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How to Reduce the Taxes on Your Venmo 1099-k Business Owners

Published on: December 6 2022 by FeedbackWrench

How to Reduce the Taxes on Your Venmo 1099-k Business Owners

How to Reduce the Taxes on Your Venmo 1099-k Business Owners

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00:00:00 00:00:04 hey what's going on um 2022 is here and
00:00:03 00:00:06 there's going to be some new rules with
00:00:04 00:00:08 venmo so whether you've been uh running
00:00:06 00:00:09 a side business or whether you've been
00:00:08 00:00:11 just sending a ton of money back and
00:00:09 00:00:12 forth between you and your friends or if
00:00:11 00:00:14 you've been buying stuff and selling it
00:00:12 00:00:16 you're going to want to know about this
00:00:14 00:00:18 my name is rob and i own feedback wrench
00:00:16 00:00:20 we help uh small businesses with their
00:00:18 00:00:21 their marketing their digital marketing
00:00:20 00:00:23 we create content about entrepreneurship
00:00:21 00:00:24 and whatnot here what i want to tok
00:00:23 00:00:26 about is why is this going to be really
00:00:24 00:00:27 important for you because i want to
00:00:26 00:00:29 teach you how to make sure you mitigate
00:00:27 00:00:32 your taxes because because you're going
00:00:29 00:00:33 to get this 1099 from venmo
00:00:32 00:00:36 you're going to want to know how do you
00:00:33 00:00:38 reduce your taxes right now reach out to
00:00:36 00:00:40 a bookkeeper a tax accountant i
00:00:38 00:00:42 recommend that you look for an
00:00:40 00:00:44 outsourced accountant
00:00:42 00:00:45 and i got all sorts of those we help
00:00:44 00:00:46 them with their websites and stuff but
00:00:45 00:00:48 anyways like and subscribe if this is
00:00:46 00:00:51 helpful let's dive right into it so for
00:00:48 00:00:54 the 2021 tax year venmore will issue a
00:00:51 00:00:57 form 1099k to business owners who have
00:00:54 00:00:59 passed the irs reporting threshold for
00:00:57 00:01:00 their state of residence so for most of
00:00:59 00:01:04 these states it's basically if you've
00:01:00 00:01:07 gone over 20 000 us dollars in gross
00:01:04 00:01:09 payment volume for sales of goods or
00:01:07 00:01:10 services in a single year so a couple of
00:01:09 00:01:11 things that's for
00:01:10 00:01:14 twenty thousand 000
00:01:11 00:01:16 of gross that's just total and that has
00:01:14 00:01:18 to do with sales of goods or services so
00:01:16 00:01:20 how you actually label them in venmo
00:01:18 00:01:23 will have a little bit to do with it and
00:01:20 00:01:25 then you have 200 payments for goods and
00:01:23 00:01:26 services so if you hit 20k or 200
00:01:25 00:01:29 payments uh you're going to be issued a
00:01:26 00:01:30 10.99 and what a 1099 is is basically
00:01:29 00:01:32 income that's come to you and it's
00:01:30 00:01:35 completely untaxed it's almost like you
00:01:32 00:01:36 own your own business so the first thing
00:01:35 00:01:37 that's going to happen is you're going
00:01:36 00:01:39 to have to run
00:01:37 00:01:41 like a schedule c you're going to be a
00:01:39 00:01:43 self-employed sole proprietorship that's
00:01:41 00:01:44 going to owe some taxes right and we'll
00:01:43 00:01:46 dive into that real quick but basically
00:01:44 00:01:50 let's just say it shows that you earned
00:01:46 00:01:52 a net 10 or a net 20 000
00:01:50 00:01:54 on venmo right now they issue this it
00:01:52 00:01:56 says hey we said 20 000
00:01:54 00:01:58 worth of transactions come here what the
00:01:56 00:01:59 heck is going on well here's the safety
00:01:58 00:02:01 okay number one thing i want you to do
00:01:59 00:02:02 is i want you to open a separate bank
00:02:01 00:02:05 account it's going to be your business
00:02:02 00:02:06 bank account right so if you are
00:02:05 00:02:08 approaching this 200 transactions on
00:02:06 00:02:11 venomo or twenty thousand dollars on
00:02:08 00:02:13 vanbo and you wanna be careful open up a
00:02:11 00:02:14 separate business bank account um you
00:02:13 00:02:16 should also probably become a sole
00:02:14 00:02:18 proprietorship and register with your
00:02:16 00:02:19 state go to your secretary of state
00:02:18 00:02:21 website you wanna actually register a
00:02:19 00:02:23 little business name this is just good
00:02:21 00:02:24 if you get side hustle income going i
00:02:23 00:02:26 would just let you know that the
00:02:24 00:02:27 government is coming for you first of
00:02:26 00:02:28 all there's this new announcement where
00:02:27 00:02:30 they're going to be monitoring
00:02:28 00:02:32 transactions under 200 they're going to
00:02:30 00:02:34 be looking for this number two there was
00:02:32 00:02:36 that update about how the irs wants you
00:02:34 00:02:38 to report even stolen property well
00:02:36 00:02:39 that's because the irs is spending all
00:02:38 00:02:41 the money or the government is spending
00:02:39 00:02:43 all the money and the irs is gearing up
00:02:41 00:02:44 with a ton more agents and everything
00:02:43 00:02:45 they're
00:02:44 00:02:47 they are
00:02:45 00:02:50 joe biden is in power and joe biden
00:02:47 00:02:51 wants to spend money and he wants to tax
00:02:50 00:02:53 however you feel about that that's
00:02:51 00:02:56 what's about to occur here so they're
00:02:53 00:02:57 gearing up to tax more and what venmo is
00:02:56 00:02:59 doing they know how we're getting around
00:02:57 00:03:01 this or not me but how people are
00:02:59 00:03:02 getting around this so bottom line is
00:03:01 00:03:04 you should just embrace the fact that
00:03:02 00:03:05 your side hustle is now an official sole
00:03:04 00:03:06 proprietorship
00:03:05 00:03:08 and the way that's going to work is
00:03:06 00:03:10 you're going to have your your income
00:03:08 00:03:13 that comes in that's your gross so maybe
00:03:10 00:03:15 it shows 20 24 000
00:03:13 00:03:18 but then you're like i didn't make that
00:03:15 00:03:19 much well you're going to want to make
00:03:18 00:03:21 sure that all your revenue
00:03:19 00:03:24 goes into this business bank account all
00:03:21 00:03:26 that venmo goes into that and then all
00:03:24 00:03:27 of the things that you pay for in that
00:03:26 00:03:29 business should be used in that business
00:03:27 00:03:31 bank account whenever you want money out
00:03:29 00:03:32 of that bank account transfer it over
00:03:31 00:03:34 but the whole idea is if you just stik
00:03:32 00:03:36 to really simple bookkeeping have a
00:03:34 00:03:38 business bank account maybe register and
00:03:36 00:03:40 actually create a you you can't create a
00:03:38 00:03:41 business bank account until you register
00:03:40 00:03:42 with your secretary of state with a
00:03:41 00:03:45 business name so you should probably do
00:03:42 00:03:47 that right it takes it's not very hard
00:03:45 00:03:48 the the more democrat your state is the
00:03:47 00:03:50 word the harder it is to start a
00:03:48 00:03:52 business but once you've got that that's
00:03:50 00:03:53 just going to help you and what you want
00:03:52 00:03:55 to do is you want to show your gross and
00:03:53 00:03:56 then your net right you want to show all
00:03:55 00:03:58 the little expenses so that you're not
00:03:56 00:04:00 on the hook for this 20 000
00:03:58 00:04:02 that's the biggest thing is you have to
00:04:00 00:04:05 show where did that money go so if you
00:04:02 00:04:08 get issued a 1099k you have got to show
00:04:05 00:04:10 the net right so maybe you brought in um
00:04:08 00:04:13 all that money but you also have to show
00:04:10 00:04:15 well maybe i was buying furniture
00:04:13 00:04:15 and then i was fixing it up and selling
00:04:15 00:04:18 it
00:04:15 00:04:20 but i was using my personal bank account
00:04:18 00:04:23 when i bought the stuff well you have to
00:04:20 00:04:25 put those as inventory you've purchased
00:04:23 00:04:27 and now you just you're going to want a
00:04:25 00:04:28 bookkeeper eventually if you get really
00:04:27 00:04:30 big but you just need to know you're
00:04:28 00:04:31 going to want to start tracking this in
00:04:30 00:04:34 a business bank account you probably
00:04:31 00:04:37 want to set up quickbooks online um
00:04:34 00:04:39 or xero something like that i recommend
00:04:37 00:04:40 reaching out to if you just search tax
00:04:39 00:04:42 accountants near me outsourced
00:04:40 00:04:44 accountant near me folks will be able to
00:04:42 00:04:45 help you with this but um you want to be
00:04:44 00:04:47 on the lookout for that that's a big
00:04:45 00:04:48 deal they're going to be issuing this
00:04:47 00:04:50 the other thing that you're going to see
00:04:48 00:04:52 is in massachusetts maryland vermont and
00:04:50 00:04:53 virginia the threshold 600 bucks
00:04:52 00:04:56 so a handful or you're going to get
00:04:53 00:04:59 1099s and you just need to know that you
00:04:56 00:05:01 want to keep that bookkeeping set up if
00:04:59 00:05:02 it shows you brought in 22 thousand
00:05:01 00:05:04 dollars and that's because you were
00:05:02 00:05:06 buying furniture fixing it up and
00:05:04 00:05:08 selling it but it shows 22 thousand
00:05:06 00:05:09 dollars and gross dog on it you got to
00:05:08 00:05:11 get the net in there so start thinking
00:05:09 00:05:12 about that right maybe keep a
00:05:11 00:05:13 spreadsheet of all the things that you
00:05:12 00:05:15 bought
00:05:13 00:05:16 and eventually get your bookkeeping
00:05:15 00:05:18 going the
00:05:16 00:05:22 oh excuse me the other thing you want to
00:05:18 00:05:24 know is that you are going to be taxed
00:05:22 00:05:26 a couple times here okay so right off
00:05:24 00:05:27 the bat welcome to sole proprietorship
00:05:26 00:05:30 taxing you're a small business owner
00:05:27 00:05:33 like me now and you get to see the gross
00:05:30 00:05:34 and write a check and there's nothing
00:05:33 00:05:37 worse than that okay so
00:05:34 00:05:39 the first thing that you're gonna owe
00:05:37 00:05:41 unless you're unless you have w2 income
00:05:39 00:05:43 that goes up to the social security
00:05:41 00:05:45 limit which is like 150 000
00:05:43 00:05:47 um what you're going to pay right off
00:05:45 00:05:50 the bat is you're going to pay 12.4 in
00:05:47 00:05:51 social security taxes and 2.8 percent in
00:05:50 00:05:53 medicare taxes those two things are
00:05:51 00:05:55 considered your self-employment taxes
00:05:53 00:05:56 now if you've got w-2 income from a
00:05:55 00:05:58 normal job coming in there's kind of
00:05:56 00:06:00 some games that get played there because
00:05:58 00:06:02 you only pay social security up to that
00:06:00 00:06:04 limit okay now you only owe that tax on
00:06:02 00:06:07 the net again if you showed 22 000 in
00:06:04 00:06:09 gross but you bought twenty thousand
00:06:07 00:06:11 dollars with the furniture and you only
00:06:09 00:06:13 had two thousand dollars net you'd only
00:06:11 00:06:15 owe that self-employment taxes on the
00:06:13 00:06:16 two thousand dollars and then it's going
00:06:15 00:06:18 to flow through to your 1040 you're
00:06:16 00:06:20 gonna pay um
00:06:18 00:06:22 income tax and you're going to pay
00:06:20 00:06:24 state income tax and federal income tax
00:06:22 00:06:25 so just prepare for that now here's a
00:06:24 00:06:27 little secret if you don't have any
00:06:25 00:06:29 employees and you're going to start
00:06:27 00:06:33 having to keep track of this one of the
00:06:29 00:06:34 best things you can do is open a sep ira
00:06:33 00:06:37 a
00:06:34 00:06:39 sep ira or a solo 401k and now if you
00:06:37 00:06:40 got another job you got to be careful
00:06:39 00:06:42 here because there's some rules if you
00:06:40 00:06:44 got a 401k going on this business and
00:06:42 00:06:47 not on this one but long story short you
00:06:44 00:06:49 could take up to 25
00:06:47 00:06:51 of the net of that
00:06:49 00:06:53 business net right so if you if you
00:06:51 00:06:56 netted five thousand dollars you'd be
00:06:53 00:06:57 able to take 25 of that and put it into
00:06:56 00:06:59 an investment account and then you can
00:06:57 00:07:01 actually invest it you know how you know
00:06:59 00:07:04 how a roth ira or traditional ira you
00:07:01 00:07:04 can kind of