I’m in college and I was just wondering do you have to pay taxes on this every year or do they take taxes out. That is one of my concerns because I don’t want to have to pay taxes on it since I’m still in college. I have a lot going on and just need a quick way to earn a little extra cash while I’m off at college and don’t really have a job. I just don’t want to have to pay taxes because I have no way to really pay for them.

First of all, almost all sites like CashCrate will NOT take taxes out of your checks. If you make money with them you are considered to be “self employed” and NOT an “employee”. So it is up to you to keep track of how much you make and pay the tax owed (if any) on your own.

What they are required to do though, is get your Social Security number if you make more than $600 in a year and then they have to report to the IRS that they paid you that money. Once you reach the $600 amount, CashCrate and other sites will withhold all payments until they get your SS#. Again, most survey websites are similar to CashCrate and will follow this same general format.

How About Affiliate Marketing Websites?

If you start making more money with Internet marketing and join any affiliate marketing sites like Commission Junction, NeverBlue, Max Bounty, or any of the dozens of others like them, they will require you to give them your Social Security number up front as part of the registration process. This is the same for sites like Amazon, Ebay, or any other company that pays you directly for the affiliate sales you make with them. But again, they will NOT withhold tax from the checks they send you as it is up to you to file and pay your taxes. They also consider you self employed (or a subcontractor) and that means they are not your employer and don’t have to collect tax.

No One Wants To Pay Taxes But It Is The Law

The last line of the email was curious and sounds to me like this college student wants to avoid paying taxes if they can. After all, does this person think that anyone WANTS to pay taxes? No one wants to but it is the law and if you don’t like it, then you need to educate yourself and vote for politicians who want to LOWER your taxes rather than raise them.

Younger people who maybe haven’t had a job yet or are just starting out have no idea how awful paying taxes are. We all know we have to pay something for the police, fire fighters, road and bridge construction, and things we all obviously need. But we pay a lot in taxes that our government and politicians absolutely flush down the toilet and it is the reason why our country is in such an economic mess right now. So, anyone who wants to be financially successful some day better get ready and willing to pay a BIG CHUNK of their money to our government because taxes are never going to go away.

You can go to the IRS website for the complete rundown on this but two things have to happen for you to owe estimated taxes on the money you make online. First is that you have to owe at least $1000 in total taxes.(this was for 2009) If you don’t owe more than a $1,000 in taxes then you don’t have to worry about anything.

Second, all your withholdings have to equal at least 90% of what you will owe to the IRS at the end of the year. In other words, if you are going to owe $50,000 in taxes, then your withholdings from your real job better be at least $45,000  or more for you to NOT owe estimated quarterly taxes.

You see, in your “real” job, your employer has to take taxes out of your paycheck and send it in. That makes the IRS happy because they are always getting your money the minute you earn it. But for things like interest income, dividend income, gambling income, and any other side income you might have, there is usually no withholding. Therefore it is up to you to send in the money yourself and you have to do it quarterly as you owe it. The IRS is “nice” enough to give you that 10% leeway to make it a bit easier for many people.

Making money online is no different than any other kind of side income or second income you might have. YOU DO OWE TAXES ON IT but only if you make enough to satisfy both those rules. Many people who dabble in affiliate marketing online or any other method of making money, do it as a hobby and hold jobs in the real world. But once you start to become successful, the money you make online may very well be enough that you have to start paying quarterly estimated tax payments.

All the United States affiliate networks like MarketLeverage, Commission Junction, and ClickBank require your Social Security number because they have to send in a 1099 to the IRS at the end of the year. That means the IRS knows what you are making and if you try to not pay your taxes they will come after you. It also means that they will know when you are late with your payments and they will know if you are not making any quarterly payments at all. Then you will start to get those lovely IRS penalties that add up faster than the money you owed them in the first place.

Working online and making making money from home through affiliate marketing or blogging can be fun and in some cases lucrative. But it is a little less fun when you realize that if you are successful, you will probably owe tax on that money and there is no way out of it. In fact anything having to do with the IRS or the government is always less fun.