Welcome to AdTaxes.com, millions of American web publishers are earning extra income using Google Adsense. Many are in question as to whether taxes are owed on this income, others are confused on how to go about claiming this income on their taxes. We will provide you answers to all of these questions, along with step by step instructions on filing taxes for your Google Adsense income. It is recommended that you file your return with an online tax program, they will provide you with all of the forms you need, take care of the worrisome calculations, and guide you through your available tax deductions. Unfortunately none of the free programs include the small business tax forms. We have done a little research and the best prices can be found at TurboTax.com, they also include free audit support. Click Here to go to the TurboTax website.
Do I have to pay taxes on my adsense income?
Yes, Google Adsense is considered taxable income, and therefore you must give the Government their share. You are not only subject to Federal and State taxes, but also a Self-Employment tax, if your net earnings are more than $400. Visit the Self-Employment section of this site for a complete overview of this tax. If you think you can sneak by without paying taxes on your Adsense income, think again, Google will report your earnings to the IRS as one of their expenses.
How much tax do I owe?
There are a lot of factors that determine how much tax you will be paying, we try to touch on all of these examples throughout the site. To start with, Google will send you a 1099-misc form in the mail, this will list your gross earnings for the year, you can visit the Google 1099 page for further explanation on this. You can then start calculating your expenses(domain name, hosting fees, ect.), this is discussed in further detail on the deductions page. Your gross earnings minus your deductions will equal your net income, this is the amount that will be taxed.
What forms do I need to file?
For business income you will need to file a Schedule C, if your net earnings are over $400 you will also need to file a Schedule SE. The tax forms page simplifies this process by giving you step by step instructions, with images, on filling out these forms.
Business or Hobby?
When it comes to paying taxes, the main difference between the two is that if you are running your website as a business you can write off any losses, if you are doing it as a hobby you can not write off your losses. Either way you still owe taxes on your earnings. It is more beneficial to be considered a business than a hobby. To run your site as a business you must do so with the intention of making a profit. The IRS will look at your tax returns for the last 5 years and if you made a profit during at least 3 of those years, you have proven to them that you are a business. If you are not writing off losses this is something that you don't really need to concern yourself with.
We are neither legal advisors or tax counselors, if you are unfamiliar with tax laws please contact a tax professional for advice.