Last Minute Tax Stuff

[blaknite]

We're approaching the end of the year and I've been mulling over the sticky tax thread here wondering what I should do now before the year ends.

My situation, Over the past year I've spent approximately 20K of borrowed money on domains most of which are parked or under development. I've brought in just shy of 3.5k in earnings from my domains. I don't sell the domains themselves, just earn money from advertising. I know I have to clam the income from the advertising. I'm just not sure If I can somehow claim the money I spent on domain purchases as expenses?

Since almost all the domains I purchased I expect to hold for 4+ years, I wonder, can I break down that expense over multiple years. I know I won't be spending 20k in domains next year or the few years after. (no budget left)

My first year domaining, I claimed the money I spent buying domains and registration fees as a Hobby Loss, and the income as Hobby income. It was a nominal amount less than 1k altogether. I'm pretty sure a 20k hobby loss deduction would trigger an audit. What can or should I do before the end of the year to prepare for filing next year. I don't plan on forming a company (just yet) so were talking strictly just personal tax stuff.

 

[netmeg]

#1 - get an accountant. It only cost me around $400 to have them do my tax return for me, and another couple hundred to set up my S Corp, and it was worth every penny not to have to worry about it.

#2 - I don't know your particular situation or your state's, but I was able to to deduct everything I spent on domains, everything I spent on PPC advertising, my new laptop, my cable connection and a few other things as well. But that's me, and that was on the advice of my accountant for my own situation.

#3 - get an accountant.

 

[mhdoc]

I second the advice about getting an accountant.

If you were talking about real estate, you would want to keep the property (domains) you plan to hold, outside of your business in a separate entity. I don't know, but suspect domains may work this way too. The tax laws get very involved.

 

[blaknite]

I expected i'd need a professional at filing time this year. I've got some other things to concider aside from the domain income. Should I hire an accountant now before the end of the year or do I wait until its time to file?

I've always done my own taxes, either e-file with software, or with good old pen and paper. The whole concept of hiring an accountant is a bit new to me. Where exactly should I get the accountant? What credentials do I look for? Is the guy (or gal) who I hire as an accountant a separate individual from say like an H&R block person who I would pay to do my taxes?

Anyone have a suggestion on someone good in Salt Lake City, Ut? I really want someone who is familiar with domaining, but given my income the cost has to be reasonable.

 

[mhdoc]

You need to talk before the end of the year. For example, I use domain registration fees as a way to shift income from one year to the next. If I made more money this year, or am under withheld I will push my renewals out farther by paying them now.

You must have a business reason for doing things. In my case I can use the RegisterFly example and Google's possible blessing on longer registration periods as justification for paying farther in advance..

 

[netmeg]

Finding an accountant who is familiar with domains might be expecting a bit much. But maybe. Mine wasn't even all that familiar with internet publishing, but she didn't really have to be. It's all about income and outgo.

Probably the best way to find one is by referral. Many business people have accountants; start asking around. In my case, we had a law firm handling the probate when my uncle died a few years ago (it was a very messy case, half a million dollar estate, no will, obscure relatives coming out of the woodwork every few months) and they recommended an estate accountant for us to deal with the complicated estate tax stuff, so when I needed an accountant, I asked that estate accountant if he did that kind of work, and he didn't but one of his employees did. And I was pretty happy with her.

I got all my stuff together and first talked to the accountant in January, and she filed electronically for me in February. Had my refund two weeks later. If you wait too long, they're a lot busier. And also, if you're likely to get any kind of refund, you probably want it sooner than later.

 

[Valdeam]

My accountant is a lot older woman and she is very tech-savvy. I had to call around for several days to find her. Keep making phone calls and e-mails and see which suits you the best.

Valdeam

 

[blaknite]

So what all information does the accountant need? I'm wondering what I should gather together and bring with me?

 

[netmeg]

A list of your expenses.

A list of your income.

The official stuff, like W2 forms for your job, 1090s and so forth that the parking companies or Google or Yahoo give you for income earned.

Mine wanted a copy of a previous tax return as well.

I didn't have to bring my accountant all my receipts, just the lists - but she said to make sure I knew where the receipts were, in case anything ever needed to be verified.

And I had to give them a blank check with VOID written on it; they were filing electronically, and wanted the official record of the account and routing number for my refund on file.

 

[sf2010]

as many people have said, hire an accountant;

you will most likely need to amortize that 20K investment (meaning taking depreciation over a period of time).

i do my own tax filing because i use the cash vs. accrual method to keep everything simple. probably not as effective, but not as audit prone either imho.