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

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

#61

Post by chc »

tedunangst wrote: post #59
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 --…

Nobody ever writes long blog posts saying "I paid my taxes. End of story." There's a definite bias in that only bad news ever gets reported. One anecdote about is not an indictment of the whole system.

Nobody ever says, "Ted Bundy didn't kill me. End of story." There's a definite bias in that only bad news ever gets reported.

One killing is not an indictment of the whole person.

Just because something works OK (not great, but OK) in the average case doesn't absolve it of terrible behavior in less common cases.

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

#62

Post by moultano »

jackfoxy wrote: post #35

The income tax system, and the principle of taxing income, is wrong in so many ways, but I have given up arguing the point. The inertia of the system and the inertia of individuals is too great to overcome. I've identified these major contributing factors: 1) Vested interests that like the tax system the way it is. 2) Envy and fear of envy. People who think the income tax takes from the rich, and people who happily p…

What do you propose instead? A link is fine.

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

#63

Post by jharrison »

yeahsure wrote: post #56
barrkel wrote: post #30

Earlier quoted context omitted.

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.

Hi - (this is my first post). I'm not sure I agree with that. For example: Starting in 2011, any vendor or independent contractor payment that aggregates to more than $600 in a year gets a Form 1099-MISC. Do you think $50/month is worth all these paperwork? I sure don't.

I have to agree. The parent seems to be basing his comment on some form of logic or reason, neither of which seem to be prevalent in government dealings. Not recognizing the burden of 1099ing every entity that I do $600 of business with shows how disconnected the author of this particular bill is from small-businesses. The good news is, there ARE a few politicians who have seen the error in this bill and are attempting to do something about it.

As a small-business owner myself, I can sympathize with the OP about having to get all businessy with his website. Being a small-business and "doing it right" can be a lot of work. You either do the work yourself, or you pay someone to do it. There are plenty of ways to go wrong if you're not on top of it.

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

#64

Post by dmfdmf »

dotBen wrote: post #46
dmfdmf wrote: post #33

Perhaps this is a startup idea for the ambitious types on HN. There are literally 1000's of very successful blogs making some marginal amount of money from ads on their site. Most of these bloggers are not in it for the money and would like a publisher to take care of the business side of things, including the taxes. Perhaps this already exists but I am not aware of it.

The problem is that the "taking care of business" is basically you putting it on your tax return correctly. No one else can really do that for you other than your accountant.

Yes, but adding W2 income to your tax forms is pretty easy and insulates you from all the tax and legal implications of running your own blog for a small income. Whereas adding a Schedule C for 1099 income exposes you to all those risks, taxes and complexity. It sounds like the guy who wrote the original blog post didn't really discuss this with his tax and legal advisors because his mistake was easily avoided if he had properly claimed the income.

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

#65

Post by jharrison »

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…

It seems pretty clear by the article that he wasn't doing any of the "business" things like tracking deductions or documentation of any kind. He could probably muster up his hosting and domain name bills but that would be it, and probably the majority of any deduction he could take anyway (recognizing his library and other "support" items as deductible as well).

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

#66

Post by jharrison »

noonespecial wrote: post #4

He's probably not nearly as SOL as he thinks. As others are already pointing out, he probably just needs to come at it as a "self employed individual". There is tax for this, but also many deductions. A few choice minutes with a tax professional would probably clear up most of his problems. Unfortunately, those minutes would have been a bunch more helpful before he ended up with penalties for not filing, but again, a…

I agree. He's not as SOL as he thinks, in general. I think where the SOLedness comes from is that he has a tax bill that he knows he can't pay right now. It's a scary place to be and probably feels like the end of the world. It's not (yes, speaking from experience).

It's unlikely that the IRS will do anything drastic in his case. He'll probably just go on a payment plan and figure out how to move forward with his website. They'll work with him.

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

#67

Post by ebiester »

jackfoxy wrote: post #35

The income tax system, and the principle of taxing income, is wrong in so many ways, but I have given up arguing the point. The inertia of the system and the inertia of individuals is too great to overcome. I've identified these major contributing factors: 1) Vested interests that like the tax system the way it is. 2) Envy and fear of envy. People who think the income tax takes from the rich, and people who happily p…

As a nation, we've decided that we like things like infrastructure should be paid in part by the federal government. We've also decided we want to have a military that spans the globe, able to support regular operations as well as two wars with presences in over 50 countries costing over 600 billion dollars, not even counting the extra war supplemental or military retirement benefits.

The fundamental fact is that the poor do not make enough money to pay for all this. Further, it is the wealthy that most benefit from the government's services -- without the roads, without the extensive police network, commerce would be much more difficult.

Thus, it makes sense that the wealthy, who are most able to afford taxes, would pay for most of it. (When you tax someone to the point where they cannot afford food or shelter, you will see revolution and civil war. Few make money in that situation.

Thus, progressive taxes are the most likely in a wealthy society. (Feudalism works on regressive taxation as an alternative.) Income is one of the easiest methods of progressive taxation.

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

#68

Post by polynomial »

camz wrote: post #26

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…

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

Why do I feel like noting this could have saved more than a few words in the article; at the very least, how was it that this salient fact is never mentioned?

> 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

Ditto. This one note seems a much more valuable takeaway than most everything in the article.

Not trashing the article, just that camz nails the important points with a greater economy of words.

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

#69

Post by ars »

polynomial wrote: post #68
camz wrote: post #26

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…

> Google issues 1099s to anyone that earns over 400 or 600 dollars so the IRS knows if you're making money. Why do I feel like noting this could have saved more than a few words in the article; at the very least, how was it that this salient fact is never mentioned? > 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…

Is you do incorporate you will need to pay corporate taxes, in addition the corporation will need to pay the employer portion of the SE tax. (So you don't pay it, the corporation does, and since they need to pay it they reduce your salary by that much, i.e. it's a wash.)

Becoming a corporation will not reduce your taxes, but it will significantly increase the complexity. The main benefit it liability, not financial.

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

#70

Post by ars »

moultano wrote: post #62
jackfoxy wrote: post #35

The income tax system, and the principle of taxing income, is wrong in so many ways, but I have given up arguing the point. The inertia of the system and the inertia of individuals is too great to overcome. I've identified these major contributing factors: 1) Vested interests that like the tax system the way it is. 2) Envy and fear of envy. People who think the income tax takes from the rich, and people who happily p…

What do you propose instead? A link is fine.

I assume he wants consumption (i.e. sales or vat tax) instead of income tax.

Google "fair tax" for one such proposal.

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