This estimate goes towards your 2008 tax liability so it reduces the amount you will owe on your 2008 tax return when you file.

To avoid the penalty for not paying enough estimated tax, you need to pay in at least 90% of your 2008 tax liability or 100% of your 2007 tax liability, whichever is less.

Alternatively, you can choose to file and pay your 2008 taxes by January 31, 2009 to avoid any underpayment penalties.

Use Form 1040-ES to submit your estimated tax payment.

For a refresher on estimated tax payments, see ‘Do I Need to Make Estimated Tax Payments?’

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You get $40 off at the store, plus a $159 mail-in rebate. I believe you can purchase this online at Staples.com also.

Go to Staples.com and look for details in the upper right area of the screen.

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I first started the Ebiz Tax Tips blog because I was getting a lot of questions from eBay sellers about taxes – whether they needed to report their income, what they could deduct, etc.

That was a couple of years ago.  Since then the number of bloggers, affiliate marketers and other people making money on the internet has exploded.  And the IRS has taken notice!

The number of 1099s that will be issued and received this year will probably be much larger than ever before.

So, you may be wondering, will you get a 1099?  And what should you do if you do receive a Form 1099?  How do you go about reporting 1099 income?

Most people are aware that they must report wages, salaries, interest, dividends, etc. on their tax returns, but many people do not realize that they also have to report other income, such as cash earned from side jobs, barter income when you exchange services or goods with someone else, awards, prizes, and even gambling winnings.

Basically, you have to report ALL income from all sources, unless it is specifically exempt from taxes.

That means if you earn money from ads on your blog, selling items on eBay, selling products for a commission, or providing a service to another person (if you are a VA, web designer, coach, etc.), then you must report that income.

If you are a sole proprietor or an independent contractor and you earn $600 or more for the year (from an individual or a company), you should receive a Form 1099-MISC reporting your income.  This income is reported to you and the the IRS. 

Even if you don’t receive a Form 1099, your income is still reportable.  There is a common misconception that if you don’t receive a form 1099, you don’t have to report your income.  Wrong!  If you are earning money from a product, service, or other activity (blog, ad revenue, affiliate commissions, whatever the source) you have to report that income to the IRS.

The good news is that you can deduct ordinary and reasonable business expenses against that income.  So you are only taxed on your net profit, not your total income.

To report your income and expenses from your online business, use
Schedule C: Profit or Loss From Business, which is then attached to
your Form 1040 (your personal tax return). You must also complete
Schedule SE to calculate your self employment taxes if your net profits
from your business exceed $400 for the year.

Note: As a self employed business owner, you are responsible for the self employment tax on top of your regular tax on your net profits.  The SE tax is 15.3% and can add up very quickly!

To minimize your SE tax, it’s important that you understand the deductions and credits available to you as a small business owner.  For a list of tax deductions for online business owners, please read “List of Tax Deductions for Online Biz Owners”.

Recommended Resources:  If you are a new business owner, and you have questions about reporting your income, what you can deduct and how to minimize your taxes, consider signing up for the New Biz Tax Consultation.

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