Death (I wish!) and Taxes…

Updated on March 4, 2009 By Ken Begg 12 Comments

I want to thank everyone who’s been using my Amazon links. It seemed a great system to get enough money to pay for my bandwidth while not costing you guys any extra money. However, I may be decommissioning them soon. In my naivety, I never figured on what a tax nightmare this would be. Turns out that I was supposed to be filling out and sending in checks on a quarterly basis because the like $750 I made last year counts me as “self-employed,” and subject to all the entanglements that entails.

I’ve failed to do this for 2008, so there will be penalties, which is fine, but since I’d never figure out what they are, I’ll have to go and pay H&R Block to figure them out for me. So let’s say that cost a hundred bucks, and then the taxes and fines are like, I don’t know, $300. A lot of work for $400 clear. The idea of filling out quarterly paperwork for like $150-200 a quarter strikes me as retarded, so I’ll probably just dump the whole thing. I mean, I’m a guy who’s always used the 1040-EZ and loved getting my taxes figured out in five minutes every year.

Sorry to go all boo-hoo on you, but this just strikes me as very dumb, and of course counterproductive. I don’t mind paying the taxes, but this level of paper work and the fact I’ll need an accountant to figure things out, for the amount involved, doesn’t seem to balance out. And how many people like me are making such decisions to forgo even small amounts of income, which suppresses in the larger scheme overall revenue? Oh, well, I guess they’ll just raise other taxes to make up for the lowered productivity they’ve caused. (Plus, of course, I’ll be back to paying for the site out of pocket, which kind of sucks. Not “WOE IS ME!” sucks, but sucks nonetheless. The extra fifty bucks a month was a nice bonus.)

Anyway, I’m out of town for a week starting tomorrow, so I guess I’ll have to attend to this mess next week and hope I don’t get an IRS notice in the meantime. Meanwhile, I’ll be all freaked out until I get that check written and know I’m legal again.

Yeesh.

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  • KeithB

    I am not a tax expert, but I believe that as long as you are up front with the IRS, they will be glad to figure out the penalties for you and send you a bill. (I.e., H&R Block not required…)

  • That’s probably true, but the IRS has about a 50% error rate on the ‘advise’ they give you, and guess who gets held liable. The piece of mind will be worth it.

  • mitch

    If you have been using the EZ form in the past there may be deductions you have not been taking advantage of. Maybe going to H&R Block and having professionals do your taxes will save you money, or at least mitigate the cost of hiring them.

  • MarshallDog

    Have you tried any of the websites that do your taxes for free? I use Tax Act… without it I’d still be going to my dad to do my taxes for me. I know you can get the program for federal taxes for free from their website. The program for your state taxes will cost you something like $15 depending on your state. I don’t know if those programs will figure out penalties for past taxes not paid, but I’ve never had to look. Maybe it’s better than paying an accountant.

  • JJ

    Actually, I believe that if you can claim it as a small business, you can actually get a significant tax deduction on your primary income. You’ll want to talk to an actual accountant about this, but I know that my own currently not-so-profitable business allows for huge tax deductions. It’s worth at least asking someone who knows; it might be that the deductions are worth the paperwork.

  • KeithB

    Good Point JJ!
    Ken, make sure to take your Bandwidth Bill with you to H&R block, so that they can offset the income with the amount you paid.

    Oh, and do it for last year, too!

  • sardu

    Two words.

    FAIR.

    TAX

  • As an accountant who *works* for the DoR in my state, I’ve got something of a background in tax and dealing with tax people. Contrary to portrayal in the media, tax people do tend to have hearts, and you can often explain the situation to them and get extensions, if not waivers of some of the penalties/fees. Not all of them, but around here we’re usually happy to hear the following words:

    “I screwed up, it’s my fault, I’m sorry… is there anything I can do about this?” General rules of thumb:

    1: Don’t be irate/surly.
    2: Don’t treat this like it’s *their* mistake/problem.
    3: Admit that you goofed, but explain that it was an honest mistake – you didn’t know it was going to be an issue, and (this might help) you weren’t informed by the program that this could bump you into the self-employed category.
    4: Be polite.

    Honestly, working customer service/collections for the IRS *or* DoR is kinda like working the register at Wal-Mart on Christmas Eve… all freakin’ year round. A little civility and actually acknowledging that the guy on the other end of the line is a human being who’s probably had a day just as frustrating as yours goes a looooong way.

    But yes – take all bills associated with the site to H&R Block with you. Just be careful – if you can’t make a ‘profit’ on it within a certain number of years (2 out of the first 3 you call it a business, and 3 out of every 5 thereafter, IIRC), you lose the business classification (but not the self-employed… go figure) and can get nailed if you keep claiming the deductions after that.

  • Well, since it is my fault, I wasn’t planning to make an issue of it. And I don’t really have any records, I pay everything electronically now. Maybe next year.

    For now, once I’m back in town, I’ll go in, pay H&R Block to make sure all the t’s are crossed, and then see what the story looks like next year. I’ve never bothered with deductions generally (largely because I’m really lazy, also because I don’t figure they’d be worth much given my life-style–no mortgage, etc.), but yeah, maybe next year I’ll track my Internet costs, my Netflix subscription, the ‘pro’ account at Photobucket I just signed up for (which is solely for the site), etc.

    I’m mostly concerned with just getting this cleared up so it’s not something I’m worrying about. And I have no beef with the IRS here; I just didn’t know the score. Even to the extent I find the tax regime counterproductive, well, that’s at least as much Congress’ fault. (*cough*flattax*cough*) The IRS just implements it.

    Worse case, I’ll keep the Amazon links for a few more months, and then when I get anywhere the $600 reporting limit, close down the account.

    I really appreciate, as always, the way you guys support the site. Thanks again.

  • KeithB

    Ken Said:
    “I don’t really have any records, I pay everything electronically now. Maybe next year. ”

    A bank statement that shows the trasnfer and the name of who it went to would be good enough.

  • Beat me to it, Keith. Alternately, a report from PayPal or your credit card company, if you’ve got one – whatever method you used, you should be able to run out the year’s bills and sort them for proof.

    If you’re getting nailed for the income, you *deserve* to take off the expenses. Otherwise, you’re paying more taxes than you should be – and where’s the logic in that?

    And I didn’t really think you’d make a big stink out of it, I just thought I’d point out the common pitfalls that people fall into – not falling into those can often get you a rep who’ll move heaven and Earth to help out, for the sake of rewarding you for being a decent human being.

  • KeithB

    I did some consulting work on the side, and deducted my full copy of photoshop since it was required for the plug-ins I wrote. Even though most of my money came from a non-plug-in consulting job. Of course, I wasn’t audited…