Welcome to April. Two weeks until tax day.
Soooo... I wonder how long it'll take for the mainstream press to pick up on the fact that there are bound to be tons and tons of independant web site owners making a few hundred bucks a month via AdSense who now have to give 50% of it to the U.S. government and probably aren't. I can see the headlines on 2020 now: "Google Fraud: How millions of dollars are disappearing from Federal income..." I for one am pretty much using this month's adsense check to cover the taxes from last year's AdSense income and am already prepping for next year. But I bet you a lot of other people aren't even going to bother.
I think for 2003's taxes, the money wasn't nearly as huge as it is for 2004 so it wasn't really an issue for most people. But now it's going to be noticable tax-burden this year. I'm sure that the more popular sites will pay, but the smaller ones? I earned $2,548.73 in AdSense income in 2004, and that was all 1099 earnings, which means the onus of federal and state taxes is all on me. I'm actually earning around $1000 a month right now from my Google Ads (and YES I can talk about that. You can't talk about specific click through rates, etc. according to the T&C, OKAY?) so that means I better make sure I take 50% of it and sock it away for taxes next year. $12,000 in additional yearly income is a bit hard to overlook on tax day.
I don't know if 50% is actually the number. I hate finances and have no idea, but to be safe that's the number I'm using. My point is that money is owed even if you earned only $100 last year from Google. Are you going to bother to pull that piece of paper out and fill in that additional form? If you go to H&R block (which charges by the form) are you really going to pay them the additional $50 or whatever? I'm guessing there's lots and lots of sites out there that won't. (Secret: I forgot to include 2003's AdSense taxes - I found the 1099 paper later and thought "Doh!" Now I have to deal with that headache among others).
This isn't just a Google thing - I signed up for Ads in my feeds from Feedburner and though I haven't gotten any money yet, if I do, I'll owe taxes on that. If Yahoo ever launches an AdSense competitor, it too will have to deal with the tax issue. It's a big deal I think... but one I haven't seen anything about anywhere. Is it not a big deal or is it just under the radar?
What do you think? Tell me the truth, are you going to pay taxes on your $200 in 2004 AdSense income?