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common tax issues for digital marketers

The realities face by digital marketing business can make it painstakingly difficult to organize and file taxes at the end of the year. The most common tax issues for digital marketers including overpaying or– worse– risk incurring the IRS’s wrath by paying too little.

Neither scenario is ideal, but it hasn’t slowed down the online business sector’s growth.

Despite such difficulties, the number of businesses moving online continues to grow each new year, creating a high demand for tax planning services.

If taxes are becoming a concern for your business, don’t worry. We’re here to guide you through it. Keep reading to see the most common tax issues for digital marketers and how to avoid them!

Tax Issues for Digital Marketers

Internet marketers often encounter a few common tax issues when filing their taxes.

Business Structure

Your company’s business structure plays an important role in determining how you manage your taxes. Your business’s status as a sole proprietorship, partnership, LLC, or corporation could significantly impact your effective tax rate.

The most common ecommerce business structure is a sole proprietorship. The IRS classifies sole proprietorships as a “pass-through entity,” so the business’s income passes through to the individual tax return of its owner. The business isn’t considered a separate tax entity, and it doesn’t fall under corporate income tax rules. The owner pays taxes on the business’s income via their personal income tax return.

A partnership includes two or more owners that maintain direct ownership of the business, and they’re also classified as pass-through entities. However, partnership the tax requirements are slightly more complex; they have to file their tax returns and provide supplementary forms to partners for personal taxes.

For an LLC or a limited liability company, regulations depend on state statutes. The IRS can regard an LLC as a corporation, partnership, or component of the owner’s tax return depending on its characteristics and tax elections. This flexibility in the business structure can make the tax requirements more complex, especially for federal tax due dates.

A corporation is occasionally referred to as a “legal person” because it qualifies for many individuals’ rights. Moreover, a corporation can sue, form contracts, and be awarded free speech. The IRS divides corporations into two: S corporations and C corporations. Whichever one your business is registered for, profits are set by corporate rates that are often lower than individual rates.

State and Federal Taxes

State and local taxes, aka SALT, can also have major consequences for your bottom line.

Federal taxes are paid as income rolls in, thus resulting in the compilation of withholding taxes that cover taxes on income as well as Social Security and Medicare. It may be beneficial for digital marketers to set aside about a third of their earned income for federal taxes.

As an online marketing company, you need to collect and transfer sales tax in accordance with tax nexus, which refers to your business’s physical presence in a state. If your business works out of San Francisco, you collect sales tax from customers in San Francisco. Tax nexus relates to the revenue of government entities within each state; thus, you may need to clarify the nexus requirement with a tax expert.

Keeping Track Of Finances

The best way to keep track of important financial documents is by using dependable accounting software.

From receipts to pay stubs to other essential documentation, accounting software allows you to have an organized record of everything you need when filing taxes. Lost documentation can lead to late payments and penalty fees for every year you fail to file on time.

Instead of devoting countless hours towards bookkeeping tasks, software can make life easier by automating many repetitive tasks.

Of course, working with a professional bookkeeper is the best option if you can afford it. Fortunately, we offer the bookkeeping services your business needs for a stress-free tax time. Contact us today to learn more about Tax Hack bookkeeping services.

Tax Deductions

If you want to save money– tax deductibles are a great way to do it. As it turns out, several company costs can be written off as tax deductibles!

Here’s a list of internet marketing tax deductions to look into. Also, check out these common examples:

Operating Costs

From banner and print advertising to related marketing costs, your business’s advertising and marketing costs can be written-off. Plus, if your company hires outside marketing and advertising efforts, you can also deduct these external professional services.

Technological Equipment

Portions of the costs required to buy and sustain technology and other equipment may be deductible on a company’s income taxes if used more than half the time to complete business tasks.

Outsourced Labor

The costs for hiring professionals to help with your business may be deductible. Professional services may be written-off from copywriters, bookkeepers, accountants, and more.

Looking for qualified tax planning services to make tax season efficient and painless? Tax Hack’s tailored services can maximize your tax savings! 

Handle Tax Season Like A Boss

Now that you know a little more about these common tax issues for digital marketers, you can take steps to avoid them.

If you need more help with your business’s taxes, sign up for a one-on-one strategy session with a Tax Hack pro today.

Our team of veteran tax pros can help you navigate whatever challenges your business is facing. Get started today to see how much you can save!

 

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