Paying taxes on domain sells/eBay

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FadiasJustice

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Hello all,

I was just wondering how do tax paying go when your selling domain names and or when your selling on e-bay.

I know this is going to sound real F-ed up but I don't feel I should have to pay taxes on my domain sells, I'm the one coming up with the names i'm the one selling them off.

The IRS shouldn't be apart of that end sell sell.

But I have to do things the right way so to all the people who have sold names did you pay taxes on them and how do you know how much to pay?
 
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AfternicAfternic
I know what you mean. First I have to go out and get a job and then take all kinds of junk from the boss to get paid each week. I don't think the IRS deserves anything, do you???

Unfortunitly, the law says that you generally must pay taxes on the money you get, and only under certain cercumstances is it partly or complety exempt from taxes. It's up to you if you declare your sales of a domain, car, or other property. If it's a small amount it may be worth the "risk" of getting caught, since they are not likely to come down on you too hard, but if it's a big sale, you should declare the "profit" on your tax return.

How much taxes you pay will depend on what your tax bracket is, but I figure it's going to be 30%-35% and I keep some of the money so I can pay my taxes in April. If it's a lot, you should pay estimated taxes so you don't get a penality, but the fine is pretty small (check with your tax person or the IRS to find out what it would be). I'm paying estimated taxes of low $x,xxx every 3 months.

Now, paying taxes sucks, but there is good news and that is that you don't have to pay as much as you think. Even if you have a regular job, you can have your own business buying and selling domains or whatever you want. This requires that you start keeping records for your business, but you don't need to incorporate or get a license generally (check local laws and regulations).

Once you decide to have your own business you can start to deduct many things from your income tax that you could not do previously. What kind of things? Anything related to your business. For me this includes my internet connection, my computer, my second computer, my wife's computer, the 3 new LCD monitors I bought this year, all the costs of buying domains, Paypal fees, web hosting fees, computer magazines, software, business magazines, and so on. Then when you sell a domain, you pay taxes on the PROFIT from the domain. So if you buy a domain for $50 that is an expense and you keep track of that as a deduction. Then if you sell the domain for $450, you have to declare profit of $400 and pay taxes on that.

If you sell the domain for $10 because you don't want to renew it, then you have a loss of $40 and you can deduct that from your taxable income. You may think that sucks, but the deductions can lower your tax bracket and "save" you money.

I'm not a tax professional and you should either study up on all this for yourself or hire a tax person to do your taxes. A good tax person may cost serveral hundred dollars, but they can save you much more if they know what they are doing. I paid $350 to have my taxes done this year... and that's another deduction. :)
 
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Wow thanks,

you answered everything......
 
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thats very usable. many thanks. rep is on the way.
 
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Now, I'm not a tax professional either, but I thought that you could NOT claim your PC and things unless you were using them in an obvious business manner, such as a separate home office. If you're using that same PC to play video games in your living room, then it is not allowed to be claimed.

I remember reading an article that really stressed a separate home business office.

Could someone clarify this?
 
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Well, I play solitaire on my computer from time to time, but I do have an area that is my home office. I don't deduct part of my house that has the office though, since I heard that it can increase the chance of being audited, and when you sell your house you have to pay taxes on part of the profit or something like that?? In the end it seemed like more trouble than it was worth to take a deduction for a home office.

You raise a good point about using the computer for games, but I think many office computers are also used to play games sometimes. The point is do you need the equipment to work at and maintain your business? If you don't have a PC game review web site, you can't deduct your xbox, but if you have that kind of site, you can since you need it for product research. :)

I think if people just use common sense about this kind of thing they will be able to stay out of trouble. Treat your business like a real business and keep records, even if you just put them into a shoebox. Don't spend money on things you don't need for your business and then try to deduct them, but if you need a clock or a radio for your office, then buy it. And if you have a lunch or dinner with a client or business partner and you discuss business then you can deduct that as an expense. But like I said, don't get excessive or they will pick up on it and may audit all your records.

One more thing I forgot to mention yesterday: When I started my small business part-time I didn't make much money, in fact after my "expenses" I don't think I made anything the first year or two. My tax guy told me not to worry, that I could lose money for 3 years before I would not be able to deduct it any more. That may have changed, but most small businesses lose money when they start out.
 
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