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Kicktaxing: The Crazy Complexity of Paying Tax Correctly On Crowdfunding
eggboard writes "I thought I knew what I was doing when I budgeted for a Kickstarter campaign. I spent weeks sorting out details, set a number ($48,000) that included expenses, Kickstarter fees, and a margin of error. In the end, we raised over $56,000. But my tax planning nearly put a crimp in cash flow, and could have been real problem. It all worked out, but I've written a detailed guide for people for before and after a campaign to avoid my mistakes."
They let people run multiuser blogs, with really terrible ajaxy UIs. So, clickbait is the natural use.
It's difficult to claim "clickbait" when there are no ads!
I wrote the article in this link, and edit a publication called The Magazine. Medium pays us to write new content and post archived material from our publication to their site while they learn about what people read. They're looking at a lot of data (which anyone who uses the site, even as a blog platform, can see in the stats page) to figure out whether people read entire articles, etc.
I wrote 4,000 words from months of dealing with tax and business issues related to Kickstarter. I didn't realize that would be considered *thrilling clickbait headlines*. Instead, I though Slashdot readers, among others, would be a likely audience working in and around crowdfunding, and might like to get some information before launching one about the tax and accounting side of things.
The "multiuser blog" is a collection of related articles, some of them run by publications like mine.
Freelance tech journalist for the Economist, MIT Technology Review, Macworld, and others
You can write the most insightful/thrilling/useful article ever in the history of mankind, but if you place it on a site where people get a lot of ads they will still accuse you of treachery.
As you say it's not so in this case, but it gives the appearance of being so just because Medium.com has started popping up all over like mushrooms after a rainstorm - so it seems like yet another linkbait site just from the context of where the links to medium are all found, around links to all the sites people have learned to despise.
I myself will not click a link anymore if it goes to businessinsider or the same sort of place, no matter how good the subject may sound.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
WTF - you know, every other small business person thinks of this shit BEFORE they start. It's not hard, really. Quit pretending you're running a lemonade stand in your parents driveway.
Is it just my observation, or are there way too many stupid people in the world?
I'll admit I first thought "well duh" as I have my own small business (nothing as large as most Kickstarter campaigns, but I've hired a CPA or two in my time). But the points you bring up are really important ones and can quickly derail a project if there's not enough advance planning. Along with all of the technical and logistical aspects of a successful campaign, there's also the financial ones.
Who do you think is responsible for setting tax policy and spending tax revenues? Hint- it's not Obama. Did you sleep through 9th grade Social Studies? Or have you not gotten to 9th grade yet?
Isn't it a weird coincidence that the Dow Jones Industrial Average has doubled since "anti-business" Obama took office?
...to get in a man's way.
If you use accrual basis you can then (in theory) report the kickstarter funds as deferred revenues and also defer the tax until goods/services are delivered. Only a cash based business would need to pay tax prior.
...Paying Tax Correctly for USA citizens on Crowdfunding
Fixed that for ya. Remember guys, the internet is WORLDWIDE.
Seeing as Wall Street gave a majority of their contributions to Obama (probably shock number one for you), he made sure to pay them back. That is why he had Bernake print around $3.5 Trillion (not a misprint) and dump it into Wall Street to make sure his donors were taken care of.
Also Solendra owners donated hundreds of thousands to his campaign.
He also invested in Brazil oil with 2 Billion because his buddy Soros was involved.
It goes on and on, but every time Obama has been given a pot of money you can directly and easily trace it going to campaign donors, he doesn't even try and hide it or pretend anymore because those who point it out are called racists now.
So, no it is not weird that the Dow doubled with Obama in charge, its actually expected and some of us have made out like bandits because of it. Enjoy paying taxes for the rest of your life for the money he gave us free and clear.
That is why he had Bernake print around $3.5 Trillion (not a misprint) and dump it into Wall Street to make sure his donors were taken care of.
Oh, and as a small byproduct of that, it kept the US economy functioning.
Isn't it a weird coincidence that the Dow Jones Industrial Average has doubled since "anti-business" Obama took office?
Not really, when you consider literally $4 trillion in new dollars (stimulus and QE 1/2/3) pumped into the economy, mainly via Wall Street. That $4 trillion has to go somewhere, and it ended up in the stock market.
Factor out this extra Governmental spending, and our GDP has barely budged over the last 5 years. The stock market is up because there's a lot more free/easy money to throw/invest, not because the GDP is roaring away.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
He mentions that you can set up a fiscal year which deviates from the calendar year. He was unable to do this because he was already operating under an LLC and changing your fiscal year after you've set it is non-trivial.
"Because Science" is one step from "Because old book". Try "Because of my experiment testing my falsifiable assertion".
If it's interesting and useful, and I submit it under my name, and it gets posted to the home page by people with full awareness, it seems like you're engaging in meta-moderation within a thread.
I don't post B.S. to Slashdot; I've been using it since it started (not under this ID at the very beginning). The moderators and other tools prevent useless stuff from rising to the top.
So.
Freelance tech journalist for the Economist, MIT Technology Review, Macworld, and others
lack confidence because of Obama
I lack confidence because I'm making about as much now, as I was a decade ago. Same for everyone else whose wages haven't kept up with inflation for the last 30 or so years. But hey, that's all Obama's fault retroactively back through Reagan's (blessed be his name) administration. Couldn't possibly be because the CEOs collectively dicked themselves in the ass to pad out their quarterly reports and award themselves giant bonuses while letting the question of "where will next year's customers come from?" be someone else's problem. I hear walmart is thinking of increasing "full time" from 37 hours a week (because Obamacare went back in time and stopped them from employing people a full 40 hours a week in the 80's amirite?)
Don't worry though, the welfare state will be along shortly to bail out capitalism yet again. How about that mincome, folks? Now CEOs won't have to pay workers anything at all, and they'll have plenty of money to spend on being customers!
"Small business owners are waiting for Obama to go away because their customers aren't willing to spend until Obama goes away."
Automation (sometimes via robots) and new technologies and labor strategies are altering the employment landscape.
This is bigger than any single person, and it will get worse. McDonald's, for example, is pursuing automation strategies.
Automation and global cheap labor are the new realities --- and with this comes institutional unemployment (fixed unemployment that is difficult or virtually impossible to eliminate) in the lower end of the employment sector.
Unemployment of those with college degrees is 3% in the USA. Even under your idea that Obama is a job-killer --- maybe / maybe not ---- the sheer job loss in the United States in lower end jobs is a bit too enormous to be attributed alone to one person, especially when many other countries have faced the same.
Priest: "Universe from nothing, no laws of physics, sped up time"+ huge discrepancies. Creationism? No. Big Bang Theory
Small business owners are waiting for Obama to go away because their customers aren't willing to spend until Obama goes away.
So how has the GDP been growing steadily since Obama took office?
As a small business owner, I can say that the US tax system really needs to be simplified. I started my business 3 years ago, and had to learn the accounting and tax side myself (I couldn't afford a CPA or book keeper at the time). For a nation that claims to be built on small businesses, it sure is crazy trying to figure out what's needed to run start or run one.
Automation and global cheap labour have existed for centuries. The pace of change, it's scope, and the impact of communication and shipping technologies are greater than before.
Yeah. So why was every Democrat screaming in 2009 about how high stock values were a sign that the middle class was being shredded by big business?
The DJIA dropped by 50% between 2007 and 2009. Please cite anyone complaining about "high stock values".
"Automation and global cheap labour have existed for centuries. The pace of change, it's scope, and the impact of communication and shipping technologies are greater than before."
Disagreeing with what I said by agreeing with it too? Different. But it's cool. I can roll with that.
But the European Union would like assess a VAT on your post --- you know, a value added tax.
And those pesky Europeans are having trouble assessing a tax, because you didn't really add much "value".
To plead your case, you must fill out this form: http://www.revenue.ie/en/tax/v... and one of the taxing authorities will get in touch with you and try to sort this all out with you in person.
Priest: "Universe from nothing, no laws of physics, sped up time"+ huge discrepancies. Creationism? No. Big Bang Theory
You may want to read the VERY NEXT FUCKING SENTENCE of my post.
Damn!
"There is more worth loving than we have strength to love." - Brian Jay Stanley
I didn't mean to come off complaining about Medium - I don't mind reading it.
I just wanted to point out why people might think it was click bait, not discourage you or anyone else from using it.
I think it's very good for readers, because it doesn't have cruft. It's words, no ads, photos/video well presented.
Generally I agree but I have two problems with it:
1) Too large/spread out, I prefer denser text. Perhaps I can use the browser font settings to correct for that, hmm...
2) The exact same format of giant image followed by text gets boring after just two articles, then I have a lot of trouble bothering to finish reading anything there for a while.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
For what it's worth, I thought it was a good article and very informative on a rather confusing topic. Yes, you link to some of your other work at the bottom *the horror!*, but it's well placed and non-intrusive. The article itself doesn't come across as trying to sell anything, merely informative. I think there's just a bunch of angry people out there that need to go rub one out real quick, they'll feel better.
Better than borrow and spend.
He got into these problems with revenue matching because he is running his business on cash basis accounting. In general only very small businesses can be run on cash basis accounting almost all manufacturing oriented businesses use accrual accounting. With accrual accounting you would book the Kickstarter money as a customer deposit and then recognize it as income when the product ships.
http://www.investopedia.com/te...
"aaaaand I'm guessing your compensation is at least partially based on clicks.": Our compensation is based on producing new content that people want to read; clickbait doesn't get us anywhere, because it doesn't turn into people reading the articles, but clicking and leaving. It also earns us anger, which doesn't help foster regular readers. Also, a 4,000-word article about tax issues is usually *not* traditional clickbait under any reasonable definition...
"That's nice, but you're not a lawyer or a tax attorney so my advice is to stop pretending like you are one before someone in a position of authority takes notice."
I love how people who didn't read the article out themselves so clearly!
Freelance tech journalist for the Economist, MIT Technology Review, Macworld, and others
Businesses - those that make stuff - aren't too happy. And they aren't hiring (in case you didn't notice that we've had millions of people drop out of the employment market - due to long-term unemployment). Now, the investors, the financial industry, they don't really care because the Fed's been pumping $85 billion a month into them - and that's made it easy to make money on the stock market. But in general, the business lobbies (outside of the financial and insurance industries - the big winners from the Obama financial moves) aren't happy.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
so... its geocities?
have you seen my sig? there are many others like it but none that are the same
Im actually interested as im looking into starting a campaign where i hope to get similar numbers. You been here long enough, dont let the trolls get to you. it seems right now everyone is skeptical about everything
have you seen my sig? there are many others like it but none that are the same
The moderators and other tools prevent useless stuff from rising to the top.
Sometimes.
(Sorry, couldn't help myself)
And regardless of your motives, the fact that you both wrote and submitted the article can open you up to accusations of self-aggrandizement, of which the Slashthink is very very suspicious.
If this is a warning about what others might think, meant as a courtesy, then it's not well worded. If it's a request not to self-submit, then it's a worthless statement. Slashdot is about conversation. If the topic is worthy of conversation among nerds, geeks, techies, etc, then somebody needs to submit it. It doesn't do any good to tell people that they ought to be bashful.
I, for one, welcome your submission.
I won't join Slashcott. OTOH, If Beta goes live, I just won't be back until it's fixed. Sorry Dice.
That website is disgusting and the text is ridiculously huge. I'm not reading that.
Dude, "Ctrl -". How do you survive on the Internet?
I won't join Slashcott. OTOH, If Beta goes live, I just won't be back until it's fixed. Sorry Dice.
The article does talk about gifts not being taxable. The problem arises when you start giving rewards in exchange for those gifts. If you can run a Kickstarter in which people give you money and you don't give them anything back, then you're fine.
I think we could debate the fact that the $3.5 Trillion could have done more for "My economy" had it been spent in public works projects and landed in my pocket.
Bernanke kept "his economy" going -- and that's stocks and record profits. That's 400 families who have more wealth than over 150 million Americans combined.
I'm not some moron who can't understand that we need some bank liquidity to keep paychecks going -- but it would be much better to let a few banks go bankrupt and to redistribute this wealth. It's too depressing to look at the lack of any increase in standard of living since the 70's for the vast majority. And rich people trading paper isn't going to create "demand".
>>"ad space available -- low rates!!!"
Well, to be fair, if GOP Governors were not firing so many workers -- we'd have about 6% unemployment right now.
But yes, it seems like the Dems and Republicans have done a great job keeping down wages, job growth and killing the economy with Austerity. They are STILL printing lots of money -- it's just not going to the people at the bottom so it isn't spurring real growth that might offset the deficit.
If we had higher taxes at the top, that would force capital investment rather than profit taking -- and it would reduce the budget shortfall by PAYING FOR THINGS.
>>"ad space available -- low rates!!!"
Guy ended up with more revenue than he spent, so he had to pay taxes.
He didn't think to consult an accountant which would have been able to make the balance sheet negative without any issue.
What if you take the money and assuming you succeed you make the resulting product available to the whole world for the same price (could be zero or more) - donors don't get any preferential treatment.
You may get a lower amount of donations but how much less tax would you pay and how much less work would that involve?
And what about their dog?
All the experts are saying it kept the economy down.
All of them? Every single one? When you make a blanket statement like that, you're either lieing or you are personally deciding who is an expert and who isn't. We would have been a lot better off if that cash had gone straight to the citizenry. I could have paid down all of my debt and be ready to actually spend serious money.
I see the glass as full with a FoS of 2.
I'm fairly certain that if you put that money into the hands of the average citizen, banks would find themselves with a lot of liquidity as people start dumping their debt.
I see the glass as full with a FoS of 2.
McDonald's, for example, is pursuing automation strategies.
McDonald's is way behind on this front. Burger King has been using an automated broiler for decades, eliminating the grill cook completely.
I see the glass as full with a FoS of 2.
Just don't even bother trying to do any business until after 2017 at the earliest. You don't need to pay any taxes to the corrupt Obama regime if you don't make any money.
What kind of idiotic business would just give up until 2017? How the hell am I supposed to eat for the next 3 years? Oh, I suppose that $900 a month should be enough to cover my rent, school loans, utilities, and food. Why I wouldn't even need to give up my caviar!
I see the glass as full with a FoS of 2.
Instead of giving $3.5 trillion to the banks, he should have given it directly to the people that got screwed in this catastrophe. Obama has rewarded the banks for failing.
Of course, that mess was directly caused by the Clinton Administration's removal of the Glass-Steagall Act of 1933.
http://en.wikipedia.org/wiki/G...
Because I have revenue of $150K/year and, except for a few deductions the IRS allows* me to take, I pay taxes on the rest of it. I'd love to take my food, housing, medical, transportation and other costs of living off the top and pay taxes on the remainder.
*Essentially, the IRS determines a 'poverty level' of sustenance and bases the allowance on that. So why don't they tell Google that a brand new corporate HQ isn't an allowable expense? They could easily set up card tables in an abandoned Safeway and run their operation from there.
Have gnu, will travel.
Everybody is allowed to deduct the costs directly involved in making money. They are not allowed to deduct consumption spending, which of course applies much more to individuals than corporations.
If you made money like these businesses, you'd buy stuff, do stuff, and sell stuff, and you'd file a Schedule D. That allows you to deduct the expenses involved in your business. (It also makes you feel the full weight of FICA, but I digress.)
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
Good stuff, don't listen to the losers ;)
Just a random thought
Has anyone done a Kickstarter in Idaho? I wonder how you would get around the tax issues there.
"(One more tip: my accountant says that Washington State requires that I inform customers that sales tax will either be included or added to purchases. Kickstarter doesn’t let you automatically surcharge sales tax, which varies by delivery ZIP code, in any case. I chose to include it. Other states may also have this requirement.)"
You are not allowed to include the tax in ID! Retailers can't do 'we pay the sales tax" sales there either.
I had to kludge our accounting system to deal with ID and WA sales tax (plus lack of OR) at the same time in the medical field which has even more exemptions than normal. Some items are taxed depending on WHO (vet vs dr) you sell it to as well as where! Half the items are only taxed in one state but not the SAME state. Ended up with a 1000 line tax code file :( On top of that one of our big customers was the state of Wa who determines what tax to pay (not Olympia nor our rate!?!) on which items no matter what you bill. We survived an audit with a zero bill :)
oops, more than i planned. Was just supposed to be an attaboy ;)
Everybody is allowed to deduct the costs directly involved in making money.
I've got to feed myself or I won't have the strength to make it to work. And then there's clothing and housing myself. Medical and dental expenses, transportation, etc. And all of the vacation and entertainment necessary to maintain my mental health and work productivity.
Like I said elsewhere, nobody seems to question a corporation spending hundreds of millions on granite and glass corporate headquarters when card tables in an unfinished warehouse space will do just fine.
The IRS has determined that the annual cost of me 'maintaining myself' as an income producing asset is $3900 and everything above that is consumption for my own benefit. Fine. So corporations should only get a $3900 per employee per year deduction from revenue when calculating their corporate taxes. Can't find a CEO who will work for that? Tough. Pay him or her whatever they want. But only $3900 goes toward their income producing ability.
Have gnu, will travel.
There's less than 1.0% chance of getting audited. So just get creative with your return.
Of course, that mess was directly caused by the Clinton Administration's removal of the Glass-Steagall Act of 1933.
You mean the Republican Congress's passing of the Gramm–Leach–Bliley Act (named for 3 promenent Republicans)? Funny how Congress is at fault for everything bad when the president is Republican, and the "administration" is at fault when Congress is majority Republican.
9/11 would never have happened if Nancy Pelosi wasn't elected, right?
And the Republicans who passed it at the time stated it couldn't cause the problems it was later blamed for by other Republicans. So where they lying then, or are they lying now? Oh, they are politicians, so it's both. Not that the Democrats are any better, but lying to implicate one and exhonerate the other is evil, and makes you one of the reasons the US is failing.
Learn to love Alaska
I'm not blaming either side for anything, the entire system is nearly completely corrupt. There is no government, just enforcers. I want people to stop telling themselves that the 90's were a good time under Clinton. He was just as bad as every other president. They're all bad.
Yeah, but you have to feed yourself whether you're in business or not. A corporation doesn't need a headquarters if it goes out of business. Your food is personal consumption (if it's directly business-related, it's deductible). A corporation needs some sort of headquarters only to make money.
The tax laws do not require somebody to spend the minimum possible money on deductible expenses. If you have medical expenses high enough to be deductible, nobody at the IRS is going to ask whether you really needed all those days in the hospital. If a doctor orders you to swim daily, and you put a pool in your back yard for that, that's partly deductible (you don't get to raise your home value untaxed, but a pool usually costs more than the increase in property value) even if there's a Y down the street.
For practical purposes, if you were only taxed for income not spent on yourself or your family, you would be pretty much untaxed. If businesses were taxed according to your suggestion, a very large number of profitable businesses would find themselves taxed out of existence.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
I think we could debate the fact that the $3.5 Trillion could have done more for "My economy" had it been spent in public works projects and landed in my
Obama proposed doing that, with like $750B. Congress rejected it immediately. So Obama did what he has the authority to do without needing Congress's approval- quantitative easing.
For many, self-employment tax is another really good reason to try to steady things and avoid "bouncing revenue", if there's the chance that you could end up taking a loss the next year. Big profit one year? Pay big tax! Loss next year? Sorry, bud, no refund!
I confess to getting first-hand experience with this, as I'm accounting on an accrual basis, and just paid taxes for a rather large amount of work done that may eventually have to be written off as bad debt, or at the least is going to cost me to collect, since the guys behind the business have disappeared, and I'll likely go into the red next year. Paying >15% tax on money I haven't actually got...ouch!