Be Prepared for Tax Time
It’s only February 12, but I am already thinking about tax time in just a couple of months. I am not a finance or numbers guy, so I use an accountant to file my taxes, although I keep very good records of sales, expenses and other transactions.
One thing that made my life easier a couple of years ago was Sandy Brooks’ Domain Tax Guide. When I first explained to my accountant what I did as a hobby, he understood it, but I don’t think he knew anything about it. At the time, I had made about $1,000 in profit, so it really didn’t matter at all.
As my income continued to rise, the tax impact did as well. A couple of years ago, when domain revenue became a significant income stream for me, I sent him a copy of the Domain Tax Guide and asked him to read it and use it as a reference when doing my taxes. If you are making a few thousand dollars or more, you should know the advantages and disadvantages of doing things certain ways.
A few things I think are important that are discussed in the Domain Tax Guide include:
- Benefits of forming a LLC or other legal entity
- When to consider domain sales inventory revenue
- Whether domain names are assets
- Depreciating domain name assets
- How capital gains taxes work with domain names
There is a lot of value in the Domain Tax Guide, and although these are affiliate links, I strongly recommend using the tax guide as a reference – whether you file your own taxes or you have an accountant filing them for you. I’ve definitely saved a lot more money than this e-book cost.