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I pay 33% federal and 7% state for a combined 40% right off the bat (not to mention real estate tax, gas tax and another 8% sales tax).
And I'm looking at ways to reduce that 40% tax and wondering if they are worth it.
A farmer will often buy a new truck or tractor that he don't need very badly in order to claim it on his taxes, but i never could justify the process unless i needed the item for production. True, years down the road when he's retired that tractoe may be worth as much as he gave for it, but we can't buy tractors
I could buy a small office building in town and work from it part time, to legitimize the expense. In my case it would be an asset for times when the electric power / net service is knocked out by a storm in the countryside.
But i can't decrease my state tax, it's 7% for anything over $30,000 so that leaves me looking at federal.
Married and filing jointly you have to go below $195,850 just to get a 5% reduction. Go below $128,500 and i get another 3% for a total of 8% below my current 33%.
But consider this:
If i spend $60,000 a year toward buying an office building, and save 5%, then my federal tax bill goes from approx 84k to 71.5k for a savings of 12.5k on taxes, but i have an out-of-pocket cost of 47.5 on the office building.
My financial year is about to end on this 31st march.
Had some funds which I can invest into my business.
Normally I list purchases as Online Business acquisitions. And thus the money spent to acquire it is my expense. To keep that business [Domain, Website] running I have to pay renewals, make calls, do marketing, get new PC's, hire a kid or two. etc are indirect expenses. Well those kids also need a place to sit so furniture comes in. Oh yes I also give them a free lunch and snacks in noon so that expense is also put into account. Electricity is another expense. Rent of the office itself is expense. If you own the office then the depreciation and maintenance of the building itself is the expense. Travels expenses and petrol bills are taken as expenses.
When the business is sold it comes back in income part. Which again I have the luxury of re investing without asking anyone
For domain name owners or website developers on small scale it might be a joke. But on larger scale I think we have to cover the "S" otherwise in future there will be legal actions taken against us.
If anyone is from India and thinks he doesn't have to pay taxes then its wrong.
You have to pay taxes in India. And if your transactions are above 25K per year then you have to get the IEC code [Import Export Code] as internet signals are now falling under that part.
There is a heavy penalty and hard actions taken against this type of stuff. So clear it all in advance and sleep well without any fear. Saving a penny right now by going around the tax is going to create loads of trouble in future. And the time once gone will never come back. So you can't start up your time machine and pay the tax.
I recently watched a TV program where some of our guys were making a fighter plane for the first time in India. And I bet they had worked hard enough. The test pilot who was going to test it for the very first time was risking his life for a very less amount of money he gets as a salary. So I salute that kind of persons and by paying my tax I am making sure that I am doing something good for my country. That is the best and easiest way to send your respects to all those who die for your country and you.
(Knock On Wood) I guess I got lucky, The tax preparer knew what a domain name and domain parking was. She said it would be a schedule C and that she would call me when their finished.
I gave her the income and all the expenses, seemed pretty cut and dry. I just hope to come out somewhere close to even.
how did your accountant claim your sales if you had them, the IRS agents told me there are 2 ways to file them depending on the situation, either treat them as inventory in your schedule C, or treat them as long/short term capitol gain depending if its just an intermittent sale or not
I didn't actually start buying names until 2005 and my phone hasn't exactly rang off the hook with offers .. When I started buying names I just thought of it as at least a 5-10 year investment with no immediate plans of selling. Someone offered me 780Euros the other day for a .net which I accepted so that will go down as my very first sale.
By the way, they just called me and I got a credit towards this year, didn't owe anything accept to the preparer. I did a lot of worrying over nothing.
Either spend it on your company or pay it to the gov.
This year I used an accountant for the first time. It cost me $415 to have her prepare my federal and state returns for me, and also to get my S Corp started, and as far as I'm concerned, it was the best money I've spent in ages. Almost nothing gets me so stressed out as taxes; a few years ago I inherited some money from a long lost uncle, and I was three years dealing with the tax ramifications of *that*. I'd pretty much decided it's not worth it to inherit money unless you inherit over six figures, ork ork.
This past year I had all my domain expense and income, I'd sold one domain, plus some of my developed sites took off, plus my day job income, and I was just dreading trying to sort it all out. Now I've already got the state refund back, and expecting the federal refund direct deposit any day. I cannot recommend farming it out enough - let the people deal with it who KNOW how to deal with it. A tremendous load off my back.
__________________ Watching idiots online since 1985...
Me too. I had a former partner screw me over - she claimed to be paying my payroll taxes when I did some work for her, and she really wasn't. Then she disappeared, and left me with a $15k tax bill, which took me about three years to pay off. Anything tax related has given me the heebie jeebies ever since.
__________________ Watching idiots online since 1985...
Basically, the banking system is like a monopoly game, the bank is the federal reserve (not federal and there is no money on reserve) can create as much money as they want, an amount which is not disclosed to the public or congress as it once was (M3)
There is no gold standard or any commodity backing the dollar. Rather than create a commodity index to create sound monetary policy and lend the money to the government interest free, the government taxes all debt which has been created out of thin air by the banks. The creators of the monopoly game can create all the money they want - without anything to back it - Why force the US populous like a pack of laboratory hamsters to run the wheels for money to go back to the Federal Reserve? By law it is a voluntary tax as it is unconstitutional.
Ron Paul is god, Ben Bernanke is a retarded dwarf - puppeted by the central banks (Fed)
The country was once prosperous, far less war mongering and did just great with no inflation because of a sound dollar and no central banks.
Woodrow Wilson inadvertently ruined his country by signing the act to allow the Federal Reserve (PRIVATE BANKS) run the money supply.
"I am a most unhappy man. I have unwittingly ruined my country.
A great industrial nation is controlled by its system of credit.
Our system of credit is concentrated. The growth of the nation,
therefore, and all our activities are in the hands of a few men.
We have come to be one of the worst ruled, one of the most completely
controlled and dominated governments in the civilized world.
No longer a government by free opinion, no longer a government by
conviction and the vote of the majority, but a government by
the opinion and duress of a small group of dominant men." - Woodrow Wilson
We must always remember - the founding fathers specifically wrote about NEVER LETTING A CENTRAL BANK TAKE CONTROL.
The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered. - Thomas Jefferson
We in the domain industry can point this out.
The 16th amendment was never ratified.
There was no new law of taxation - so this means that the income tax is not constitutional and is illegal on the ground of it not being an 'apportioned' tax - like say gas, tobacco or sales tax.
- Use schedule C for fees/income
- Treat all the mandatory annual renewal fees from the domain registry as fees/expenses which can be filed in schedule-C under other/miscellaneous expenses.
- ppc revenue is income on schedule-C
- If you treat the occasional domain sales either as part of your income, then it will be on schedule-C along with ppc income
- If you treat domain sales as short/long term capital gains, then it can be done using schedule-D. Remember if you claim all registration fees as expenses then you must show cost of acquisitions on schedule-D as ZERO imo. Now if you buy domains from other people then its a different situation, then you can use the acquisition cost as it is.
I think one also has to be consistent in treating your income/expenses/sales every year.
V.Imp Note: This is NOT professional advice, so do not use it without consulting with your tax professional. This information is provided for fun only
Last edited by rickkumar : 04-15-2008 at 03:53 PM.
I used to do quite a bit of real estate investing. one thing you had to worry about was IRS "dealer status" - apparently if you bought and sold too many houses a year, the IRS would call you a dealer and your homes are now inventory and the sale is taxed as regular income instead of investment-related income (investment related income has lower tax brackets)
Considering that domains are a form of online real-estate, do we have to worry about this sort of thing?
I've researched this a while back, and the source of the first two sentences cannot be confirmed; the claim is always "Woodrow Wilson said this x years after the Fed was established..." but the actual source cannot be found. It's not in his book (The New Freedom) and it's not in his speeches. The rest of it is in his book (chapter 8, go check it out), but he's wasn't referring to the Federal Reserve; he couldn't have had since it was in his campaign speech before the Fed was even established. The title is called "Monopoly, or Opportunity?" and it is a discussion on the organization of business.
Please confirm you sources.
__________________ Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment.
Lol. Well, what woodrow wilson states there is interesting, and possible, but it also sounds like a conspiracy theory. COuld it also just be the by-products of capitalism? Sounds plausible, but these issues transcend several parts of society. A pretty complex subject basically is what it is....
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Thats exactly what the IRS agent told me if I buy and sell on a reguar basis then basically i own a domain store and i couldnt use schedule D, capitol gains for sales, but an occassional sale is OK. He couldnt give me the number, or income threshhold from sales that constitutes the change over because no one has been brought to court to determine that.
i HIGHLY recommend a S-Corp. You can deduct at least 30-40k off the bat as a "income expense", which means you wont have to pay the 15% "SS + Medicare" Tax on that 30k-40k.
.. When I started buying names I just thought of it as at least a 5-10 year investment with no immediate plans of selling. Someone offered me 780Euros the other day for a .net which I accepted so that will go down as my very first sale.
