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tomh20

Junior Member
What is the name of your state? California


Situation One:
I own a small online business. I believe I did an excellent job in keep tracking of deductibles (domain names, advertising, hosting, etc.). I decided to invest my business income by purchasing other online property (domains & websites). Now my problem comes from that fact that the IRS (and my accountant) say that domain names are depreciated over a 15 year period. I was unaware of this when I originally purchased the online properties, but I plan on learning from my mistakes. :)

My problem is that my taxes owed are greater than cash I have from the business. For example, let's say that I made $25,000 in which I used $23,000to purchase online properties, leaving me with $2,000 cash in hand. Due to the appreciation I would be taxed at about $21,000, thus owing far more than the $2,000 I have available.

I am stronly discouraged by this because I will now be spending nearly 1/4th of this years income to paying off last years taxes, thus hindering my expansion abilities.

Also, my business was started Dec 2004, and I am a teenager (not a minor), in case there are any tax breaks for new-businesses or teenage owners etc.

Question 1: Are there any statues that could help me dwindle down the tax payment (EG: can't owe more than net-income regardless of depreciation )?


Situation Two:
I also work for a corporation (IE: I am an employee and receive a paycheck). My work income alone is in a fairly low tax bracket. My business income alone is in a fairly low tax bracket. When combining the two I am in a higher tax bracket and I am thus required to pay more taxes (doh! :) ).

Question 2: Is there anyway for me to legally seperate my business income and my personal income into two seperate incomes? I know I wouldn't be able to use my business income for personal purposes (unless I report it as such), but I would have no problem keeping my business income inside my business and retaining any earnings.What is the name of your state?

Thank you for taking the time to read this (and thank you for replying. :))
 


LdiJ

Senior Member
Well...first, I don't know where you get the idea that you would have to pay 21,000 in tax on 25,000 in income......

I think that you probably need to go get yourself a consult with a local tax professional.

However, there is no way to separate your two incomes and have a low tax rate for both. You could put your business into a C corp...and that would separate things, but the taxes would just be significantly higher.
 

tomh20

Junior Member
Thank you for replying.

LdiJ said:
Well...first, I don't know where you get the idea that you would have to pay 21,000 in tax on 25,000 in income......
The $21,000 in tax was a made up figure of what I am taxed on after expenses (such as purchasing the websites & domains). I should have stated $25,000 revenue, $21,000 income.

LdiJ said:
However, there is no way to separate your two incomes and have a low tax rate for both. You could put your business into a C corp...and that would separate things, but the taxes would just be significantly higher.
I wasn't aware of this, thanks for the info.
 

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