IRS sent me a bill, trying to tax me for income from a domain sale.

[DigiNamesDigiNames is verified member.]

in 2008 I purchased a batch of domains for $5000. Within a couple of weeks I turned around and sold one of the names for $2500 to a company, and at the end of the year that company sent me a 10-99 Form reporting their payment of the money.

Because I purchased the name myself, I felt I hadn't netted $2500 from the transaction, so I didn't pay taxes on the funds. I just got a bill from the IRS saying that I owe them $400 as taxes for the income.

How does this work? can I subtract the expense of my cost for the name? Should I send them proof that I paid $5000 for the domain along with a few others, and explain that I didn't actually profit that amount? Or, should I just pay the $400 and forget about it....

Has anyone else received a 10-99 for a domain sale?

 

[TheLegendaryJP]

Well, if this isnt a business and just personal I am sure you can avoid it considering you havent made anything on that investment, go see an accountant for $150/hr BUT for $400 my time and stress level it isnt worth the effort, but thats me, maybe $400 is alot to you.

GL

 

[bobovia]

It is your duty to pay taxes to the fatherland so they can bail out rich bankers who don't know how to run a business.

Just kidding.
I'm wondering why they sent you a 10-99 for purchasing a name from you.
A 10-99 is usually issued to independent contractors for work performed.

The IRS received a tax document so they're going to follow their

 

[draggar]

It is your duty to pay taxes to the fatherland so they can bail out rich bankers who don't know how to run a business.

Just kidding.
I'm wondering why they sent you a 10-99 for purchasing a name from you.
A 10-99 is usually issued to independent contractors for work performed.

The IRS received a tax document so they're going to follow their

Simple - they contracted the OP out to get the domains (in their eyes) which I think falls under a better tax bracket for them (as opposed to a business expense).

So, they got a slightly better tax break while screwing the OP.

 

[bobovia]

regulations and bill you for taxes on supposed "wages"

 

[BiggieBiggie is verified member.]

in 2008 I purchased a batch of domains for $5000. Within a couple of weeks I turned around and sold one of the names for $2500 to a company, and at the end of the year that company sent me a 10-99 Form reporting their payment of the money.

Because I purchased the name myself, I felt I hadn't netted $2500 from the transaction, so I didn't pay taxes on the funds. I just got a bill from the IRS saying that I owe them $400 as taxes for the income.

How does this work? can I subtract the expense of my cost for the name? Should I send them proof that I paid $5000 for the domain along with a few others, and explain that I didn't actually profit that amount? Or, should I just pay the $400 and forget about it....

Has anyone else received a 10-99 for a domain sale?

when there is such a trail as the one that followed you, then you have to claim the expenses of the domain purchases and report the earnings of that sale, along with any other ppc income


i usually just claim the expenses and report the income

the "reporting" part of the income can be tricky, depending on how the payment is classified...

you could also have to pay "employment tax" on those earnings


consult a tax expert

imo...

 

[DigiNamesDigiNames is verified member.]

Well, if this isnt a business and just personal I am sure you can avoid it considering you havent made anything on that investment, go see an accountant for $150/hr BUT for $400 my time and stress level it isnt worth the effort, but thats me, maybe $400 is alot to you.

GL

Thanks-- It's not that the $400 is a lot, but if I can put a response together in an hour and have a chance, it would definitely be worth it to me. I just don't know how I should respond, or if I am just wasting my time...

It just sucks that they reported the $2500 in the first place.

 

[Gerry]

in 2008 I purchased a batch of domains for $5000. Within a couple of weeks I turned around and sold one of the names for $2500 to a company, and at the end of the year that company sent me a 10-99 Form reporting their payment of the money.

Because I purchased the name myself, I felt I hadn't netted $2500 from the transaction, so I didn't pay taxes on the funds. I just got a bill from the IRS saying that I owe them $400 as taxes for the income.

How does this work? can I subtract the expense of my cost for the name? Should I send them proof that I paid $5000 for the domain along with a few others, and explain that I didn't actually profit that amount? Or, should I just pay the $400 and forget about it....

Has anyone else received a 10-99 for a domain sale?

Welcome to the real world.

Obviously what is not important to you is important enough to someone else to report a business purchase/transaction on their end.

Yes, you deduct the cost of goods from the purchase price. Your tax should be on the $2500 net.

The point now is to not delay resolving this too long. Penalties and interest tallies up and there is no forgiveness on that. Call your IRS office or stop by and speak to an agent. Yes, they are pretty good to get along with lately.

 

[jdk]

What if the remaining batch of domains cost you $1000. The one you sold cost you $4000 and you took a loss of $1500 by selling it for $2500. Couldn't you claim this as a loss What makes the IRS or other company calculate how much you are taxed when you could have taken a loss for the domain.

It appears as if they paid you for a "service" rather than purchasing a product.

 

[thejosh]

Contact someone that is licensed to give tax advice within the jurisdiction that you are obligated to pay taxes in.

 

[jdk]

I agree. Contact someone professional for legal advice. You do not want to mess with the IRS.

 

[GeoOwners]

answers to questions are free at your local IRS office.

.

 

[axeman]

Simple - they contracted the OP out to get the domains (in their eyes) which I think falls under a better tax bracket for them (as opposed to a business expense).

So, they got a slightly better tax break while screwing the OP.

BINGO, sounds about right.

Anyway if he paid $5000 and made $2500, my math says hes minus $2500, so surely you would declare a $5000 expense against a $2500 claim.

 

[Mike Cruz]

Lol @ IRS offices. Don't go there. Go to a GOOD accountant that only charges when he is able to help you.

What state / city are you in? I have a great account, VERY reasonable pricing.

 

[INFORG]

For 400, you should chalk it up to a learning experience and move on. An accountant is going to cost you too much, and it is unlikely they will be able to do much unless you want to refile your taxes and go through a lot of hassle.

For all domainers, if you aren't at least registering as a sole proprietor business (check your state business website for details - usually very inexpensive <$100 in many states), you are missing significant tax breaks that come with operating a business out of your home. You could be deducting for computer equipment, software, registration fees, a home office, and much more.

For a simple home-based business, you can even do your own taxes using Turbo-Tax. If you are moving any kind of money around in this business, even a few grand a year, it could be worth the effort.

I'm not a tax professional, so take my advice for whatever it is worth to you. I'm just a guy that got tired of always filing simple returns and owing a ton of money. The tax incentives for small business are there for a reason - to increase business growth for small business owners. You are not taking money from the government - you are keeping money that you earned.

Good luck.

 

[whitebark]

How is that the IRS always finds an American who even owes as little as a dime, yet the American government can't track down and apprehend/kill Osama Bin Laden? Maybe they should tell the IRS that Osama owes them $1000... :smilewinkgrin:

 

[DigiNamesDigiNames is verified member.]

What if the remaining batch of domains cost you $1000. The one you sold cost you $4000 and you took a loss of $1500 by selling it for $2500. Couldn't you claim this as a loss

This is pretty much the question I have. Because I got them as a package deal, how do I value or prove my expense for this single name? Between my proof of the payment and the 10-99 they have, on paper anyway, I took a $2500 loss for the year.

I have until April 15, 2010 until the penalties and interest start, so I think I will write them a letter to explain and include proof of my payment for the domains.

 

[-Matt-]

Anytime you get a 1099 treat it just as you would a W2 from an employer. The sender is reporting your transaction to the IRS or they wouldn't have bothered to mail you the 1099. The IRS compares what the sender reports and what you report on your taxes. They saw you didn't pay or report it, thus the letter.

The short and skinny is any transaction in which payment is made greater than $600 is potentially subject to reporting on a 1099-MISC ; should it meet the overall criteria. Some businesses send every person, company, and organization they paid more than $600 to in any tax year a 1099 to protect themselves from IRS penalty for not reporting taxable transactions; regardless if required or not. They paid you more than $600, so they reported it as you potentially made reportable income.

You should can mitigate losses and the costs of services sold by filing a 1040 schedule C ( profit / loss) when filing your tax return. Unfortunately all the profits you make through the sale of domains or other online ventures while in the US are subject to income taxes and self employment taxes.

This is pretty much the question I have. Because I got them as a package deal, how do I value or prove my expense for this single name? Between my proof of the payment and the 10-99 they have, on paper anyway, I took a $2500 loss for the year.

I have until April 15, 2010 until the penalties and interest start, so I think I will write them a letter to explain and include proof of my payment for the domains.

Do you have or could you get an itemized statement from whomever you purchased the domains from listing the individual value of each domain in the sale?

 

[Theo]

Also, plan to incorporate in the new year and hire a CPA to ensure all your taxes are in order.

 

[Mike Cruz]

Also, plan to incorporate in the new year and hire a CPA to ensure all your taxes are in order.

Exactly.

Incorporation + CPA = simplicity and HUGE savings.