Online Content Pay & Taxes

[Anastacia]

I have whined a lot about them but I still managed to make $850 last month. That's not bad. I'd like to aim for that kind of money again this month. My check for this week was $240 which again is pretty good money even if they do make me just a bit crazy along the way.

I noticed they don't take any taxes out. Does anyone know if we have to file some sort of quarterly tax return from them? I wrote a handful of articles for them last year so the thought did not occur to me.

[inkkognito]

Yep, if you earn over $600 in a year from them you have to pay taxes. They will send you a 1099 form. Figure roughly 1/3 of what you make for the taxes, but be sure to keep track of expenses to write off.

[blueobsidian]

That's what I thought. I am wondering if I have to pay some sort of quarterly tax. I work for two other companies but those companies are essentially work at home employee jobs rather than any sort of independent contractor gig.


Yes, working for DS (and most of the other content sites) means that you are self-employed and you will need to pay estimated quarterly taxes.

[ravenlea]

ugh, ya'll had to go and start talking taxes. And here I was trying to forget all about them. I haven't made enough in DS to need to worry yet, but I plan to write more and then will need to pay attention to all the little details more carefully.

[joyce]

I also work part-time at a grocery store, so I've been having them take out extra taxes. I figure that job has become my tax job. I know me too well and know if I stash tax money aside and the car blows up.......well I know I'll dig into that tax money and fix the car.

[HeidiW]

Yep, if you earn over $600 in a year from them you have to pay taxes. They will send you a 1099 form. Figure roughly 1/3 of what you make for the taxes, but be sure to keep track of expenses to write off.
I'm not an accountant, but...

You have to pay taxes on any amount you earn. They have to send you a 1099 if they pay you $600 or more. (This is true for big companies or for small business owners who contract out some work.) But even if you get less than $600 from a particular client the IRS still expects you to claim the income and pay taxes on it, including self-employment tax.

As for quarterly payments, I guess individual circumstances determine whether you need to pay estimated taxes each quarter or not. I know TurboTax and probably other programs like it help determine if you have to.

Heidi (off to file an extension before she forgets...)

[inkkognito]

Very true. I forgot about my husband's carefully scrutiny of my PayPal income and magazine checks to make sure he's including any that did not hit the $600 threshhold. Thankfully he handles the taxes, so I don't have to worry about it other than giving him the PP downloads and checks to copy before I deposit them.

[JenNipps]

Guys, I thought a lot more people than just Demand Studios writers could benefit from the taxes discussion, so I've split that part off into its own thread. It applies to anything online, including my articles for TutorialBlog and those who write for About.com, b5, etc.

[SouthernFriedJulie]

What about income from out of the US if you're US based?

[blueobsidian]

You still have to pay taxes on it. They don't provide paperwork, but it has to be claimed.

[MamaLou]

I have been self-emplyed for the last two years as a freelance for income tax purposes. I include ALL income, whether it meets the $600 threshold or not, because in an audit, that $599 check could turn into thousands of dollars in iinterest and fees.

However, I also claim mucho expenses. A portion of my house is written off (measure the room vs. the SF of the house because that percentage dictates more than just how much space you're taking up)

I take to my accountant a spreadsheet showing what ALL my utilities are (not just internet but ALL. As a travel writer, I watch the Travel Channel heavily so a percentage of our television/satellite bill is written off)

As far as quarterly payments, there is a threshold you must meet before it's "required". You need to talk to an accountant to help make that determination. I have Quicken for business and it does the paperwork for me (I haven't had to do it yet, let's say 'in theory') But, again, only a registered Tax professional can answer that question. Don't trust "Joe the Barber and Tax Preparer". I know a girl who does this and she's missed out on medical write-offs for years and she pays $150 a month for ONE prescription)

Keep track all year of any and all business related expenses. I write off my ink and paper since I'm the only one who uses my printer. I write off every single time I buy batteries for my pencil sharpener, I write off every ream of paper I buy throughout the year. Finally, and this is one people ALWAYS forget to do... Whenever you are using your car for business related activity - WRITE DOWN THE BEFORE AND AFTER MILEAGE!!!!!!!!!! Keep track of mileage, ALWAYS.

Also, there is a "rumor" that you can only write off three years of losses before the IRS tells you it's a "hobby". This isn't true. Okay, it is in some cases, but in my case, I am actively promoting myself as a writer, I am getting "some" work, but I am showing a loss for the last two years... I can keep doing that for so long as I am promoting myself. Last year, I showed a loss of about $1500, this year about $1800. In countering my husband's pay and taxes, we broke even for 2007 and got bsck $212 this year (which to me is pretty much breaking even)

Never turn in "just" the $600 or more 1099s. Even if the IRS isn't getting one, that doesn't mean they won't find out you got paid for work that was less than $600. I'd rather pay the little bit in taxes every year on income that doesn't bring a 1009 with it than look at an audit and explaining where $599 came from in our bank account (and yes, they will look at that if you're self-employed).

I got a letter the first year I claimed freelancer about showing more income than my 1099s showed. I wrote them back with a copy of the cancelled check showing income that didn't have a 1099. I got a letter back with, "Thank you very much, consider the matter closed".

[Cathy C]

Yeah, I pretty much include everything too. Some of our older books only make royalties in the double digits, but they're included, as well as mystery shops I do on the side. It's just easier not to consider any money "free". Eventually, someone will discover it and the cost/hassle/pain of an audit simply isn't worth the tiny bit of tax. (IMO). The penalties and interest are WAAAY more.

[Anastacia]

Just wanted to clarify:

I really do pay my taxes.

:tongue

I swear. I swear. I swear.

Last April alone I made out a check to the IRS for $2500.

But my other sources of income have largely been traditional sources of income where taxes are taken out before you get a paycheck.

My primary concern is that I have not made this much money before from an untaxed source. I may have to consult a CPA and find if I have to file some sort of quarterly tax document to make up for the fact that no taxes are being taken out directly from Demand Studios.

[SouthernFriedJulie]

This year, most of my income has been from outside of the US. Looks like I'll need an accountant, but even for US income, I pay no federal tax. State is very low. So, I doubt there will be any fees.

Before you think I'm nuts:

4 kids, each count as '2' on the forms.
Head of house hold-1
Spouse unemployed-1
Spouse as dep-2

11 total 'points'. Before this baby, had 9, feds took no taxes from my pay. This was with all reported. Tax prep said don't bother reporting income under $500-but good to have it documented.

Keep record of everything you do. Mileage to doctor office, gas, ALL computer expenses. Everything you do can be written off, nearly.

I'm still unsure of how to report overseas income. Guess I'll need an accountant this year.

[veinglory]

You just declare the income, they charge the taxes.

Because a lot of freelance work is untaxed it is wise to remove the tax and put it into a separate savings account ready for tax time each year.

It is also wise to look for deductions like your computer, travel expenses, working lunches etc.

[stldenise]

My taxes are already done (yea, TaxCut) but I've never had the guts to claim the home office deduction. We only have one computer in the house and it's shared. The way I was readying the home office thing, you have to have an area that's only used for business, and I don't. Blah!

I haven't done quarterly taxes yet...I haven't made enough money to be worth it. I just let them suck their tax money out of my husband's withholdings (and we still get a refund). I should probably ask a pro about the quarterly stuff, since I'd like to reach a point where freelancing is a real job rather than a side gig.

[inkkognito]

I am another one who doesn't declare the home office deduction. I don't really have a dedicated office space; my "office" is a recliner in front of the television, with various cats in various states of unconsciousness draped around my body. Hmmmm, wonder if I could deduct cat care expenses since they keep me company and reduce my stress, thus facilitating my work and earning potential.

[Anastacia]

I'm starting to think I really should be able to claim more deductions. I work full time at home. More than full time sometimes. We have two computers and two internet ISP's plus a separate room where I work. The ISP is necessary because if I don't have internet access I can't do my job. I am not a fan of Comcast or Verizon.

I actually out earned my husband the last two years from my work at home jobs.

Then again I think if I ask my husband to redo the taxes he'll probably threaten to bury me in tax documents head first. lol

[HeidiW]

I am another one who doesn't declare the home office deduction. I don't really have a dedicated office space; my "office" is a recliner in front of the television, with various cats in various states of unconsciousness draped around my body. Hmmmm, wonder if I could deduct cat care expenses since they keep me company and reduce my stress, thus facilitating my work and earning potential.
Barb, this sounds just like my "office"! Except usually some of my cats are quite conscious and demanding my attention. And I usually have several types of food and drink scattered around too.

Heidi

[SouthernFriedJulie]

Barb, this sounds just like my "office"! Except usually some of my cats are quite conscious and demanding my attention. And I usually have several types of food and drink scattered around too.

Heidi

My home office is corner of the dining room. Cats, kids, portable crib...and whatever else lands here while kids are up. Phone calls are taken in the basement to hide from kid radar. I wonder if I could write off the one room in the basement with a loveseat, notebook, and pens?

And, um, an old ironing board as a make-shift desk down there?

[treehugger]

I am another one who doesn't declare the home office deduction. I don't really have a dedicated office space; my "office" is a recliner in front of the television, with various cats in various states of unconsciousness draped around my body. Hmmmm, wonder if I could deduct cat care expenses since they keep me company and reduce my stress, thus facilitating my work and earning potential.


Ha! I've often thought that I should be able to claim the cats as dependents. I mean, they are...

[AngelRoseDarke]

I am about to receive my first payday from Demand, and I have a question. I have never done any kind of work like this before. How much should I hold out for taxes? I checked the H&R Block website, but it was so confusing. What is the percentage? I would be most grateful for any help. Thanks!

[moth]

Angel - I read somewhere (on AW, I think) to set aside something like one third of your earnings and file a Schedule C (not sure what that is exactly, beyond it being a tax form) quarterly. I'm also not sure what 'quarterly' means (e.g., whether it's dependent on hire date or not) but I hope that helps. :)

To Blue and Cy, thank you guys. I was looking at the language that detailed limits on receiving payments (only so many per year), but then I looked again at the DS FAQ and even they say to use a Personal account. But thank you both for the input, very much appreciated!

[JNS]

Angel - I read somewhere (on AW, I think) to set aside something like one third of your earnings and file a Schedule C (not sure what that is exactly, beyond it being a tax form) quarterly. I'm also not sure what 'quarterly' means (e.g., whether it's dependent on hire date or not) but I hope that helps. :)





Basic Info:
http://www.irs.gov/businesses/small/article/0,,id=110413,00.html

When to Pay:
http://www.irs.gov/publications/p505/ch02.html#en_US_publink10007384

[stldenise]

Had to look up the tax question, I've been wondering this myself. So far I haven't bothered with quarterly taxes because I don't make a lot of money. It's more of a hobby and my tax burden has been easily covered by my husband's withholdings.

Check out http://frugaldad.com/2009/03/30/self-employment-tax-lessons-learned/

He said to hold back 30%. And he tells how to send in a quarterly payment.

[AngelRoseDarke]

Angel - I read somewhere (on AW, I think) to set aside something like one third of your earnings and file a Schedule C (not sure what that is exactly, beyond it being a tax form) quarterly. I'm also not sure what 'quarterly' means (e.g., whether it's dependent on hire date or not) but I hope that helps. :)


I knew about the Schedule C form. The dates for quarterly taxes are April 15, June 15, Sept. 15, and Jan. 15. It's also not according to hire date. That was on the H&R Block site. They also said that there are penalties for underpayment.

I read the one third thing too, but that seems awfully high. When I worked outside the house the percentage was less than 20%. I know that my employer paid 7% on my medicare and social security. Surely someone knows the exact amount.

[stldenise]

Ug. This is complicated. I looked it up at IRS and:
SE tax rate. The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

Plus you get to deduct half for some reason.
Self-employment tax deduction. You can deduct half of your SE tax in figuring your adjusted gross income. This deduction only affects your income tax. It does not affect either your net earnings from self-employment or your SE tax.

http://www.irs.gov/businesses/small/article/0,,id=98846,00.html

[AngelRoseDarke]

The part I can't find is the federal percentage. I think I saw somewhere that it is also 15%. I guess that would make the 30% that the Frugal Dad blog was saying he withholds. I don't have state taxes (thank God), so I just have to figure out this federal stuff.

Thanks everybody for the replies!

[blueobsidian]

The tax stuff is complicated, because it is based on how much money you earn. Personally, I am paying about a quarter of my estimated earnings in quarterly taxes (between the income tax, social security, and medicare). IRS penalties can be ridiculous, so if you are really concerned or think you will be making a lot of money freelancing, it may be worth it to speak to a tax professional to help you organize your information.

ETA:

The federal percentage isn't fixed, which is probably why you can't find it. You will need to estimate your income for the year and estimate your tax liability based on that.

[AngelRoseDarke]

The tax stuff is complicated, because it is based on how much money you earn. Personally, I am paying about a quarter of my estimated earnings in quarterly taxes (between the income tax, social security, and medicare). IRS penalties can be ridiculous, so if you are really concerned or think you will be making a lot of money freelancing, it may be worth it to speak to a tax professional to help you organize your information.

ETA:

The federal percentage isn't fixed, which is probably why you can't find it. You will need to estimate your income for the year and estimate your tax liability based on that.


Okay. Thanks! I figure that I won't make more than 16,000 a year max. My hubby and I have no other income, so I can't count on withholding from any other source.

[moth]

Great info (to which I added pretty much nothing ;) ). Sorry about that, and thanks! :Thumbs:

[AngelRoseDarke]

Great info (to which I added pretty much nothing ;) ). Sorry about that, and thanks! :Thumbs:

Don't worry about it. I learn a lot from reading answers to other people's questions.

Actually, you did add something pretty darn important. A lot of people don't know about the Schedule C form. I found it on the H&R Block site.

[JenNipps]

I swear, the more I read/learn about taxes, the more confuzzled I get sometimes. *s*

[Cyjon]

I'm a math nerd and like doing my own taxes. If you really want to know how much to withhold you can download Publication 505 (http://www.irs.gov/pub/irs-pdf/p505.pdf) (it's a PDF file) and figure out the right amount. There is a worksheet for steady income and another one for variable income like ours.

Or you might just want to say 30%. Yes that's a high percentage, but it's a "better safe than sorry" number. Uncle Sam is happy when you pay too much but gets cranky when you pay too little. I'm a big fan of withholding the minimum I can get away with then paying a huge tax bill on April 15 - interest free loan from the government.

[AngelRoseDarke]

I'm a math nerd and like doing my own taxes. If you really want to know how much to withhold you can download Publication 505 (http://www.irs.gov/pub/irs-pdf/p505.pdf) (it's a PDF file) and figure out the right amount. There is a worksheet for steady income and another one for variable income like ours.

Or you might just want to say 30%. Yes that's a high percentage, but it's a "better safe than sorry" number. Uncle Sam is happy when you pay too much but gets cranky when you pay too little. I'm a big fan of withholding the minimum I can get away with then paying a huge tax bill on April 15 - interest free loan from the government.

Thanks a lot! That was very helpful. I saved it.

[stldenise]

Yeah, I probably need to chat with a tax guy to get straightened out. I'm not sure if I'm ok because I haven't gotten a tax bill of more than $1000, or because I file jointly with my hubby who withholds enough to get a nice refund for us.

I'd love to make enough that this is really a part time job and not just a hobby I get paid for. Of course, if I started working that hard, would I have enough time for Cub Scouts and toddler time at the park? Speaking of which, I have to get back to gluing feathers on head bands for this weekend's camporee!

[inkkognito]

30% is my safety number too...well, more like 33 I guess since DH puts aside 1/3 of my earnings for taxes. I give all my receipts to him and he sorts it out at the end of the year. We usually get a fairly modest refund, although his income figures in there too. I have no clue how or why or what as taxes are a "boy job" in our household.