iOS Damn taxes.. :-(

[marcpage]

Sounds like you'd prefer the Fair Tax:

http://www.fairtax.org/

Talk to your representatives today.

 

[firewood]

And being a programmer there are not that many deductions since it's a service not goods. 45% down the drain, so depressing

Another way to look at it is that the government pays for about half of everything one needs as a cost of doing business. Check with your accountant, but this possibly includes travel to developers conferences, shiny new Macs required for development and market research, broadband internet used for customer support, data plans, iphones and ipods used for long term software QA and competitive analysis, and etc.

ianal or aa.

 

[rabbit19]

A tax system where the richer you are the less you pay...interesting

OK this is only a small part of the story. This tax (and I agree it is a tax) goes into our US mandated social security fund. It is used to pay the pension from the govt people collect when they are older. Once you make a certain amount of income you don't have to pay it anymore for the year. The thinking being you have a cap on how much you can get from that fund.

 

[rabbit19]

Another way to look at it is that the government pays for about half of everything one needs as a cost of doing business. Check with your accountant, but this possibly includes travel to developers conferences, shiny new Macs required for development and market research, broadband internet used for customer support, data plans, iphones and ipods used for long term software QA and competitive analysis, and etc.

ianal or aa.

yeah that is definetely one way to look at it. I am writing off two macs, printer, iphone, ipod touch. Since I am in the second highest US federal bracket, and highest highest California bracket. That means a lot of stuff I would have bought anyway they are picking up the tab or part of the tab for dual use stuff.

Granted I'm using it for programming iPhone all the time and not recreational use.

 

[NT1440]

No offense everyone, but is this in the wrong section?

 

[dejo]

No offense everyone, but is this in the wrong section?

Not really. More or less talking about taxes for iPhone developers.

 

[caveman_uk]

OK this is only a small part of the story. This tax (and I agree it is a tax) goes into our US mandated social security fund. It is used to pay the pension from the govt people collect when they are older. Once you make a certain amount of income you don't have to pay it anymore for the year. The thinking being you have a cap on how much you can get from that fund.

Oh, so it's not an 'income tax' as such. It sounds a lot like our 'National Insurance'. That has a cap on how much you have to pay in.

 

[detz]

Oh, so it's not an 'income tax' as such. It sounds a lot like our 'National Insurance'. That has a cap on how much you have to pay in.

The cap is only on social security and medicare(goes to 2.9% from 15% at $102,000), state and federal taxes usually increase the more you make. Wikipedia has a great beakdown if you're really interested but in the US it's tiered so everyone pays the same amount in each tier.

It's just a lot of money, this does not count taxes we pay on anything else. For example, after they take these taxes I have to pay 5% on anything I buy in the store, $0.30/gallon on tax, i have property and car taxes...etc. So, even after they take that 45% tax I'm stuck paying even more with the money I have left over. In reality if I wanted to work for myself I would have to bring in around $150,000 to live comfortably, not an easy task.

 

[jnic]

Here's the equivalent pretty tax graph for the UK (also from Wikipedia).

I'd always assumed that taxes in the US were significantly lower by comparison, given that it's not a welfare state, but from reading Wikipedia it seems they're actually fairly close, mostly due to the Defence and Debt budgets.

Can't say I particularly begrudge paying tax though (except perhaps our own Defence and Debt slices). $150,000 seems an awful lot just to live comfortably, and $0.30/gallon in tax is downright cheap from this angle

 

[Jeremy1026]

I just got my taxes done by H&R Block.

They made all sorts of deductions for me. Including internet bills, phone bills, iPhone, MacBook, Advertising (such as on review sites) and Web hosting.

Might be something to look into fella's.

 

[Luke Redpath]

Yeah, stupid isn't it?

In the UK if you want to avoid paying the top tax bracket (40% iirc) you setup a limited liability company and then you just have to pay 21% corporation tax and 10% dividend tax (rate goes up if you pay yourself more than £30k roughly).

I don't know if the same is true in the US.

Although its still worth paying yourself the national minimum wage (approx £11k) and taking the small income tax hit on it in order to meet your national insurance contributions.

I believe the higher dividend tax amount is about 32% so its still less than the higher PAYE tax (40%) so definitely worth doing if you are bringing in good revenue.

 

[Luke Redpath]

I was under the impression that HMRC had gradually made being a company less and less advantageous for those simply trying to avoid paying more income tax

Only if you are performing work under a contract that would normally see you considered as an employee (IR35 regulations). App store sales wouldn't apply in this case (but you should look into it if you are offering iphone dev services as a contractor).

 

[Luke Redpath]

It costs very little to setup a company in the UK, and the returns can be minor but it does all add up.

Back in 2000 when I used to run my own company it used to buy my gadgets, pay half my mortgage and bills (as my home address was my place of work) and paying myself a minimum wage I could live and occassionally take out dividends, I think now it's much less efficent as they tied up the loopholes but I imagine it would be worth it in the long run, especially if you are already close to or in the higher tax bracket

It's still worth it if you're earning a significant amount but you certainly won't be able to get away with things like claiming half your mortgage as an expense!

Note, IANAL or AA but my accountants recommend taking no more than the flat rate of £156 per annum to cover utility-related home office expenses (no receipts required) unless you can sufficiently prove otherwise (difficult).

You can of course claim things such as your broadband connection even if you use it for personal use (as long as it's in the business name and there is no way of distinguishing broadband/personal use), phone lines (must be in business name/for business use), computer equipment, software licenses, certain travel expenses etc. (not commuting though).

 

[Luke Redpath]

As a limited company you only pay 21% on your total turnover regardless of earnings.

I hope you meant to say on your total profit otherwise you're probably paying a bit too much corporation tax.

It goes up to 22% in April btw.

Also if you pay yourself the maximum amount of tax free allowance (£5,300 ish) a year salary then you do not need to pay national insurance or any other tax and I believe you can also claim tax credits. Then you just make up the rest of your salary with dividend payments assuming that the company is in profit.

Just beware that if you don't pay national insurance your state pension will be rubbish so make sure you keep paying into a private pension fund.

Or pay yourself the NMW as I mentioned above, which will cost you roughly £1000 in extra income tax.

One other benefit of being a small business is that it can be beneficial to register for VAT under the flat-rate scheme whereby you charge VAT at the standard rate (currently 15%) but only pay VAT on your total VAT-inclusive turnover at a fixed flat-rate (depends on your industry but currently 11.5% for IT services). You also get a further 1% discount in your first year.

Of course, the idea is that the money you make on the difference should cover any VAT you have paid over the course of the year but if you don't make many VAT purchases, it gives you a nice little bonus. Naturally, the opposite is true, and if you make a lot of VAT purchases you may end up out of pocket and should go on the normal VAT scheme.

 

[Luke Redpath]

And being a programmer there are not that many deductions since it's a service not goods. 45% down the drain, so depressing

Without your tax dollars/pounds then your country would probably fall apart so I wouldn't really say "down the drain". Taxation is a necessary evil.

 

[admanimal]

Without your tax dollars/pounds then your country would probably fall apart so I wouldn't really say "down the drain". Taxation is a necessary evil.

I think the depressing part is the amount of our tax dollars that get wasted. It would be much easier to swallow giving up half of what we make if we knew it would really go towards making our lives/the country better.

 

[Drumerdude]

I am still young and don't have a job. When I put my apps on the market I don't care right now that I don't make my full profit. I am getting money for doing something I like and I am able to spend it on new apple products. There are so many money advantages to being a minor.

 

[pilotError]

And being a programmer there are not that many deductions since it's a service not goods. 45% down the drain, so depressing

Another way to look at it is that the government pays for about half of everything one needs as a cost of doing business. Check with your accountant, but this possibly includes travel to developers conferences, shiny new Macs required for development and market research, broadband internet used for customer support, data plans, iphones and ipods used for long term software QA and competitive analysis, and etc.

ianal or aa.

There's still not very much to write off, even getting new Mac's every couple of months... Office Supplies (pens, stamps, stationary), Internet / Phone, Hardware purchases, MacWorld , some other stuff, but compared to other industries, there's very little there. A percentage of one of your car's, but then you have to keep a log.

It's still worth it if you're earning a significant amount but you certainly won't be able to get away with things like claiming half your mortgage as an expense!

Be very careful if you try and write off a portion of your mortgage as part of your business (have an office in the house). If you owe taxes, Uncle Sam turns a blind eye and will take your house. Even in dispute, they'll take it and apologize later... Doesn't help when your living on the sidewalk...

 

[Drumerdude]

There's still not very much to write off, even getting new Mac's every couple of months... Office Supplies (pens, stamps, stationary), Internet / Phone, Hardware purchases, MacWorld , some other stuff, but compared to other industries, there's very little there. A percentage of one of your car's, but then you have to keep a log.



Be very careful if you try and write off a portion of your mortgage as part of your business (have an office in the house). If you owe taxes, Uncle Sam turns a blind eye and will take your house. Even in dispute, they'll take it and apologize later... Doesn't help when your living on the sidewalk...

That's true. The government can be pretty cruel. Like Pilot Error said, "They'll take your house, and then apologize later."