What tax forms will I need to file for my Adsense Earnings?
You will begin with Schedule C, you will report your total gross business income from all sources, you will also claim your business expenses, and then calculate the net profit or loss for the business. If your net earnings, gross earnings minus expenses, are over $400 you will also need to file Schedule SE, which is Self-Employment Tax, also known as Social Security/Medicare Tax. Finally you will carryover this information to your normal 1040 form. We also recommend using an online tax program to file your taxes, these programs are very simple, they do all the work for you. The free programs do not include the Schedule C and Schedule SE forms, which are needed to file taxes for the self-employed. We have done a little research and the best place, with the lowest prices, to file self-employment taxes is at TurboTax.com, they also include free audit support. Click Here to go to the TurboTax website.
How do I file Schedule C?
For the following examples we will assume that your adsense income is your only source of business income. If you have another business outside of Adsense you would combine the earnings. Schedule C is made up of five parts: Part I-Income, Part II-Expenses, Part III-Costs of Goods Sold, Part IV-Vehicle Information, Part V-Other Expenses. The following steps will guide you through the process of filling out this form. There is also an illustration at the bottom of the page.
Place your total gross earnings on line 1, you can find your gross earnings on line 7(non employee compensation) of your Google 1099-misc form. If you did not receive a 1099 it is probably because you did not earn more than $600, it is still your responsibility to keep track of these earnings and file your taxes accordingly. That is really all you should be filling out in Part I. If you had a site that sold a product as well as had Adsense earnings you would calculate your "Cost of Goods Sold' in Part IV and carry that over to line 4. Your final gross income will go on line 7 of this form, in most cases lines 1 and 7 are going to be the same.
Part II allows you to claim any business expenses, qualifying deductions are discussed in further detail on our deductions page. Part II is broken up into about 20 lines, each line representing a different type of deduction. Find the corresponding line a write in your allowable deduction, the obvious deductions are the cost of Hosting Fees, Domain Names, and Advertising . Other deductions get more complicated, please contact a tax professional for advice. If you don't see a line that corresponds to your deduction you can go to Part V and fill out the "Other Expenses" section and carry that number back over to line 27 in Part II. You will then total up all of your deductions and write that number on line 28.
You will subtract line 28(expenses) from line 7(gross earnings) and place this number on line 31. This is your net profit or loss, carry this number over to line 12 of your 1040 form, and also to line 2 of Schedule SE. If it is a loss you will be able to lower your adjusted gross income, therefore lowering your taxable income. If you had a loss, you must also complete line 32.. If you made a profit this will increase your adjusted gross income, meaning you will be paying Federal Taxes, State Taxes, and if net earnings are over $400 you will also be paying Self-Employment Tax.
Once you have completed your Schedule C form, visit our Self-Employment Tax section for step by step instructions on completing that form.