThis guest post is written by Amanda DiSilvestro.

As the daughter of an accountant, I have to say I’m not surprised that I was hounded about my taxes the minute I got a full-time job. Although it seemed like a hassle at first, I have to admit that for a writer, any information about taxes is helpful. I know that I was extremely surprised to find that bloggers/writers had so many different types of taxes to file, and I was even more surprised to find that the penalty for not understanding (and therefore ignoring) these taxes was so serious.

Blogging is a wonderful job because you are your own boss. You set your work schedule, you write about whatever interests you at the moment, and you essentially get to decide how much you’re going to get paid at the end of any given week. Although this is all very exciting when first starting a business, bloggers need to realize that they are not immune to paying taxes. Unfortunately, it can be tough to know what you have to pay and what you do not. While a more traditional job will have a paycheck taking the taxes out for you, you are on your own with blogging. If you decide to ignore your taxes, you could be in serious legal trouble.

If you don’t have an accountant for a Dad and have realized that you don’t know what taxes you need to pay or not pay, look no further. Consider some of the taxes you’ll need to keep in mind if you’re making money online:

Top 3 Things Bloggers Need to Know about Paying Taxes

  • Income Tax – All businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are qualified for a tax refund.

How the income tax is used in the government is actually up for debate, but the bottom line is you have to pay. If you don’t pay, the Internal Revenue Service (IRS) could hit you with steep penalties, your property could be apprehended, and in very extreme cases you could face jail time. This is extremely important for those making money online to understand because you do not get this tax taken out of any paycheck. Therefore, you must set money aside each month so that come April 15 you will have enough money to pay your income taxes. The amount of money you will need to pay depends upon how much you make, so visit the IRS self-employed tax center to get a figure.

  • Self-Employment Tax – This is a tax that someone who works for himself/herself must pay each year.

If you make more than $400 or more per year online, then you are obligated to pay this “extra” self-employment tax. This tax is typically 15.3% of your net earnings and can be filed by filling out a Schedule SE form by April 15. You can pick up these forms either at the IRS or at most banks and/or post offices. You can learn more about the Self Employment tax by visiting the Social Security Administration website.

  • Claim Your Expenses (Not a Tax!) – If you are making money online, then you have the option of writing off any tools you need to make your living.

Although those self-employed have to worry about paying taxes, they also get to worry about not paying taxes. In other words, any supplies or money spent that was needed for your job is tax-deductible. For example, if you are a blogger and needed to buy a nice computer or fancy software, you will not need to pay taxes on those items. However, it is important you keep all of your receipts so that you have proof of what you bought and the IRS can take a look. You need to fill out a 2106-EZ form if you’d like to take advantage. You can also find this form on the IRS website.

Making money online doesn’t have to be stressful. Many bloggers work with an accountant or their bank to help figure out which taxes they need to pay, when they’re due, which forms need to be filled out, and how to fill out the forms. The most important thing to remember is that taxes are not something you should put off until tax time in April. Bloggers should be setting money aside each month to prepare for tax time.

Photo Credit: blogs.app.com

Amanda DiSilvestro is a writer on topics ranging from social media to business phone systems. She writes for an online resource that gives advice on topics including credit card processing to small businesses and entrepreneurs for the leading business directory, Business.com.

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Category: blogging

26 Comments on "The Sad Truth: You Still Have to Pay Taxes If You Make Your Money Online"

  1. I think this is not applied to all countries in this world. The truth is that I didn’t have to pay tax for my online income when I was in my home country. However, since I went to the US, I’ve had to pay tax for every single penny I earn.
    You should clarify this point in the article as well.

    • Sam says:

      Yes Tuan I agree same case resembles with me I don’t have to pay any kind of tax. I haven’t paid single cent to anybody yet … anyway Tuan I agree and also like to recommend what you have mentioned above.
      -Sam

    • Eleazar says:

      As a responsible citizen, it is a duty to pay taxes. But you don’t necessarily need to pay as much as you are right now. You can actually save money by avoiding overpayment of your taxes through tax deductions. Tax planners or tax lawyers can help identify items that can qualify for a deduction in accordance with the country’s tax laws.

    • Tho Huynh says:

      Yeah, I agree with you 🙂 We don’t have to pay tax in our home country, but things are quite different when we come to the US.

  2. I see paying tax as giving back to ones own country to foster the growth and development. But like Tuan said, Australia has their own Tax policies and so does US.

    All the same, I enjoyed your post, well detailed and points out the best steps to take when paying tax online. But you sound so strict in your post, are you an IRS agent? (I’m just asking)

  3. I agree with Tuan this not applied in all countries. It is a person’s obligation and duty to pay for taxes, however, not all would like to pay it.

  4. Tax may not apply in the same way as it does in the US, but I can’t see that it does not apply at all. I mean if you’re making thousands online, how can you NOT pay any tax at all? This doesn’t seem fair, regardless of which country you live in.
    I love JJ. It’s great to see a picture of her here 🙂

  5. Sanna says:

    Hi Amanda,

    Thanks for your excellent post. Finally someone talking about the tax issue. We (internet marketers) tend to talk about the millions (!) coming in, but not the legal part of paying our taxes. I assume many people do, but I haven´t heard anyone mention it. I´m from Sweden and actually contacted the tax authorities here and could not get a sensible word out of them:) So I still need to do some research about that. Sweden is high paying tax country, so I´m certain that I will not be able to get out of contributing with my share:)

    Best,
    Sanna

  6. ohh , really i don’t know about this new tax .. thanks for let me know about this .. i’m from India so i think its not apply for me

  7. The title of the article is so true but it hurts so bad! Paying taxes is never fun for anyone but it is even worse when it is one lump sum during tax season. I guess that is just part of the process of earning money online huh? Great article though, love the content.

  8. Dean Soto says:

    This is a great post. One thing to note, at least in the United States, depending on your business entity and if you are a single owner of a side business (i.e. you have a full-time job), you can have your full-time employer take additional taxes to compensate (if you need to). I do that and it’s a bit easier than having to pay estimated taxes etc.

    Also, there are a lot of web apps out there that track income and expenses for you so that you don’t spend a ton of time figuring all that out monthly and at the end of the year. 😉

    Thanks for the great post 🙂

  9. mike @ consumer court says:

    e-Payment facilitates payment of direct taxes online by taxpayers. To avail of this facility the taxpayer is required to have a net-banking account .Timely payment of advance tax helps in timely completion of projects.

  10. Bill says:

    This is a challenging outcome especially here in the U.S.A particularly in Arizona and Canada. But all in all we should be all patriotic to our country benefits. Thanks Amanda for the thought full idea.

  11. Robinsh says:

    Hi Amanda,

    Thanks for this wonderful presentation but I’m still confuse wheather I have to pay any tax or not being an Indian blogger earning around $500 per month.

    Please reply !!

    • Sheyi says:

      Robinsh, I guess you have to check with your local tax council.

      @Topic, Its better to pay tax as there are numerous gains from paying taxes.

      Sheyi

  12. I’m surprised not to see you mention the new 1099-K form. If you make more than $20K on Paypal or any other big payment processor in 200 transactions or more, Paypal will be reporting your income to the IRS and sending you this special new form. I know because I got one…

    This is a huge change that daylights a lot of income that I think was probably previously hidden…I’m curious to see if the IRS will report how much 1099-K income they learned about for the first time this year.

  13. Patricio says:

    Great post! I’m glad that you covered this topic as it is rarely discussed. Taxes are very important and can be very difficult to understand when starting an online business for the first time.

  14. Ray says:

    Yep, nowadays everything gets taxed! Last time i was at a casino and i won about 5,000USD i was asked for my ss# so they could have taxed me. At first i’d though they didn’t think i was overage. But later on i was taxed on my winnings!

  15. really an awesome post providing such a nice information and helpful information

  16. Glori S. says:

    I don’t think this is applicable in the Philippines… Although Im just writing part time and I have a day job. The employer tales care of the taxes…

  17. Xps says:

    “All businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are qualified for a tax refund.”

    That is incorrect. As quoted by the SE Individuals Tax Center you linked to, “You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions.”

    In short, it’s not an absolute that you must file despite what you said. If you don’t meet the $400 net profit mark and you don’t meet the filing requirements (ie. filing status, age, gross income), you don’t need to file at all. Since you don’t make enough money, you don’t take out deductions either.

    Of course, if you’re a professional blogger, then this is all hooey because you likely meet the filing requirements. As a developer, I’m made to look for logical absolutes and find their faults. I don’t like the word “must” because it’s rarely true compared to how much it’s used.

  18. karan says:

    Pretty insightful post. Never though about paying taxes and all. But I am still a starter. Will take care of this in the future

  19. James Hannan says:

    I am not sure whether online earner from all over the world need to pay tax especially from south Asian

  20. robert says:

    this post was helpful but its very hard to read with this huge add on my screen ” get the writer’s handbook for free” trying to close the thing doesn’t help at all

  21. Expat says:

    I am a US citizen currently living in SE asia, I have been for almost 2 years now. I stopped filing income tax when I left the states. I make my money on-line. I do not plan to let the US know of my earnings ever. As far as I am concerned the US IRS can kiss my ass. I have no assets they can get hold of and all my cash is liquid. So they find me when I return to the states, big deal. They can get anything from me. I have lived in the USA for over 40 years and I do not feel any patiotic responsibility to them. All the US is filled with is lawyers, doctors and goverment agencies all trying to get your money. I paid my dues. I don’t live there anymore. I don’t use any US services. As far as I see it the US owes me my money which they took from me in the form of Social Security and I would like to have it all now….but are they going to give it to me. Think not.

  22. indian developer says:

    I have a question. Recently when signing up for Amazon Android app development, I cam across this plethora of tax talk and forms etc. They were asking to fill up W-8BEN form or something like that for non residential aliens earning income from U.S businesses or services. Something to say that income from my paid apps would be subject to U.S govt’s tax net.

    Is it so with AdSense also? Other ad networks that work from the U.S ?
    I’m worried. Do I really have to do paperwork related to IRS? I mean i don’t even reside in the U.S, and Amazon was asking for a ITIN for which I would’ve to fill up an IRS form and file tax returns and so on. I mean, for a thing like this, why don’t they just cut their piece of the pie (my hard earned pie) and just give back whatever belongs to me without strangling me with all the IRS shit

Onibalusi

Welcome! I'm Bamidele Onibalusi, a young writer and blogger. I believe writers are unique and highly talented individuals that should be given the respect they deserve. This blog offers practical advice to help you become truly in charge of your writing career.

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