One of the most detrimental misconceptions about working in Web Marketing is that it is a tax free industry. Men and women go into IM convinced that because they are earning money online and being paid through, mostly, PayPal--they don't have to pay taxes on that money. It is incorrect! More to the point, failing to pay taxes on this income can get you into all sorts of trouble! Fear not, though: doing your taxes as a web marketer does not need to be hard. Here are some tips to help you out.
1. Set up a visit with the local Small Business Association. Just about every community has a Small Business Association (ordinarily working through a community college) that has experts on both starting your business and making sure that all of the details (like taxes) are dealt with. What's notably great is that this resource is just about always cost free.
2. Keep an eye on everything. Let me repeat that since it is important: monitor each and every detail. Excel makes this easier than you think. Put together a spreadsheet and record every last cent you make with your Internet Marketing business and also one that tracks every single cent you spend on your IM efforts. Keep all of the invoices and receipts that document these transactions.
3. If you could afford it, hire an accountant. This way you don't have to worry about the numbers and taxes part of your online business. You tell them the amount of money you've made, show them how much you've invested (you'll need proof of these things) and they take care of the rest, especially at tax season.
4. Pay toward the taxes you are going to owe throughout the year. 30% of every sale is the fundamental guideline you should follow. You can do this quarterly through Estimated Tax Payments with the IRS or you could even do this month to month. The IRS is right now set up well enough that they can take estimated tax payments from you whenever you feel like making them. In this way you won't have an eye popping number that you owe at the end of the year (which will be specifically stressful if you haven't saved up for it). What is much better is that if you have somehow overpaid through your estimated tax payments, you'll receive a reimbursement just like you would if you were working for a traditional employer. Make sure to talk to a person at the IRS to get this set up correctly.
5. Discover which tax deductions you are allowed to take. When you manage your own business in your own home, there are a lot of things, including the money you pay in for utility payments, that become tax deductible--just like paying for other business related supplies. Your accountant or someone from the IRS can help you find out what all you can take once it's time to pay taxes.
It is not all that tough to become intimidated by the idea of paying taxes when you are an Internet Marketer. Luckily, there are a lot of resources available to help you follow the law and still keep yourself from losing your shirt to the IRS!