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CALIFORNIA - So I have a website which has picked up and starting to grow and earn more and more ad revenue every day. I have no other income/job besides making content for my site. As far as taxes, how should I proceed?
Can I just withdrawl my Adsense revenue to my personal bank account each month and report my yearly Adsense revenue as income on my taxes each year?
Or do I have to go as far as registering as a business and opening a business bank account and having the Adsense revenue withdrawn to there?
Tell me why or why not.. and everything else you think I should know... thanks!
Last edited by girlygirls32; 09-02-2020 at 03:47 PM..
You can operate as a sole proprietor - that is no special account and you use your social security number and report Federal income on Sch C of your 1040. You will have state tax also.
Probably have to pay your estimated tax quarterly so look up the rules.
I would open a separate account for all your income and expenses. Just makes accounting a lot easier. You will need to track all your income and expenses to do the tax returns.
CALIFORNIA - So I have a website which has picked up and starting to grow and earn more and more ad revenue every day. I have no other income/job besides making content for my site. As far as taxes, how should I proceed?
Because you have no other income, and cannot have additional taxes withheld as part of a salary, then you need to pay quarterly. If you wait to the end of the year, you risk paying additional penalties.
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Can I just withdrawl my Adsense revenue to my personal bank account each month and report my yearly Adsense revenue as income on my taxes each year?
Yes, you can do this, although as noted above, you should pay taxes quarterly.
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Or do I have to go as far as registering as a business and opening a business bank account and having the Adsense revenue withdrawn to there?
No, you do not need to do this.
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Tell me why or why not.. and everything else you think I should know... thanks!
The main advantage to creating a business is to shield personal assets from business liability. Creating content for a website seems pretty low risk (depending on content I guess), so it is probably ok to run this as a sole proprietor.
The main disadvantage to creating a business is additional paperwork. Sub(S) corps and LLCs require annual meeting with minutes. Although this requirement is largely ignored, but you could theoretically void your incorporation if you do not do these things. Really low risk, but still there. You also need to keep books for your business, and file taxes for the business, which then runs as a passthrough for your personal taxes. So it is a bit more complicated.
Why do you want to create a separate tax entity (aka business)?
no need to register as a business because if you getting 1099 income is all being reported anyways and you'll need to file a schedule c business return. So your pick if you want to register as a llc or corporation, but not necessary.
in which case you benefit from being a business because you can deduct business expenses.
by the way, if you dont report your income, that's a super easy way that the IRS will come and slap an audit on you right before your statute of limitations expires, and you'll owe a TON of taxes, penalties and interest.
THEN
Commie state of california will piggyback on the IRS audit and slap you with a state audit, and you'll owe a TON of taxes, penalties and intererst.
no need to register as a business because if you getting 1099 income is all being reported anyways and you'll need to file a schedule c business return. So your pick if you want to register as a llc or corporation, but not necessary.
in which case you benefit from being a business because you can deduct business expenses.
by the way, if you dont report your income, that's a super easy way that the IRS will come and slap an audit on you right before your statute of limitations expires, and you'll owe a TON of taxes, penalties and interest.
THEN
Commie state of california will piggyback on the IRS audit and slap you with a state audit, and you'll owe a TON of taxes, penalties and intererst.
You can still deduct business expenses as a sole proprietor filing via schedule C. If OP is creating online content, I would assume they are deducting video and computer equipment, any appropriate home office expenses, etc.
You don't need to pay a CPA, you don't need to set up a separate business. You really don't need to set up a separate business account either. Just go ahead and transfer the money to your account and congrats on getting some adsense money!
Keep records of any expenses you have from the business.
Next year you'll get a 1099 from Adsense showing how much they paid you. You'll fill out a Schedule C when you do your taxes and enter that amount and subtract out all your expenses. Then you'll have to pay taxes on your profit.
If you're not making much yet, you may not even owe any taxes and you probably don't have to worry about filing quarterly.
You don't need to pay a CPA, you don't need to set up a separate business. You really don't need to set up a separate business account either. Just go ahead and transfer the money to your account and congrats on getting some adsense money!
Keep records of any expenses you have from the business.
Next year you'll get a 1099 from Adsense showing how much they paid you. You'll fill out a Schedule C when you do your taxes and enter that amount and subtract out all your expenses. Then you'll have to pay taxes on your profit.
If you're not making much yet, you may not even owe any taxes and you probably don't have to worry about filing quarterly.
While far from a tax expert, this is the best answer. as far as I know and I did a Schedule C for many years and I so miss it.....LOL
Schedule C is Profit or Loss From a Business. Basically a Schedule C say how much Income did you earn? What were your Expenses? Subtract Expenses from Income. Go from there.
To the OP. A an example you needed a computer, printer, high speed Internet, etc. which were all business expenses. Granted used for other purposes but a portion of the expense is business related. You had to drive to an Office Superstore for printer ink. Mileage allowance and ink are all business expenses. You took someone to dinner to discuss your website. The cost of the dinner is a business expense. Are you getting the idea?
One thing to be careful about is if you had Income and did not pay any taxes, the IRS could go after you for back taxes. They also will demand you start paying Quarterlies which is estimated (by the IRS) taxes. I believe there is minimum Quarterly payment and if below this, no need to pay Quarterlies.
A brief discussion with a CPA is advised.
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