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According to the IRS you are a private contractor employed by Google

etymonline.com

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Re: According to the IRS you are a private contractor employed by Google

#21

Post by space-monkey »

DanI-S wrote: post #14

I moved to the US last year and work a regular full-time job. I haven't had to file taxes before, since I only started work in May. I'm about to launch my first 'weekend project' to potentially involve some advertising and Amazon-affiliate revenue. I'm not really clear on what I should be doing and what is necessary with regards to tax, registering as a business, etc. Can anybody recommend any good resources for info…

Get a cheap tax-accountant. It seriously can take years to really come up to speed on our tax system. It's not so complex that a somewhat trained professional can't answer all of your questions, and ask you some good ones in a short session, but it's relatively easy to miss something doing your own research. Do as I say, not as I do, of course!

Re: According to the IRS you are a private contractor employed by Google

#22

Post by icco »

pinksoda wrote: post #20
enjo wrote: post #18

Earlier quoted context omitted.

You make 10K a year at a yard sell or selling pot, you owe the IRS money on that income. Just because you're less likely to get caught doesn't make it any less illegal. Probably the closest "real world" example would be a flea market. Those large flea markets are the google, and the vendors are the independent folks putting ads on their sites. You sell $10k worth of goods at a flea market, you bet your ass that marke…

There was a guy who got caught selling a lot of marijuana and didn't get in much trouble because he was paying taxes on it since day 1.

That sounds hilarious, source?

Re: According to the IRS you are a private contractor employed by Google

#23

Post by jrockway »

What a whiney baby. You have to pay taxes. You don't have to shut down your site and sell it to a "spammer" because you forgot to pay. You pay the taxes and consider it a lesson learned.

There is a reason why Google sent you a 1099 form and not just an account statement, after all. Now you know what it is. No need to whine about how it's some sort of conspiracy -- you sell your time to someone, you're a contractor, you made income, and you pay income taxes. It's very simple.

The rant about the "financial crisis" was also off topic. Selling insurance really cheaply to people that you should be selling it to for a lot of money is not the IRS's problem. When the banks can't loan money or give back deposits, though, that is a problem, and that's why they got bailed out. Most of the banks paid back their money years ago. TARP is over. You got your money back. Now you need to do your part and pay what you owe the government.

(Whenever I write an article and it ends up in the tone of voice that the poster's ends up in, I realize that I fucked up and I'm not going to get any sympathy. I hope the author also learns that lesson. You make mistakes -- fix them, don't whine about them. If you want a new tax system, run for office. Your blog is not going to change anything except the public's perception of you.)

Re: According to the IRS you are a private contractor employed by Google

#24

Post by [deleted] »

pinksoda wrote: post #20
enjo wrote: post #18

Earlier quoted context omitted.

You make 10K a year at a yard sell or selling pot, you owe the IRS money on that income. Just because you're less likely to get caught doesn't make it any less illegal. Probably the closest "real world" example would be a flea market. Those large flea markets are the google, and the vendors are the independent folks putting ads on their sites. You sell $10k worth of goods at a flea market, you bet your ass that marke…

There was a guy who got caught selling a lot of marijuana and didn't get in much trouble because he was paying taxes on it since day 1.

[deleted]

Re: According to the IRS you are a private contractor employed by Google

#26

Post by camz »

Hey guys. Sorry for the slow reply. Thanks Cullen King for the shoutout. I'm traveling to meet a client so I wasn't able to check HN as often as I usually do.

I'll email him shortly later today to offer my help directly. But I'll post a few thoughts just so that anyone else in a similar position will be prepared.

Everyone pretty much hit the mark with the self-employment tax issue. SE Tax is a 15.3% tax that you have to pay on income earned from a business.

It sounds like the etymonline guy pretty much got hosed from paying income tax on the income but failure to pay the SE Tax.

Google issues 1099s to anyone that earns over 400 or 600 dollars so the IRS knows if you're making money.

But, from the sound of his explanation. His server and upkeep costs should've generated enough expenses to wipe out his income. I'd have to speak with him directly and more in depth but that is the impression he left in his plead.

Also, there are ways to avoid paying SE tax entirely. If you incorporate into a S Corp and pay yourself a reasonable income, the rest would be excluded from SE Tax. An Scorp is a passthrough entity which means that all income is not taxed twice like a regular Corp. You pay tax on the income once on your 1040. But because the scorp is still a corporation, then you wouldn't pay SE tax on that income because the distribution is a dividend. You don't pay SE taxes on dividends.

Also, it seems like the taxpayer isn't clear about his options once the audit has commenced. Luckily, I'm sure that the taxpayer could still plead his case if he has some facts that could help his situation.

But these are my initial thoughts on the situation. I'm going to email him now and see if he's interested in discussing the issue further.

I'll update everyone on this issue later on if he is willing to allow me to speak on the matter as a learning experience for everyone.

Re: According to the IRS you are a private contractor employed by Google

#27

Post by gscott »

terra_t wrote: post #5

The guy's a dumbass. If you're making money off your site, it's a business, just that simple. It does cost a few 100$ every year, but if you get income from anything other than W-2 jobs, you'd better have an accountant. I've definitely had little accidents in my filings and minor trouble with the IRS but my experience is that, with the help of an accountant and some common sense, these problems can be worked out easi…

More likely he has a Hobby not a business http://www.irs.gov/irs/article/0,,id=186056,00.html

Re: According to the IRS you are a private contractor employed by Google

#28

Post by gallerytungsten »

tibbon wrote: post #25

I'm curious though- could have all of this been fixed by filing and saying, "look, our expenses 100% meet our income... no tax burden!"?

If he had incorporated, absolutely. From the context of his blog, it seems he didn't.

Re: According to the IRS you are a private contractor employed by Google

#29

Post by alanstorm »

tomjen3 wrote: post #12
larsberg wrote: post #2

It wasn't entirely clear from this article, but it looks like he was paying normal income tax on the money coming in, but failed to pay self-employment taxes. I have talked to more than a few iPhone developers whom this happened to as well -- forgetting about that extra 15.3% can really hurt. But, did he remember to track and deduct all of his expenses? The flipside to that income is that the server costs are all ded…

I don't understand the US tax system, but are you supposed to pay more money when you don't have a job than when you do have a job?

There's a (roughly) 15% tax on income that covers social security and medicare. As an employee, 7.5% of this comes out of your paycheck, and your employer has to match the other 7.5%. When you're self-employed, you need to pay both ends of this (unless you start getting tricky with the way you incorporate)

Re: According to the IRS you are a private contractor employed by Google

#30

Post by barrkel »

enjo wrote: post #18
DanielBMarkham wrote: post #10

I'm always amazed, when the-tax-system-sucks posts come up on HN, how quickly most commenters are to trash the author and/or lecture the complainer on how wrong they are. There is a impedance mismatch at work in our system of governance that's not going away any time soon. The government makes laws by sticking people into little boxes and making rules for those boxes. This system of boxes and rules -- the tax code --…

You make 10K a year at a yard sell or selling pot, you owe the IRS money on that income. Just because you're less likely to get caught doesn't make it any less illegal. Probably the closest "real world" example would be a flea market. Those large flea markets are the google, and the vendors are the independent folks putting ads on their sites. You sell $10k worth of goods at a flea market, you bet your ass that marke…

It's not in the government's interest to collect tax on every transaction at every scale, because (a) it costs money to collect tax, and (b) economic activity is itself dampened by the transaction costs of keeping reliable accounting records in case of audits etc.

That's not to say that 10,000 USD annual revenue is too low to be efficiently taxed; but there certainly are points at which it doesn't make sense.

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