Where do I start (tax related)

Alright, I'm a young guy...And made a few game sites as a joke when I was bored, and then I got addicted. Next thing I know I'm making a very respectable amount of money from my sites. I only expected to make a few 100 here and there IF THAT...This all happened in the last 6 months...

My income is about 75% paypal and 25% google/ypn (one of my sites is a partnership, and the guy paypals me a % of the ypn earnings)...Where do I start in figuring stuff out? I was very unorganized, because I never really kept track of much.

In 2007, starting today...I'm going to make sure to keep a text file on my computer of everything I spend/recieve in terms of web stuff. Anyone have any special way of doing that?

My main question is what do I do now? I've found a local accountant, and he said to have all my stuff ready to show him in a few weeks, but I don't even know where to start. I spend alot of money every week for ads and I know thats a deduction, but still really confused and mad at my self for being so unorganized.

 

You need to provide the accountant with a total of gross income and a list of expenses. The expenses should be by catergory.

All of your PayPal transactions are still in you history folder at PayPal so getting that should be easy. If you made more than $600 from from Google or Yahoo and live in the US they will send you a 1099 form not later than Jan 31 detailing what they paid to you. Google has a prior payments history and I bet Yahoo does also. No need to get in a hurry, you can't file before mid Feburary till all the forms come in.

Unless your total business expenses exceed $5000 the actual itemization isn't required to be submitted. It is still a good plane to have an itemized list of the expenses

Unless I missed something that should account for the income.

Looking at the expenses, advertising is surely a big one that you can claim. Hosting fees for your sites would be another. The domain reg fees for the domains used to produce income would be another small one. What else did you spend money on for the business?



I would suggest that you avoid the temptation of claiming a home office expense, computer depreciation and home ISP fees unless you have detailed usage logs to prove the amount of time these items were used for business purposes. The 3 items are "red flags" to the IRS computers.

Quicken or Money is the easy way to track income and expenses. Database driven easy to manage. Basic version of either can be tweaked to do the job.

 

Thanks

I've been spending anywhere from 1-2k a week this past year on advertising, so I'm guessing its going to be a HUGE deduction. I also pay alot of people to do web design work, etc.

 

What did the accountant tell you he needed? Chances are any receipts that you have for hosting, advertising, etc and any statements that you have telling how much you got paid would be a good start.

He should tell you what he expects from you - especially if you made it clear you are unsure

 

Can you claim as an expense the actual buying on a site? I bought one here a couple of months ago and it makes me the most money.

 

since your business is 100% then all of you transactions will show up your credit card monthly report or paypal monthly report or bank statement.

make sure that you have all that and it would be enough the rest leave for accountants to figure out.

if you have any specific questions about taxes you can take a look at TaxForum.us

 

If you can justify the purchase as a "start up expense" the first 5K can be written off the first year. The balance over 5 or 15 years, I can't recall at he moment.