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View Full Version : How to do tax with iphone sales money?




yalag
Nov 27, 2008, 02:21 PM
So I've been thinking about taxes as I receive my payments from Apple. How does it work, is this counted towards my personal income? Is it possible to treat this as my own company? Is this affected by the type of membership of ADC (currently I am independent with ADC).

Anyone want to share some of their plans with respect with taxes?



admanimal
Nov 27, 2008, 07:12 PM
I am not qualified to give any sort of tax advice, but my understanding is that if you haven't set up any sort of official business for yourself (or maybe even if you have), you will end up having to pay a self-employment tax (i.e. SS and Medicare) in addition to including your App Store income with whatever other income you usually make. Depending on how you usually have your taxes set up as far as withholding, etc. goes and how much you are making from the App Store, you may also be responsible for paying estimated taxes in advance of the normal deadline.

fungg3
Nov 27, 2008, 07:14 PM
What if I setup a business right now, is it too late? It's still many more months to doing taxes for next year.

admanimal
Nov 27, 2008, 07:18 PM
What if I setup a business right now, is it too late? It's still many more months to doing taxes for next year.

There are pros and cons (and sometimes laws that apply depending on where you live) to setting up an actual business. The best thing to do if you are unsure is talk to a lawyer and/or tax professional. The moral of the story in any case is that if you make a decent amount of money from the App Store, you are going to be paying about 30% of it to taxes.

wizard
Nov 28, 2008, 01:09 AM
I strongly urge everybody to resolve this issue before the first sale is made. In the long run, with any amount of sales success, you will be better off knowing you did what is best in your juristiction and what is best for your product. The thing is there is no perfect answer as to how to structure a business. That us why you talk to lasers and other business men.


I haven't set up anything myself yet but have attended a SCORE class on small businesses. SCORE is a program of the SBA.

The worst part of operating a business is they heavy amount of paper work involved. It might be easier to give away the program instead of giving away 50% of what you earn and burden yourself with all the effort involved. Part of that paper work is things like quarterly fillings. Oh and the 50% vale can be pretty close depending on ythe state you live in that is what you will lose on every sale. Sad but in many cases true. Worst if Obama follows thru it could end up being worst than 50%.

I'm note trying to rain on your parade but that simple SCORE class opened my eyes to what is involved in making money. Sadly you need to make more cash than you may first realize. The above didn't even cover insurance and other business expenses, thingsyou need to be careful about.


Dave

nottooshabby
Nov 29, 2008, 11:05 PM
I strongly urge everybody to resolve this issue before the first sale is made. In the long run, with any amount of sales success, you will be better off knowing you did what is best in your juristiction and what is best for your product. The thing is there is no perfect answer as to how to structure a business. That us why you talk to lasers and other business men.


I haven't set up anything myself yet but have attended a SCORE class on small businesses. SCORE is a program of the SBA.

The worst part of operating a business is they heavy amount of paper work involved. It might be easier to give away the program instead of giving away 50% of what you earn and burden yourself with all the effort involved. Part of that paper work is things like quarterly fillings. Oh and the 50% vale can be pretty close depending on ythe state you live in that is what you will lose on every sale. Sad but in many cases true. Worst if Obama follows thru it could end up being worst than 50%.

I'm note trying to rain on your parade but that simple SCORE class opened my eyes to what is involved in making money. Sadly you need to make more cash than you may first realize. The above didn't even cover insurance and other business expenses, thingsyou need to be careful about.


Dave

You'll get a 1099-Misc or 1099-something from apple. You'll pay your normal income tax rate on this, plus SS and medicare. Keep in mind you'll pay 2X what you normally pay in SS with a normal job because your employer typically pays half of it for you. So instead of the 6.x% you'll be paying 13.X just for SS plus medicare plus your normal income tax rate. So if you have another job, plan on paying 40%+ in taxes.

yalag
Nov 29, 2008, 11:13 PM
The number you guys are quoting is that for personal income? My understanding is that the tax rate for a company is much lower?

taylorwilsdon
Nov 29, 2008, 11:57 PM
SPEAK. WITH. AN. ACCOUNTANT. OR. A. TAX. LAWYER.

Seriously, dude. You don't want to be asking for important tax information on an open forum - anyone can contribute, and no matter how legitimate sounding they appear, it could be totally off. Pay for an hour of consultation and figure out what your best course of action is.

fungg3
Nov 30, 2008, 12:00 AM
taylorwilsdon: yes you are right, I understand that. I'm just asking around to first get an idea.

wizard
Nov 30, 2008, 03:21 AM
You'll get a 1099-Misc or 1099-something from apple. You'll pay your normal income tax rate on this, plus SS and medicare. Keep in mind you'll pay 2X what you normally pay in SS with a normal job because your employer typically pays half of it for you. So instead of the 6.x% you'll be paying 13.X just for SS plus medicare plus your normal income tax rate. So if you have another job, plan on paying 40%+ in taxes.

Yeah that covers a lot of it but in NY that rate actually gets very close to 50% of everything you make.

By the way, depending on your app and any possible liability associated with it or its use, you as a programmer may want to avoid as much liability as you can for the product. I know that more than half the apps are currently games or things with modest liability potential, but that doesn't mean everybody's app is free from liability. Some lawyers might even go so far as to say all apps create liability problems. Some sort of corporate shield should make it easier to sleep nights.

Dave

wizard
Nov 30, 2008, 03:38 AM
The number you guys are quoting is that for personal income? My understanding is that the tax rate for a company is much lower?


At least some of the numbers came from a SBA / SCORE course I took back in September. The data was for NY and of course depends on how you structure the business. In essences if you have a DBA you end up paying all the Taxes you would as an individual and more. As someone has already pointed out you end up paying employer contributions too. Frankly the truth is far form the common wisdom even though the politicians are very good at exploiting the ignorance of the masses with respect to this subject.

You can of course spend more money to create a corporation but then you end up in a situation commonly referred to as double taxation. That is the corporation ends having to pay its taxes and when it issues you a salary, your salary also gets taxed at what ever your tax rate would be. There are negatives as well as positives with respect to forming a corporation and as has been pointed out that is what lawyers and accountants are for. it is also why I urge people to look into what is the best approach for them and the apps they intend to sell.

Mind you guys we are only focusing on taxes right now. If you want to make a living at this and have security too. You will need insurance for the various potential problem areas. Health insurance is one thing an individual can live without for too long and the cost there will bring tears to your eyes. Liability insurance can range from minor to very painful depending on what you are doing. Now I also know that the majority here are not into this as a source of full time income, but there is still much to consider to get your ducks all in a row.



Dave

nottooshabby
Nov 30, 2008, 09:40 AM
Yeah that covers a lot of it but in NY that rate actually gets very close to 50% of everything you make.

By the way, depending on your app and any possible liability associated with it or its use, you as a programmer may want to avoid as much liability as you can for the product. I know that more than half the apps are currently games or things with modest liability potential, but that doesn't mean everybody's app is free from liability. Some lawyers might even go so far as to say all apps create liability problems. Some sort of corporate shield should make it easier to sleep nights.

Dave

You're right, I didn't even mention state tax. Where I live that is another 10%, so brings it up to 50%......

marcpage
Dec 1, 2008, 12:04 PM
I would suggest doing Schedule C and putting your ADC expenses (and possibly Mac Mini purchase, etc.) to offset your income. I would suggest talking to a tax professional, as you will have to depreciate the computer. But not all of your income is taxable, you have to take out expenses.

admanimal
Dec 1, 2008, 01:06 PM
as you will have to depreciate the computer.

Not in 2008. http://www.section179.org/section_179_deduction.html.