On Thu, 02 Apr 2009 20:46:51 -0700, Darren New wrote:

> Jim Henderson wrote:
>> On Thu, 02 Apr 2009 20:08:08 -0700, Darren New wrote:
>> 
>>> Jim Henderson wrote:
>>>> That's sales tax, not income tax.
>>> That's not what I'm talking about.  I'm talking about income tax.
>> 
>> So am I.  But you said:
>> 
>> "Otherwise, you wouldn't pay income tax if you had 10,000 customers a
>> year each buy $20 of stuff from you."
>> 
>> *That* is sales tax.
> 
> I'm confused. I said income tax, you said sales tax. The two are
> unrelated.

I know.  My point is that the tax you collect and pay on "stuff" that 
people buy from you in the quantities you are talking about is sales 
tax.  10,000 customer *buying* $20 of stuff from you requires that you 
pay sales tax, not income tax.

>> Does *anyone* think the tax laws make sense?  I sure don't.
> 
> I'm pretty sure the owner of the local gas station pays income tax, even
> tho he *never* gets a 1099, yes?

He would pay personal income tax, sure - because his business would 
generate an 1099 for him.

>> Well, like I said, I'd have to check with our treasurer.  She said she
>> "got it sorted out with the state", so I assume the state issued the
>> certificate, and the feds accept that.
> 
> That's possible, but the designation as a 503(c) organization is an IRS
> thing.

Yes, that makes sense. But that doesn't necessarily mean the feds get 
involved when one is created.

>>>>> Did you take them as an individual, or a corporation, or what?
>>>> Individual.
>>> Well, a corporation has to report everything, even if they don't get a
>>> 1099.
>> 
>> Yes, but we were talking about individual income tax?
> 
> Yes.

So I'm not clear as to how we're getting them conflated.

>> Oh, wait, I think I see now where the misunderstanding is.  We're
>> talking at cross-purposes again.  We got on the subject of income tax
>> and I assumed "individual" and you are talking about for an entity, not
>> an individual.
> 
> I'm talking about both. If your job is buying $50 parts, fixing them,
> and selling them for $100 on eBay, and you make $100,000 a year doing
> that, are you paying income tax? Sure. Who reports your sales to the
> IRS? Nobody but you. That's what I'm saying.

If that's your job, then you *should* be working for a "company" entity, 
even if it's a sole proprietorship and you're the only employee.  That 
way if the business tanks, it's the business' finances that are hosed and 
not your personal when you file for bankruptcy.

So you - as the business - are responsible (as I understand it) for 
reporting the business' income as an entity (quarterly as I understand 
it) and then as an individual you are responsible for reporting your 
salary from your business (and the business is responsible for reporting 
that as well and dealing with withholdings and such).

I know a few folks who are independent consultants, and they all seem to 
have incorporated a business for this purpose, as well as paying an 
accountant to help them keep their books.

>>> Now, if it's <$600, you don't get a 1099 at all, but I'm pretty sure
>>> that doesn't *legally* let you off the hook for reporting it. It just
>>> means the IRS isn't going to be able to catch you easily.
>> 
>> I got a 1099 for <$600.
>> 
>> But I suppose "not going to be able to catch you easily" also
>> translates to "not worth their while".
> 
> Possibly. But I'm trying to distinguish between "practically get in
> trouble" and "is illegal."  If I rent a DVD and show it on the
> big-screen TV at my sports bar, I'm also violating copyrights legally
> and also unlikely to get in trouble for it.

Well, that depends on if Jack Vallenti is a patron or not. ;-)

But I see what you're saying.

>> But on my individual income taxes back when I got the advance (which
>> was more than $600 and I got nailed for the taxes, or would have if the
>> expenditure hadn't been tax-deductible), I talked to a tax accountant
>> about the situation, and he explained it to me then.
> 
> It's possibly because it was an advance, and you would have had to pay
> it back had you not finished the book, or something like that. I.e., it
> might have had nothing to do with the amount and more to do with when
> you were officially booking the income.

Even as an advance, it was taxable income unless it was used to cover 
business expenses - which in my case it was.  I probably could have made 
it much simpler by incorporating myself, but for one book that seemed 
like overkill.

>> Now I'll have to find the form.   It may be that I'm just remembering
>> the boxes saying "0" for what was owed on it.
> 
> 1099's don't have a "how much you owe" box on them. Just google for
> "form 1099" and suck it down off the IRS website.

Hmm, I might be thinking of box 4, which I see is the amount withheld.

>> Nonfiction books for a very small segment of a targeted market segment
>> tend not to be real moneymakers.  Just a good way to get your name
>> known
> 
> Sounds that way. :-)

Yeah.  It did work to get my name out there in that particular part of 
the customer base, no doubt about it. :-)  In a way it's like Ward 
Christenson (developer of XMODEM) said to me once on CompuServe when I 
asked if he was *that* Ward Christenson - he said "yeah, that and $0.25 
will get me a diet Coke".  :-)

>>> I do love box 13 for 2009: "Excess Golden Parachute Payments."
>> LOL, that's a good one.
> 
> I think it's the whole AIG thing.

I had a similar thought. :-)

Jim

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