subject: What You Want To Recognize About Online Business Taxes [print this page] People might think that there are vast differences between conventional businesses and online companies, but the truth is that both are still monitored and taxed by the IRS. If you are questioning how it works, you should know that taxes and deductibles applicable to an online business are comparable to the ones for a home-based business. When you are first starting to figure out the taxes, bookkeeping, and all the other reports you have to do, it may seem overwhelming. However, it does get better over time. If you are interested in learning about taxes for your online business, here is tax information for business owners and tips specific to online businesses.
Keep tabs on your suppliers and your independent contractors
If you are looking to save money by employing freelancers or independent contractors, it is essential that you keep track of overall payments to those who are US citizens. The IRS requires a 1099 form submission for anyone whom you have paid over $600 to within single year. For those who offer commissions to their affiliates, you will have to keep track of the gross income of each affiliate selling your product. You will be happy to know that there is free software available to track this online.
Do not linger until tax season to manage your records.
Because most online businesses do not have enough employees, they often neglect to do their bookkeeping and records until the last chance. Regrettably, it is when you are trying to rush during tax season that you allow the most errors. When you keep track of your income faithfully and you make sure that there are source documents for every transaction, then this should be a walk in the park. For starters, all transactions that you put on your books should have supporting documents. It is also vital that you have US-based independent contractors sign their W-9, too. You do not even need to have it physically signed, since the IRS already permits digital signatures.
Know the maximum available deductions that you can claim for your online business.
Make sure you are knowledgeable of the tax information for business owners so you can completely make the most of your deductions. In fact, if you have children, you may even hire them to take advantage of the tax break. Contemplate giving donations to your favorite charity as well, as it is also considered as a deductible. Using your home as an office as well could prove to be good for your business. However, this is on a case-to-case basis, and you need to discuss this with your accountant. Doing this could open your business up to an IRS audit. Website charges, books, and seminars may also be used as a tax deductible. However, the tax deductible needs to be within reason or you may find yourself being looked at by the IRS.
