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Some questions about getting started!

Hi guys, I'm mostly looking for advice here on getting started with accepting small commissions (and maybe eventually some day working up to bigger ones), but I had a few questions that I need answered and some general advice.

So I'm not a huge fan of paypal and have looked into alternative online sites (none of them seem to be quite up to the versatility paypal has) and was wondering if anybody's even been hurt by accepting just money orders-and other offline payment methods.

If I do end up signing up for a paypal, do you recommend I open another bank account to connect it to? I don't know how I feel about it linked to my personal checking account. (And if not, then what about when I start taking bigger commissions or selling more expensive premade products?)

Taxes (I'm a US resident): Do you have to make a certain amount before you have to worry about paying taxes? I'm really just looking to do small-time commissions for things like gas, or a little bit of pocket money and really don't even expect to make over a thousand a year doing it.

Any other general advice for someone just starting out? And thanks!

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( 14 comments — Leave a comment )
celestinaketzia
Mar. 2nd, 2012 08:02 pm (UTC)
Anything above $800 should be reported to the IRS. However, Paypal won't request your personal information for reporting your income to the IRS until you have over 200 transactions AND make over $20,000.

Edit: Er, I should say that they may request it before hand if you hit 200 transactions, but they won't do anything with your personal information.

I suggest keeping a running total on how much you've made for the year. How much you make can add up very quickly, and before you realize it, you're hitting the $800 mark. To be safe, I've been told to save $.20 for every $1 earned.

I also really wouldn't worry about your account with Paypal linked to your bank account. My Paypal account has existed since 2003 and I've only had a single problem with Paypal withdrawing more than what they should have from my account. My bank fixed it immediately and Paypal fixed it on their end two days later.

Edited at 2012-03-02 08:04 pm (UTC)
trimblecat
Mar. 3rd, 2012 12:27 am (UTC)
Yeah? I think I'll just file anyway even if I make below. I'd rather not take the chances and wind up with problems over it incase I make a mistake, and it'll help me keep organized too. =)

The reason paypal worries me is because I've heard stories where people have had their accounts over-drawn because someone tried to file a charge back (Either for a legit reason, or the customer scamming the buyer) as well as stories of paypal freezing money you have stored with them for small infractions that may or may not have happened. It's kind of scary but I guess so long as I'm upfront and good with records that's all unlikely to happen.
animecat
Mar. 2nd, 2012 08:46 pm (UTC)
PayPal is an awesome service, and I've never had any problem with them. I have a business premiere account with them for 5 or so years now, and its tied to my personal banking account, and never has there been a single issue. Nowadays, you can use Square, but that's not something I recommend unless you have a client with a credit card right there in front of you. You can take credit cards by punching in the number on a card, but I seriously doubt a client is just going to hand you a credit card number willy nilly.

Outside of PayPal, AlertPay (never used it, can't give any good info here) or Google Checkout, I don't have much info to offer. I just only attest to how awesome PayPal has been to me over the years. Their customer service is stellar.

Now, taxes. Pay them. You can list them as "income earned from a hobby" on your IRS tax forms at filing time. Many programs like TurboTax will ask you if you earned anything from a hobby of the year. Do yourself a favor and FILE YOUR EARNINGS, no matter how small. It's a whole lot better than getting audited by the IRS should they find out you've been making income on the side. I do it, and it's really not so bad.
trimblecat
Mar. 3rd, 2012 12:31 am (UTC)
Yeah, I think I'm just going to file no matter how little I make! Better safe than sorry and it'll help me keep an incentive to stay organized!

It's nice to hear good stories about paypal but I'm so nervous over some of the stories I've heard from people. (Though to be fair, a lot of people talk about the bad experiances and not the good ones) I made a post a little while here asking about how reliable the service was and a lot of people seemed happy with it, but some of the horror stories just make me quite wary. I think I may end up going for it though out of convenience. Do you know if you have to attach it to a bank account?
greenreaper
Mar. 3rd, 2012 12:52 am (UTC)
You may be able to get a PayPal debit MasterCard. However, I just link it up to my bank and use better rewards credit cards for purchases (Amazon.com Rewards Visa and Discover More).

I have had bad experiences with PayPal, but I still use it; the alternatives are limited and often have higher fees. You could consider offering payments via Dwolla, though. Some also use AlertPay, although fewer now that they've thrown out FA, IB and SoFurry.
scribblecat
Mar. 2nd, 2012 10:28 pm (UTC)
Paypal is something you can avoid, but it gets a bit difficult seeing everyone has one, and anyone paying you might find it a hassle to open an account with a new payment service or write up a money order, which costs them.

Yes, Paypal are evil and will charge you fees, so just make sure you add an extra $10 or so to the commission price to cover that. Every commission I've ever had has used Paypal. It's just easier.
Good luck!
temrin
Mar. 3rd, 2012 10:32 pm (UTC)
the paypal fees is VERY low. Only around $1 for smaller purchases. it is a percentage of what is being paid to you and it is quite small.

You really only need to add $1 maybe $2 to the price if thats the way you want to do it, @trimblecat and never, EVER, say that you are adding to cover fees, for that is against paypals rules for you to get your customers to pay it.
greenreaper
Mar. 2nd, 2012 11:47 pm (UTC)
In relation to taxes, animecat's advice is sound - always file, always pay. You may find you owe less than you think or can even take a deduction in some years because of it, or it may get you EITC or provide eligibility for an IRA if you don't already have wages.

If reporting as a hobby, there is a single box to fill in on the main form 1040. If reporting as a business, you would file Schedule C/C-EZ to report earnings, and Schedule SE to calculate and pay self-employment taxes. You do not have to file the latter if your net profit (including deductions) is below about $433 in the year.

Note that if you are running it as a business and filing a Schedule C/C-EZ for it, you can also deduct expenses towards it. Be sure to save all receipts for potentially deductible expenses, such as travel to events or hotel rooms. (If you are only running it as a hobby, you can only do so if you deduct miscellaneous expenses rather than taking the standard deduction - unlikely - and then only once they start to exceed 2% of AGI.)

Don't fear taxes, but do keep organized records. This will likely help your business in other ways as well.
trimblecat
Mar. 3rd, 2012 12:16 am (UTC)
Thanks a lot! Yeah, I'm not too scared over taxes or anything like that, I was just sort of wondering how to approach it because I know some people if, they made little enough, don't file so I was more curious as to what that number was. Are there certain qualifications you have to meet to be called a business?
greenreaper
Mar. 3rd, 2012 12:47 am (UTC)
If you're taking people's money with the intent to make a profit, that's pretty much it. If you make $50 in revenue selling commissions, you can take a $30 deduction for art materials and pay tax on $20. In some years, you might spend more than you earn in that business, and in that case you may be able to deduct the loss from everything else you earn. The IRS has more detailed advice, but generally if you make a profit three years out of five, you're good.

(You might wish to incorporate as an LLC or S-corp or something similar but that would be for other reasons, such as reducing your personal liability. Realistically, this is unlikely to be necessary at your level of activity.)
stormrunner1981
Mar. 3rd, 2012 04:05 am (UTC)
I recommend sending invoices to people and not having them pay you directly as well. This gives you a solid proof of purchase and sale.
alpharaye
Mar. 3rd, 2012 04:56 pm (UTC)
If you have issues linking PP to your primary checking account, why not open another one specifically for commissions?
I personally love ING direct for my alternative needs. It's a great online bank that pays interest on their checking accounts.
And right now when you sign up and meet a few terms, you get a free $50. I did this a long time ago, well worth it. :)

It's also nice to have the additional checking account to sock cash into. Plus you can link you primary checking account to ING and transfer your commission $$ back and forth that way.

I'd either do that, or link my PP to a credit card.
Either or if you don't want it on your checking account.
Hope it helps! Good luck. :)
alpharaye
Mar. 3rd, 2012 04:59 pm (UTC)
PS. There is also Serve.com which is ran by American Express. They have a similar account system to PP, I have yet to use it to transfer $$ but it's always another alternative.
trimblecat
Mar. 3rd, 2012 08:32 pm (UTC)
That's sort of what I was asking, if maybe I should open account for commissions specifically! I think I might do that. I'll have a look at ING and Serve, thanks for letting me know about them!
( 14 comments — Leave a comment )

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