How Do I Keep/Record Taxes On This?
I’m practicaly sending people money, literally. They arent buying anything from me whatsoever, but I’m confused as to when, how or IF I even pay taxes on money that is being sent to me.
Example……
I get a judgment for collection, I collect the money. Lets say that the total is $100.00…..I write a check to the guy whom I told I would send him money so that only leaves me with $50.00……..How in the world am I suppose to tax things like that? Every book that I read about taxes is assuming that I will be selling something????????
By: ochomeaga
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Published by: admin on April 7th, 2008 | Filed under Keep Tax Records
3 Responses to “How Do I Keep/Record Taxes On This?”
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April 8th, 2008 at 11:59 pm
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Yes, you need to keep a record on this. You aren’t “selling something” as such, you are selling a service.
And that services involves collecting money that is owed to someone else. You need to keep a record of all your transactions. All expenses you have that relate to the collection process can be deducted from your income.
You owe taxes on your net income.
Better get an accounting to help you out.
Good luck.
April 10th, 2008 at 1:47 am
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First of all, I would start keeping a record of everything that comes in and everything that goes out. You can do this with an Excel spreadsheet. Next you need to determine if you are a sole proprietor, a corporation, or what. If, for example, if people are sending you money for your services, you are taxed on the amount you keep. The things you have to pay for are deductible as business expenses. (telephone, postage, mileage). You sound like you are a sole proprietor and would complete a schedule C. You can download this at the IRS website. That form works you through what’s deductabile and what isn’t. It really isn’t that complicated. Just keep in mind: if you get it you pay taxes on it. If you spend it you deduct it. Actually, you are selling something–your services.
April 11th, 2008 at 8:03 am
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Right, most books go from the standpoint of selling something, because taxable expenses take consideration into account, in that you’re not just giving money out. Giving money out is your loss, you cannot write that off on your taxes except under special circumstances the IRS has very strictly laid out.
Any money you bring in that is not immediately taxed must be accounted and reported on a Schedule C and Schedule SE on your tax returns for the year. If you did not receive any more than $400, you are not responsible for Self Employment taxes, but you must still report the money because it does count as part of your total income for the year. The Schedule C outlines the income, the Schedule SE outlines the tax liability on the income reported on the Schedule C.
In this case, you took in $100. You gave out $50, but you cannot write that $50 off because it is not a qualified expense. You are responsible for taxes on the $100 as a whole. The $100 would be reported on the Schedule C, and also provided on the Schedule SE to figure the tax liability.