How exactly do taxes work for the whole "getting free stuff". I see the number $600 getting thrown around a lot but do you ALWAYS only pay taxes if ONE site gives you $600 or more? My friend might be opening a site and cut me in on the profits, so i figured i should get the taxes part figured out if it will happen...
So lets say mywebsite.com is an incentive site and for every offer recieves $20/lead and pays $10 to the users.... just to keep numbers simple
User# 1 has made $700 for himself, $1400 of revenue for the website, and $700 profit from the user
Does the user pay $700 in taxes, or $100 (anything over $600)?
Does the site pay taxes on the $1400 or $700 (they earned)?
User# 2 has made $200 for himself, $400 of revenue for the website, and $200 profit from the user
Does the user pay anything in taxes? what if he made / was given money somewhere else?
Does the site pay taxes on the $400 or nothing until the magic $600 mark?
My guess is that the user pays taxes on all of it, but the site only pays taxes on what the user receives if it exceeds $600. If this tax falls under the gift tax does the W-9 serve as an agreement the user will pay for the gift tax instead of the website?
Sorry its been a while since economics class and this isn't exactly covered in any textbook I've read
It's basic business finance, really.
You are legally required to report ALL income, regardless of whether it's $600 or not, and are required to pay taxes on it assuming you have enough income to owe taxes. Even if it's $20, or whatever.
The $600 number is the threshold that a business is required to cut you a 1099 and report to the IRS themselves as being paid to you. If you get less than $600, they aren't require to report you receiving it, but YOU still are.
As to what the site themselves report as income, then likewise whatever they receive from their publishers ($1400 in your example) is reported as their income, however it is offset by a corresponding business expense of the payout to you ($700), so their net taxable income on the transaction is $700.
That's actually an over simplification because tax laws are complex, particularly with regards to business ownership, but that's the general idea in a nutshell.
Also, the standard disclaimers apply DO NOT ask for or act upon tax advise on a public internet forum, particularly one that is not tax-specific like FiPG. Consult an accountant, attorney, or professional tax preparer before deciding what you're going to do, unless you just intend to follow the letter of the law. Just remember that if a freebie site reports your payments and sends you a 1099, they have already reported it to the IRS as well -- so you had better not fail to report it yourself.
Is that disclaimer a warning or a rule?
if its a warnings does the 1065 (partnership) form include for a partnership LLC? I believe my friend has sent in the application for an LLC to make things a little easier (and legal) in both of our names (as in an LLC Partnership). The only other form i could think of is 1120 (corportion) form... but theres a huge difference between an LLC and Corp so that can't be right could it? Unless the LLC is included in the coproration one
is there a specific name for this taxation... like the gift tax or something?
if the disclaimer is a rule, ignore the above -)
It's not a rule we enforce unless we see things getting out of hand with it. It's just a very strong guideline. We don't want FiPG to be seen as giving out bad legal advice.
As to your other question regarding LLC's, I'm not a corporate lawyer nor a business owner myself so I won't pretend to give you advise, other than to restate the disclaimer about taking legal advice of ANY sort from a freebie forum. ;) However we do have several site owners, including some of the staff, who have gone down the corp/LLC road who might have some insight to share with you.
It's actually illegal to dispense financial or legal advice without a license. It's okay to tell people what the forms are and what each form is for, and it's okay to tell people where to go for financial help and advice or tax help and advice, and it's okay to quote and/or summarize tax laws. But it could mean jail-time for anyone who advises on a specific situation of a particular person (without a license).
I hope I explained that right.
Maybe you guys could make a general info thread that will cover these common tax questions in a broad way. Then FiPG can avoid all potential infringements.
well yeah i believe that what i'm asking is not advice as much as general information.
And i'm pretty sure someone from the irs isnt going to come to FiPG forum, figure out where you live, and arrest you for saying what the function of a 1040ez is or something like that...
All i really want to know is the name of the form LLC's fill out regarding their taxes for that fiscal year. I'll go ask YGF i guess -P
[quote507c6faa11="skepticalcynic"]It's actually illegal to dispense financial or legal advice without a license.[/quote507c6faa11]
Do you have a source for this? That's an awfully fuzzy definition.
That would rule out me telling you to only buy things that are on sale, in order to save money.
I believe the one about legal advice, but I'm skeptical about financial advice. Could be wrong though..
so....... nothing on which form an LLC fills out?
Did you try googlinge for "llc tax form"
People generally don't mind helping others out, but you get a much better response if you show some initiative to figure it out, in my experience.
wow i feel [b6941617646]really[/b6941617646] stupid...
No worries, I didn't mean it to make you feel stupid. Just a general suggestion that will help you get more responses in the future D