Hire a good accountant and listen to what he says. I have paid quite a bit for a single mistake by not listenning to what he said. He is your best friend. Just make sure he knows what he is talking about.

If you don't need all of your income for your day to day living expenses, you can tax defer quite a bit in various types of retirment plans. I had my own retirment plan set up with an actuary. It costs a bit to set up but the actuarial expenses themselves are tax deductible.

Everyone in my family either does, or will work for my business, and can put money away in the retirement plan. My kids salaries are a deductible expense to me. They don't pay tax on the money they contribute to the retirment plan until they withdraw it, and in the meantime it can grow tax deferred. Then when they are older roll the money over to an IRA and use it to buy a house or pay for college, penalty free.

There's lot of interesting things like that you can do in the U.S. if you are a small business owner.

Wow, I didn't expect all these responses on my thread. But mention taxes and I guess everyones got an opinion. But thanks guys, I appreciate it.

Just to clear things up. I have a full time job and am earning 40,000 or so and pay plenty of taxes. My website is a side thing which I do in work on at night. And it's really frustrating to work so hard and then realize that so much goes to taxes.

Hmmmmmmm.......So just to be clear it dosen't make a difference if CasaleMedia is based in Canada?

Here ia quote from google regarding what is a Non U.S. Business from [google.com...]

Non U.S. Business (No U.S. Activities )

United States (U.S.) Activities involve having employees or owning equipment in the U.S. that are involved in any way with revenue earned through the AdSense program. This includes, but is not limited to, owning a web server or owning a hosting service in the U.S., or having employees in the U.S. who are involved in either:

setting up a web server, hosting service, or website
developing content for your website
marketing to create a user base for your site
telephone support for your site
buying products for your site
maintaining your site
Generally, utilizing an unrelated third-party U.S. web hosting service to host your web pages, renting web servers that are located in the U.S. from an unrelated third party, or having your payment sent to a U.S. Post Office Box or mail forwarding address, do not of themselves constitute U.S. Activities.

If you do not have U.S. Activities, you will be asked to agree to a statement to that effect. No tax forms are required in this instance.

I have a full time job and am earning 40,000 or so and pay plenty of taxes. My website is a side thing which I do in work on at night. And it's really frustrating to work so hard and then realize that so much goes to taxes.

You could take your Adsense earnings, invest them in real estate, have a paper loss and shelter some of your regular earnings from taxes that way.

Or, if your business is just a side income you could probably shelter all of that income from taxes with just basic business deductions legally available to small business owners such as business travel, home office deductions, office equipment, office supplies, retirement plans, health insurance, books and magazines related to your business, training, etc.

[edited by: Jane_Doe at 5:01 pm (utc) on Mar. 2, 2007]

I have a expense related question. suppose if I hire somebody outside usa to code or write content and pay him through freelance types of sites or pay him using paypal / xoom etc.
Can I deduct that as business expense. would the paypal transaction printout will be enough for IRS?

thanks

In the case where you and all your activities are outside the US, then there is no requirement on Google to file any tax forms. But you as a United States Citizen still owe taxes, and are required to report them.

So, you have a job that pays $40k and you are considering moving out of the country just to avoid paying taxes on $24k. And that 24k is a much less reliable source of income?

"I made a $2000.00 this month from Adsense and I plan on getting even more next month . I WANT TO KEEP IT ALL! and not give 40% to taxes."

Don't we all.

"Hmmmmmmm.......So just to be clear it dosen't make a difference if CasaleMedia is based in Canada? "

I believe the location of the employer isn't important I could be wrong. I think it only matters if you're a US Citizen and you're making income.

Move to Dubai and you won't pay a cent in tax or keep your mouth shut and don't declare the earnings ;)

How do I get out of paying taxes?

Death.

Sorry Bill - they've closed this loophole in the UK now. The increased property prices mean that typical family houses put people's estate to the level where death duties become payable.

Personally I'm happy to pay taxes - albeit making maximum use of any legitimate tax avoidance measures available - I want to stay living where I am and if I earn more that means I pay more tax, then there is still more for me. I can't abide those who begrudge paying their share.

Some of us were born into a negative income taxes bracket though. When you're in a negative tax bracket the government owes you (Her Majesty's Revenue and Customs pays me tax credits every four weeks).

Mind you they caused the £750,000 (over my lifetime) problem in the first place so hey - I only feel it's fair that if the government makes a mistake, causes a disability and reduces your life expectancy and therefore they save on paying out a pension (reduced life expectancy) they should look after me a bit better through the tax system!

People always moan about direct taxes though (eg income tax, national insurance etc), but they forget about indirect taxes (VAT (17.5%), sales tax (varies from state to state) etc etc..

As the saying goes though there are two certainties in life - death and taxes... :)

It's up to the Adsense publishers to either earn so much that tax issues don't matter or study accountancy/bookeeping so they under the complexities of the system. Too many people just farm out matters to accountants. *sighs*

I'm in the US, Florida, and will end up paying about 8,000 USD or less this year for about 100,000 USD in Adsense income. If I do anything expensive I find a way to make a site(or even just a page) about it and write it off as an expense, be creative and write all that stuff off.

I also put money away into a retirement fund and they can't tax that until I officially retire and collect. I pay my taxes when I go shopping for personal items, fuel up on gas, etc, etc. No way I'm sending them 40% of my Adsense income in addition. Talk to a trustworthy accountant or do your own research, that amount is just ridiculous.

>> put money away into a retirement fund and they can't tax that until I officially retire and collect

I believe the tax rates in the future will be much more higher than what we have now (America used to have a top marginal tax rate of 94%), so i think tax deferral is not a good strategy (even after inlcuding the benefits of tax-free compounding).

The reason tax-deferral does work is that you will theoretically be in a much lower tax bracket when you are no longer earning. The highest bracket may be a much higher percentage, but retirees generally aren't in that bracket.

It doesn't work for everyone, but it works for most.

I would be a bit more circumspect about proposing illegal actions -it isn't difficult to track you down......

America used to have a top marginal tax rate of 94%

But how many people really ever paid that rate? It seems like in the U.S. there have always been loopholes and ways to avoid taxes for the top income brackets. At lower income levels of retirees, it is also easier to avoid taxes by investing in real estate.

As BigDave said, it is usually better to pay taxes at a lower income level when you are retired than at the tax bracket you are in when you are in your peak earning years.

Plus, if retirement funds are structured properly they are one of the best methods, beside having a business structure that avoids unlimited personal liability, of protecting your personal assets.

spaceylacie,

I'm very interested to hear more about what sort of legal deductions you can perform, based on your sites. If you take a cruise around the world, as long as you write up a review for a section about travel on a personal site, would that be a legitimate expense?

scorp is the only way to go for your situation..

If you take a cruise around the world, as long as you write up a review for a section about travel on a personal site, would that be a legitimate expense?

As I understand it, if you write it up on a *personal* website, you can deduct the cost of the trip from any income you get from writing about that trip.

If you are operating as a *business*, which is as simple as keeping separate books for your business and opening a business bank account, you can apply it against all your other business income, and even take a loss. But you must be planning to make a profit, not just using it as a loss center.

Of course, if you are really operating as a business reviewing cruises, they would be comped by the cruise lines.

Interesting.

So say you had a website on games? But you decided in your games forum you'd like to post a thread about your cruise (maybe even put an advert in their to legitimise it), would that count?

Probably not, because that would not pass the sniff test of your tax preparer, much less an auditor.

But if you started a travel site in addition to your gaming site, you probably could deduct it. But you need to run the travel site as a real business showing the intention of making money.

That whole "showing the intention of making money" part is very important. Tossing in a thread in an unrelated forum would be insufficient by just about anyones measure. that would be an obvious attempt at getting a deduction, not making a profit.

Sure, so say you make a site about cruises, and use this as your first review page. Even if the site doesn't make any money (although it's still a fully working site, with ads etc), but other parts of your businesses do, that can still be used as a legitimate business expense? It's very interesting. I'd like to hear what others write off in the holiday department, for example.

Last year I deducted 15% of my florida vacation house.

This year my parole officer says I can't leave the state :(

Sure, so say you make a site about cruises, and use this as your first review page.

As long as you continue to develop it, and not just put up a one page site. If you are audited, an actual person might look at the site, look at your books and say "denied".

You can do it, but you gotta do it legit. Is your actual goal to write off the vacation, or is it to make some money by writing about the vacation you took. If it is only the former, you are asking for trouble.

If in doubt, ask your tax preparer.

$2K/month = $24,000/year. That's pretty much poverty level.

In my state, 24k a month is considered great money. The median household income in some parts of my city is $12,000 a year.

suppose if I hire somebody outside usa to code or write content and pay him through freelance types of sites or pay him using paypal / xoom etc.
Can I deduct that as business expense. would the paypal transaction printout will be enough for IRS?

Yes- that is a legit business expense. It's still legit if you hire locally.