I’ve received a few messages from new bloggers or website owners asking about the tax system when it comes to filing with your Google Adsense earnings. Especially now with Tax Season on the horizon. The biggest question most people bring up first is, ‘Do I have to report my Google earnings when filing my taxes?” Very simply put, yes. However, the deductions involved, and the taxes owed to the government varies depending on the user.

In this little informative guide I will give you all the run-down on how taxes are managed with Google Adsense, and other revenue services on the web. I will touch on subjects such as what is taxable, how to determine how you should go about filing, and much more useful information including how to get your cell phone paid for, get some gas money, and get any other expenses like computer purchases covered by the government!

First off, you want to decide on weather you’re a business, or a hobbyist. If what you do is a hobby, that would mean you’re not in it to make a profit. Being a business owner would mean you’re a sole proprietorship, meaning your personal and business taxes will be combined, and this would also mean you’re goal is to generate a profit. Declaring yourself as a business owner has a whole mess of benefits. One being you can write off most of your daily expenses as a business expense. Another is being able to call your self a business owner, and legally being so. See “Is it a business or a hobby?” at the IRS.gov site.

So, what can you add to your list of deductions? Lots!

• Domain Registration Expenses
• Web hosting bills
• Money spent on advertising your site
• Home Office expenses
  • Portion of mortgage or rent
  • Portion or all of:
    • Internet bills
    • Telephone bills
    • Utilities
• Cellphone Bill (if used for the business)
• Physical Equipment
  • Computer purchases
  • Other Computer Upgrades
  • Digital Cameras
  • Printers
  • Scanners
  • Fax Machines
  • Office Supplies
  • Or anything purchased and used for the business. (Anything used 51% of the time or more for the business)
• Software for your business
• Business Mileage on your personal vehicle
• Magazine or Newsletter Subscriptions
• Books
• Post-Office Box Rental
• Tax-Preparation Expenses

There are many things that can be written off on your taxes. A tax proffesional can help you out if you bring the right documentation to the consultation meeting.

There is a bit of bad news about calling your site a business. Being a sole proprietorship means you are self employed. And along with that, there is the self employment tax. This only applies if you make more then $400 net a year. (Only the first $90,000 is taxable income by law). See “Tax Guide for Small Businesses” for more info.

Another question people bring up, is the 28% deduction Google automatically takes out of your check each month. That, my friends, is your withholding allowance. Upon filling out your W-9 when you registered you selected a box that said withhold taxes. This simply means that Google will give that money to the IRS as your tax expense. The IRS will either pay you the difference or request the difference depending on how much actually should have been taken out (over or under the 28% mark). It is a good idea to let Google withhold the money, as it will ensure you have enough to pay in at the end of every year during Tax Season.

Google will indeed report your earnings to the IRS, regardless of how much you generate. This is simply because Google pays taxes too! A business only has to pay taxes on it’s revenue, so Google writes all of us off as a business expense. Don’t think you can evade the government by just not filing, as it is 100% your responsibility to file your earnings. And in most cases, low income generating sites can actually be beneficial. For example, StealthyTech will be fully paid for thanks to the $125 cell phone bill I can write off, the new $3,000 computer, $40 a month internet service, $120 in hosting fees, $10 in domain registration fees and more.

This all being said, IRS is a great resource for all your tax questions. Also note, tax laws and regulations are subject to change at any time without warning.