Hello,

I live in California, and along with my regular job, I do affiliate
marketing on the side and have started generating some revenue from
this home based venture. The affiliate marketing company pays me
checks every month and will send me a 1099 at the end of the year. I
wanted to be able to write off some of my expenses related to my
internet business:

1. Mainly internet advertising
2. An occasional trip (flight + hotel)
3. My broadband connection
4. Part of my apartment rent?

I went and filed a business license under my own name. This way I
didn't have to file a DBA or ficticious business name. Now, since this
business is under my own name, and all of my expenses have been paid
for with my own checking account credit card, can I simply write these
expenses off on my next personal 1040 tax return (given that I have
copies of all receipts)?

I have kept copies of all my expenses since January 2005 (when I
started my business) and have them in a folder.

Questions: 

How easy would it be to simply file these as expenses? Will I be able
to claim these expenses as write-offs? Can I simply write these
expenses off on my next personal 1040 tax return (given that I have
copies of all receipts)?

I do not need a TID or need to go to the IRS for any reason, correct?
I can simply write these off my personal social security tax return.
The business is under my own name.

Could I simply go to H&R block in January with my huge file of
expenses and tell them to declare it as an expense, using my personal
social security number?

Will I be taxed 50% on all commission (minus write-offs) earned as
they send out a 1099?

Do I need to do anything else? Do you have any tips?

Dear Moelost,

So far, it sounds as if you have the right idea.

When you prepare next year's tax return, you'll be using a Schedule C,
to report the income and expenses. 

Report the income from the 1099 on the Income line. 

Yes, to all your questions 1,2,3,4.
All your business-related travel is deductible. 
As are all you business-related expenses, computers, software, 
Internet connection, supplies and so forth. 

Yes, you will qualify for office in home deductions, if you 
should care to use them. 

Keep track of your business charges on your credit card, 
as well as in your personal checkbook. 

Don't forget to track some of your cash expenses - things
like office supplies, postage, parking meters, tolls, valets,
tips, etc.

You will be paying self-employment tax (Social Security
and Medicare) only on your business profits.

The rest of your profits will be reduced by your personal 
exemptions and itemized deductions, if you have any.

So, the tax rate won't be 50%. It will be your tax rate at 
that income level. 

In fact, you might enjoy these books. They'll help you
identify more of the tax savings to which you're entitled.

Here are some books you might want to look at before you
make the decision - Fred Daily's Tax Savvy for Small Businesses
http://www.amazon.com/exec/obidos/tg/detail/-/0873378326/

And Jan Zobel's Minding Her Own Business: The Self-Employed Woman?s 
Essential Guide to Taxes and Financial Records
http://www.amazon.com/exec/obidos/tg/detail/-/1572484551

Of course, IRS has a couple of publications you might want to read:

Pub 334 Tax Guide for Small Business 
http://www.irs.gov/publications/p334/index.html

Publication 463 Travel, Entertainment, Gift, and Car 
http://www.irs.gov/publications/p463/index.html

Publication 533 Self-Employment Tax
http://www.irs.gov/publications/p533/index.html

Publication 552 Recordkeeping for Individuals
http://www.irs.gov/publications/p552/index.html

Publication 583 Starting a Business and Keeping Records  
http://www.irs.gov/publications/p583/index.html

You asked about going to H&R Block next year.
You can. But I would only recommend doing that if
your local H&R Block office has someone with whom
you can establish a long-term relationship. 
If you can have the manager or owner (some are franchises)
work with you personally, fine, go there. 

If not, I strongly suggest that you find a good 
local tax professional and establish a relationship.
H&R Block's fees for a tax return with all the forms
and schedules you will need, won't be less than $250.
For that price, you can have your own personal Tax Pro.

Better yet, set up a planning appointment and you'll
learn how to set up the right kind of retirement plan
and other tax benefits you and your family can use.

I do hope this helps.

You had enough sense to save the cost of DBA by
using your own name. And you were smart enough to
market a product or service that is popular enough
to generate sales. So I have a feeling you're also
smart enough to get good tax advice. 

Best wishes,

Your TaxMama-ga

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Request for Answer Clarification by moelost-ga on 30 Aug 2005 09:21 PDT

Can you please clarify the answer to these questions, real quick?

I do not need a TID or need to go to the IRS for any reason, correct?
I can simply write these off my personal social security tax return.
The business is under my own name.

And when you say I need to file a Schedule C, does this mean I do not
need to include this in a 1040?

---

Clarification of Answer by taxmama-ga on 30 Aug 2005 10:36 PDT

Dear Moelost,

 
You asked:
   I do not need a TID or need to go to the IRS for any reason, correct?
   I can simply write these off my personal social security tax return.
   The business is under my own name.

This is correct.

You asked:
  And when you say I need to file a Schedule C, does this mean I do not
  need to include this in a 1040?

The Schedule C is one of the pages you attach to the Form 1040.
You'll be attaching several pages to your 1040, when you have a business.

Those books and/or IRS publications will explain in more detail. 

Start with the Publication 334 to get an overview of how this works. 

But at least you won't need to file any other kind of tax return
(like a corporation or partnership, etc.) just your very long,
personal income tax return (Form 1040 and schedules/forms).

Best wishes

Your TaxMama-ga