Question by Marianna: How would I go about filing for taxes for my new internet business?
I have a Facebook like page which has over 100k likes. It’s all about fashion, make up, jewelry, pastry etc. Small & sometimes large business always contact me about promoting their page on my page. My charges are
1 post every 3 days for 1 month – $ 75
1 post every 2 days for 1 month – $ 100
1 post every day for 1 month – $ 125
1 post every day for 1 month + being featured on my website & blog – $ 150
I also get paid money from goodadsense pay per click on my website and blog. I get money from that as well.

I haven’t spent any money yet & I’ve been doing this for almost a month. My paypal account is STACKED with cash. I wanna transfer to my bank account but I wanna know if there’s anything I should know before I do that. I want to buy my baby some stuff.

Also aside from the internet business I got going on, in my daily like I’m a nurse & a student. My child will be born in October on this year so I wanted to know that when I claim her, would that make how much taxes I owe go down? Or what happens?

Best answer:

Answer by Jared
If in 2012 you had no dependent (your daughter), and in 2013 you have a dependent, you will have a child credit. So if all other things remain equal, then you should expect to owe less / get back more (whichever way applies to you) in 2013. By all other things remaining equal, I’m referring to earned income, passive income, deductions, and filing status — these things do not change.

What you are referring to, here, is passive income. If you are a nurse, then you have earned income. This side venture is just that — something on the side (passive). You will need to make quarterly estimated tax payments on your earnings (net income) from this passive venture. That’s the easiest way to avoid penalties. You say you haven’t spent any money yet, so sales (gross income) IS net income. How much do you need to pay quarterly?

As a general rule, look at your last two years’ tax returns, and determine your average effective tax rate. Take into account if this extra income from the passive venture will increase your effective tax rate. If you aren’t familiar with what effective tax rate means, I’ll give you some info and then a personal anecdote.

If you are single, then whether you make $ 100,000,000 per year or $ 1,000 per year, you will owe the same percentage on one tier of earnings. Then there are several other tiers. These are called marginal tax brackets. These marginal tax brackets are different if you are married filing jointly.

In any case, let’s just use John Doe as an example, and I’ll do my best to remember the brackets (but the numbers don’t really matter — just see the method). John makes $ 30,000 this year (after all tax credits and deductions) — e.g., his tax basis is $ 30,000. The first $ 8,700 of his adjusted income is taxed at 8%. The amount between $ 8,701 and $ 15,700 is taxed at 10%. The amount between $ 15,701 and $ 30,000 (ends there not because of the tax code, but because that maxes out his taxable income) is taxed at 15%.

In accounting and finance this is a problem of weighted averages. Out of that info, how do you determine the average income tax rate John Doe pays?

($ 8,700/$ 30,000 * .08) + [($ 15,700-$ 8,701)/$ 30,000 * .10] + [($ 30,000-$ 15,701)/$ 30,000 * .15] = 11.8%

John Doe pays an effective tax rate of 11.8%. Your tax preparer, CPA, or TurboTax — they can tell you what your effective tax rate was for 2012. If you do not want to be any more sophisticated than that, then (if you are John Doe), and you add passive income to the equation, make sure you remit 11.8% (your prior-year’s effective tax rate) of your passive income each quarter to the IRS.

It’s more complicated than this. Since you have no expenses and you can claim no deductions, you should probably go with a higher percentage. So, let’s say your effective tax rate was 8.5%. Add an extra 20% onto that (.085*1.2 = 10.2%) — so remit 10.2% of your passive income back to the IRS quarterly.

That’s a big generalization, but the tax code is so hard for many people to understand — it’s the best I can do on yahoo answers.

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