Tax Question

I know taxes have been discussed but I don't remember the cost of refs being explained.

I see people cashing out $1,000 a week from sites like giftmonkey. The 1090 is going to have the amount they were paid from the site not just the profit that was made. How does the cost of refs work into taxes.

Let's say you do a site where the refs are worth $40 each. You payout $20 for each refs and get 25 refs so your payout would be $1000. The 1090 is going to show you received a gift of $1000. If you pay 33% or whatever on the $1000 you end up with $670 but you also paid out $500 to get the refs.

I'm guessing there has to be some way to work all that in so you don't pay taxes on the money it cost you?

Yeah i think what you pay for referrals can be a reduction and also the cost of the offer, but im not too sure

[quoteff2229c8ff="zr2152"]Yeah i think what you pay for referrals can be a reduction and also the cost of the offer, but im not too sure[/quoteff2229c8ff]

Yeah that's what I'm thinking too. Just wanted someone that knows taxes a bit better to confirm.

[quote1cdce79d89="ronmm"]
Let's say you do a site where the refs are worth $40 each. You payout $20 for each refs and get 25 refs so your payout would be $1000. The 1090 is going to show you received a gift of $1000. If you pay 33% or whatever on the $1000 you end up with $670 but you also paid out $500 to get the refs.

I'm guessing there has to be some way to work all that in so you don't pay taxes on the money it cost you?[/quote1cdce79d89]

I was wondering this same thing and have tried looking through old threads for days now...I think you can file the money you paid for referrals as an expense...is that correct anyone? Also, what proof do you need to file an expense? Could you print off the confirmation from paypal??? I know we are suppose to get information from tax experts, not someone on the forum...but if somebody has some idea it would help a ton!!!

problem is that it may be hard for u to have good documentation should u get audited. the paypal payment would have to say what site it is for. another option is to cash out less than $600 and then have no worries...

I keep all of my costs and profits as a business ledger, and file as a business schedule. That way I can go for the big prizes without losing out on what I have paid.

Actually, I file it in with another business I run, so it doesn't cost me any thing extra to file.

Laurel

[quoteccff7ac905="laurelwm"]I keep all of my costs and profits as a business ledger, and file as a business schedule. That way I can go for the big prizes without losing out on what I have paid.

Actually, I file it in with another business I run, so it doesn't cost me any thing extra to file.

Laurel[/quoteccff7ac905]

So you only end up paying taxes on the money you profit and not the full amount you were paid? I file self employed anyways since I work from home.

[quote7f74ccdb1d="ronmm"][quote7f74ccdb1d="laurelwm"]I keep all of my costs and profits as a business ledger, and file as a business schedule. That way I can go for the big prizes without losing out on what I have paid.

Actually, I file it in with another business I run, so it doesn't cost me any thing extra to file.

Laurel[/quote7f74ccdb1d]

So you only end up paying taxes on the money you profit and not the full amount you were paid? I file self employed anyways since I work from home.[/quote7f74ccdb1d]

Exactly. And I plan on getting a new computer this year, which would be a tax write-off as well. I can even write off a percentage of my internet connection. (And my spiral notebook, but that's more relevant on a different thread lol )

Laurel

[quote5c578212be="jy3"]problem is that it may be hard for u to have good documentation should u get audited. the paypal payment would have to say what site it is for. another option is to cash out less than $600 and then have no worries...[/quote5c578212be]

So would putting something in the subject line such as "Paying for Green on Phones.ZeroPricetags.com" be adequate to document this kind of write-off?

As I am just starting to file taxes, I don't want to screw up.

I have years of freedom to look forward to!

I hope....