Increasing numbers of people are drawn to the thought of operating an online business through the notion that whatever income gained on the internet might be exempt from taxes. This sadly is a prevalent misbelief on the grounds that those who own internet businesses are still required to pay their tax dues.
In reality there has been considerable controversy regarding online businesses and taxes leaving many of the owners who started their online businesses with this false perception wishing that they had done their homework before starting out.
"But I Am Working At Home"
And Other Pointless Justifications Not To Pay Taxes
With an influx of people now working in the comfort of home and receiving earnings from their online labors the most obvious defense is that since they generated the income at home they need not pay taxes. They do not realize that taxes are in fact based on the origins and volume of the earnings as well as the categories of products and services sold; not on the location of the business.
Bearing that in mind you should understand that you are indeed required to pay your tax dues even if you earned it online.
Internet Tax is paid in the same way any other business pays tax. As a matter of fact the government does not collect income taxes based on how a business runs but rather it concentrates on the type of business.
If your business is based on the Web you still have to register for GST and PST (if appropriate) the same as any other business. Based on the structure of the business, sole proprietorship or incorporated, you will still need to fill out the mandatory forms so that your online business could be deemed as legal and to enable you to pay the appropriate taxes routinely.
There is in fact no difference between the tax obligation of an online business and any other business.
Online Businesses And Federal Taxes
Even when you manage an online business you're still required to pay federal taxes. It may seem unjust to you but it is crucial that you understand this in advance rather than learn down the road that you owe money to the IRS. The federal taxes you need to pay will change according to your company structure.
If your business is set up as a sole proprietor for an online business any income you earn through your online business is going to be taxed as income on your PTR or personal tax return.
Aside from that you will need to pay for your portion of social security and medicare taxes using schedule SE.
In contrast in case you have incorporated your business the tax schedule is going to be rather different from a sole proprietor of an online business.
At times, the tax you have to pay as an incorporated online business will likely depend upon the kind of organization. You'll either pay tax at a corporate level or it will be passed down to you as an income.
Figuring out taxes as it applies to your online business could be very complicated but it is important to get a picture of what is required so as to ward off complications down the line. You might want to seek out expert advice from a lawyer or public accountant if you're not totally certain what taxes are required for your online business.
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