as an internet entrepreneur you open yourself up to a wonderful world of tax benefits and deductions but at the same time you are 100% responsible for doing all of your reporting so this video is going to help you make sense of this whole world of doing your taxes as a solopreneur or as an internet entrepreneur specifically we're going to look at the differences from kind of like the employee world to being an entrepreneur online so you can understand what's expected of you once you make that shift into entrepreneur ship second we're going to talk about some of the tools and the processes that I've been integrating into my business to make this process very simple so when it comes tax time it's actually relatively easy for me to get everything done and then finally we're going to talk about you building a team so you're not necessarily the person doing it because as an internet entrepreneur your time is best spent uh going and driving more leads driving more customers and ultimately making more money which is what you do as an entrepreneur so first and foremost what is the difference between being like a normal employee who goes through an HR process with a company and gets paid and all the taxes get deducted for you and being an internet entrepreneur the way I like to describe these is through the document that you'll receive at the end of the year so if you're in a normal job where they take out your taxes you get a W2 at the end of the year and that W2 shows to you what your company sent to the IRS saying this is how much you earned this is how much you paid in in taxes and that's the main document that you use to calculate all of your taxes but when you run your own business when you're an internet entrepreneur whether you have an LLC whether you have an S corporation or even if you don't set those up if you're just a sole proprietor which I cover that do you need an LLC in a separate video the link to that will be below but when you're on the path of being an internet entrepreneur you are going to get a $10.99 at the end of the year for all income that you earn when you earn more than $600 a income from any one source so this right here is a W2 employee versus a1099 independent contractor that's the big shift so as an internet entrepreneur your funds are going to come to you at the end of the year and the reporting is going to come to you on a1099 filing and this doesn't matter whether you're a YouTube Creator who earns Revenue ad revenue from the ads that play this just means that Google's ad platform that you signed up with they're going to send you a $10.99 at the end of the year if you're an affiliate marketer meaning you promote other people's products and you earn a commission when you make sales those vendors or the platforms will send you a $10.99 at the end of the year and if you sell your own products then you have uh your shopping cart that's tied into a merchant account like PayPal or stripe and those platforms will then send you a1099 at the end of the year when they send you a1099 they're also sending a document over to the IRS saying hey I paid this person this much money that's their reporting and then it's on you you it's your requirement to your reporting for your earnings okay so this path of being an internet entrepreneur also requires you to do quarterly tax payments now you're supposed to send in an estimated quarterly tax payment every quarter because on those 1099 from these corporations they don't withhold any taxable income from you now if you don't send in your quarterly earnings there is just a small penalty that you pay at the end of the year but when you when we get to the later sections in the video talking about team and processes ultimately your CPA should be able to set all of your quarterly earnings based off your estimates up to automatically withdraw from your bank account so it's actually not something you need to think about once you have your process built and once you have your teammate in place and then you open yourself up to the world of tax deductions so right now for this one video which is only one small part of my business right creating YouTube videos is like the smallest part of my business I have multiple lights going on I have built a set with a backdrop and some audio acoustical stuff and some fun trinky things here on my desk I've got microphones I've got a laptop I've got internet that's used to upload this video everything that I use in order to continue to grow maintain expand and make money through my business I am able to deduct so it's really important for you to not only keep track of all of your income that's the $199 side of things but you also need to keep track of all of your expenses all of the money that you're spending because in theory you or a tax professional can write off all of those deductions against your income helping you kind of lower your tax burden and this is why generally speaking in uh entrepreneurs of all varieties pay lower taxes based as an overall percentage than employees do and this is the benefit of going down this path and getting good at this path is that you can actually lower the amount the percentage of your earnings that you pay in taxes you can get that number down lower in the entrepreneurial path versus what you can do with this as a W2 employee and if you've got a day job 9 to-5 where you're earning on a W2 and then you're getting some $199 income at the end of the year because you're working nights and weekends to build your internet side hustle a I commend you and B some of your deductions can actually help counteract the taxes that you're paying as a W2 employee and this is the moment in the video where I want to remind you that I'm not a tax professional in any way shape or form and this isn't actually tax advice I'm a guy who's an internet entrepreneur I made my first dollar online as affiliate in 2003 I've just had to figure all of this stuff out and ultimately you are going to want to get a tax professional to help you with this who understands your local laws because your state your county are I guarantee they're different than the state and the county that I operate from so there are just nuanced little differences but we'll cover that here in a minute minute so what you really need to be ready to do or what you should be doing already is itemizing or keeping clear records of all of the money that you're earning and all of the money that you're spending when it comes to your business now this is the basics of bookkeeping and there's a few key tools techniques strategies that you'll need to implement number one is separate out your accounts now I did not do this at first so when it came tax time I had to go into my normal bank account and my normal credit card and I had to look line by line for everything and say was that a business transaction or not and I moved everything onto a spreadsheet and it was a nightmare I mean it took me dozens of hours usually done on April 13th or April 14th to get ready for my April 15th filing um and it's just a complete pain in the ne so when you start your business whether it's an LLC an S corporation or whether you're just acting as a sole proprietor it doesn't matter start a new checking account this can be a checking account at some other uh bank or some banks will allow you to set up a new checking account right within your main banking dashboard that you already have it doesn't matter you can name it checking number two and you just know mentally that checking number two is ultimately the bank account for your business and then when all of these companies want to pay you you have them direct deposit those funds directly into bank account number two so you have a clear record at the end of the year of all of the money that you received if you have a business PayPal account when you withdraw funds from that business PayPal account you can either send them to your actual business account or you can send them to your personal account meaning you might have to account for two accounts at the end of the year your person your business checking account your checking number two and also your PayPal account just know that you're going to need to go through each and every one of these and then second I like to use a credit card for all of my expenses this just helps me keep all of my expenses itemized and generally speaking you can get 1% one and a half or 2% cash back on some of these credit cards and that's just extra income for the things that you're already spending so my Internet bill when I buy a laptop my Hardware the um the microphone or the webcam that I'm speaking and using right now in this moment all of that gets purchased on my business credit card I pay off 100% of my business credit card each and every month and that's it those are really like the two or three statements that I have to manage each and every month in order to have all of my business expenses and income separated out for my personal expenses and my income I'm telling you just this one shift of separating everything out is going to make your life so much easier in the future but then I highly recommend adding on one more piece of technology that is going to be some sort of a bookkeeping software now some folks like to use zero that's xer o I believe uh QuickBooks has a tool for this as well and there's probably dozens of other basic bookkeeping software and what you you do is you get this signed up generally they're going to be I don't know $ 20 $30 per month type uh fee for this and you connect it up to your business bank account you connect it up to your PayPal account and you connect it up to your credit card account and it's going to automatically pull all of those transactions into One dashboard for you and this is where you can manage your books on your own or ultimately where we're going to get to here in a minute growing your team you can hire a bookkeeper who can then log into that dashboard for you um the tools like zero give you kind of a an administrator access you can you can kind of give them access to your account without being able to go into all of your bank accounts right because you don't want your bookkeeper going into your actual bank accounts that's a uh there's a risk there that's obvious that we want to segregate out which is why we use these kinds of tools and then what you're going to do is each and every month you should reconcile every single line that goes in so everything that you your credit card expense said was spent out it should you got to go in and make sure that line by line everything actually made it on I love automations I love that these tools claim to go pull all of my credit card transactions uh but they miss things sometimes the connection fails sometimes and we go line by line each and every month to make sure that every dollar I spent is accounted for inside of my bookkeeping software and the same is true on the other side for every dollar that's earned we make sure that gets into the bookkeeping software and then at the end of the year the output from your bookkeeping software is what you send over to your tax software whether you're going to do that through like turbo taxes on your own or whether you're going to hire a CPA you would send her your profit and loss statement and your balance sheet statement with those two documents that come from your bookkeeping software Bingo your CPA can do all of that work for you so let's talk about the team right growing your team in a position to get you really to where you can um make this process relatively fun and easy I mean let's be real it's not that fun per se um but the the number one person and I didn't hire this person really till late in the game is a bookkeeper and my bookkeeper I found on upwork which is just a basic Outsourcing software platform that's online that you can use I pay about $33 per month or 35 bucks per month for my bookkeeper and every month I send her three documents essentially she gets a PayPal statement she gets my credit card statement for my business credit card and she gets my business checking account statement I simply put those into a shared Dropbox folder where she has access to that shared Dropbox folder I send her an email and say hey last month's documents are up and then she goes line by line by line makes sure that everything is actually on the sheet and then she categorizes all of my expenses so my Facebook ads all get tagged as advertising expenses um my personal development my professional development any courses that I'm taking uh Hardware web services right my email Services my web hosting and things like that so she categorizes all of that stuff out for me um and that's what she does so every month it costs maybe two or three hours of her time per month so most months are like $70 to $100 for me to work with somebody to handle this and then from there I have a CPA who I work with generally speaking just once per year if I have questions throughout the year I can ask her for questions for example if I don't know how to set up all those little categories and my bookkeeper doesn't know how to set up all those categories that is a question for a CPA ultimately to help you build that out but really I don't talk to my CPA much during during the year until it's the end of the year and here are all of my documents and she goes and prepares all my taxes and makees sure that I'm getting all of the best um tax deductions and doing thing the right way for me there now for finding a CPA um I really recommend that you find someone local who understands homebased businesses because right now I'm I'm obviously I'm in a room in my home right and this room in my home is dedicated the only thing I do here in this room in my home is I work so there's a portion of my mortgage payment there's a portion of my utility bills there's a lot of deductions that we as Internet entrepreneurs have access to that if you're new to this realm you're not going to know what all of those deductions are you're not going to know how to qualify for them appropriately or how to account for them appropriately and this is why a CPA at the end of the year is actually going to help you make a lot more money by simply saving you money on taxes that you would probably overpay because you don't understand the law correctly but you need to make sure you know a CPA who really understands home homebased businesses and they need to understand your local County and your local state laws as well so how do you find a local CPA obviously you can go on to upwork and you can find CPAs who are great for internet-based businesses the local County and state laws aren't that difficult to figure out so if you don't really want to go meet anybody in your local network you can also use upwork for that as well but I recommend going to BNI meetup groups that's business networking International in most cities and small markets in small towns there's at least one business networking group BNI group that meets generally they'll meet once per week you can go as a guest to one of these and essentially it's a leads group where there's a bunch of people who are passing leads to each other you can just go and you're going to say hey I'm a new business owner and I'm looking for a local CPA who understands homebased businesses to help me get my tax filings all done and to really be prepared to grow into an S corporation over time which I think is one of the better um structures that you can use for the games that we play um that's where you can go find someone locally they'd be happy to help they'll sit down with you over coffee and kind of explain how everything helps I've loved having someone local who I can talk to um but if if you're not comfortable doing that then finding somebody on upwork works for you there really the key is to remember that you are responsible for all of your reporting and when it comes time at the end of the year you don't want to just go look at all of your 1099s and send all your plug all your 1099 numbers in because there are situations where you can get double reported in that scenario so PayPal is one example a lot of affiliate vendors will pay through PayPal but unless you earn $20,000 in a year with PayPal or have something like 2,000 or 200 um transactions in a year PayPal will or won't send you a1099 so if you're over a certain threshold PayPal is going to send you a $199 which means the vendor who sent you money and PayPal May both be sending you a $10.99 for the exact same amount of money which means it might look like from the irsa standpoint that you earned more than you did and if you just filed your taxes based on those 1099s you received without going through line by line and making sure that your income reflects exactly what those 1099 reflect you put yourself in a position to possibly overpay on your taxes which is obviously not something that you want to do and this is why it's important to just be meticulous and remember off the top of your head the first thing you want to do is separate it all out to where your business and even if you don't have a real business set up it's not an LLC it's just you operating as a sole proprietor there's a separate checking account and there's a separate credit card account that receives and spends all of the money from your business activities so this way even if you're just waiting until the end of the year and you're just going to have a rough night and go through everything all you need to do is look into two places you go into your bank account that's separated for your business you go into your credit card that's separated for your business you pull all of those numbers you crunch it down into a spreadsheet you have how much came in you have how much went out you send that over to CPA or you plug that Into Turbo Tax and you have effectively cleared the hurdle but you're probably missing out on some tax deductions that could open you up to saving even more money which is why having a CPA is going to be helpful for you and ultimately on the long journey I think you want a CPA who is going to be who's going to really understand how to Leverage The Power of s corporate because there are some additional tax benefits that we business owners can have as an S corporation and if you're currently in LLC you can also file to have your LLC taxed as an S corporation these are all of the things that a CPA is going to help you to do the way it worked for me is I was operating as a sole proprietor for like seven years I didn't have a business structure at all my tax lady was like yo my CPA she was like yo miles you need a business you're you're you're overpaying and finally one year after I paid my taxes she's like Miles by the way you would have saved $12,000 last year had you had an S corporation set up we were making six figures Plus at this time and that was the time when I pulled the trigger on getting my S corporation set up and since then we've had a very very very good structure but that's it separate everything out know that you're responsible for it all get a team working get some tools in place working for you so you can make this process easy it doesn't have to be drudgery and once you get this all set up a couple of hours throughout the year and then a couple of hours there around tax time will make it really easy for you to file all of this and then you can reap all of the rewards and the benefits that are available to us internet entrepreneurs I hope this video has been helpful if you have questions for me you can get at me in the comments here but do like and subscribe I appreciate you these are not the kinds of videos that go viral because nobody actually really cares about this in Mass Consciousness but I'm taking my time on a Sunday to share everything I know with you here to help you build your business effectively so clicking that like button clicking sub subscribe sharing this video on social does help me get to reach out which I do appreciate those kind of little touch points from you so thank you very much for your time I look forward to connecting with you on the next video Until then be well
Taxes For Online Businesses Made Easy
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