Taking forum donations - tax/legal ramifications?

[Isil`Zha]

We're using subscriptions to take donations to cover server costs. For those that have subscriptions/donations going, how have you dealt with the legal/tax issues?

I honestly don't know a lot about this area - one idea is to create a non-profit company and bank account and put the money there. But I figure this has to be something someone else has dealt with before, so what was your answer to this problem?

 

[DaveM]

I suppose this will depend on where you live and if I remember correctly does PayPal not have an option for this.

 

[Mr Lucky]

I think in any country that income is taxable, ie you should declare it. Whether you actually pay any tax would depend on whether the income exceeded your expenses which would include the server costs, licence costs of xenforo and any addons, Paypal fees,plus various other expenses related such as computer costs.

Forming a company to keep it separate from your personal income is possible of course, but in order to make that worthwhile you would need to be making a lot more than just enough to cover your server costs.

 

[DJ XtAzY]

Most aren't liable for taxes if the total donations received is under a certain amount (say $10,000 or whatever your limit in your country). Heh I bet most forum admins won't even bother with taxes, but those who do will speak up here.

 

[DaveM]

Well I never gave taxes a thought until this thread but then we only just get enough for server cost and a bit of running expense

 

[Mr Lucky]

Most aren't liable for taxes if the total donations received is under a certain amount (say $10,000 or whatever your limit in your country). Heh I bet most forum admins won't even bother with taxes, but those who do will speak up here.

That assumes you aren't getting any income from elsewhere. If you have a day job and are earning enough to pay tax, then any profit (very simplistically = income minus expenses) from forum subs would be liable to tax.

And don't forget if you collect via Paypal, it is discoverable.

 

[Lord Squishy]

then any profit (very simplistically = income minus expenses) from forum subs would be liable to tax.

Where you live is highly important for this determination, because in at least some jurisdictions you may not be able to claim the expenses as a deduction against the revenue for personal tax purposes...

 

[craigiri]

In the USA I think you have to declare income above a certain amount.....in total.
Although, if people are just sending you small "gifts", I suppose many people don't.....and then, in the small chance the IRS inquiries, they say "I didn't know" and pay up.

Basically, if it's under a couple thousand dollars....wouldn't worry much about it. If it's over 600 from one company they have to declare they paid you and then you have to declare that you received it.

As others have said, though, you can weigh income against expenses and probably get a net savings on your taxes. Example - if you received $2,000 in the year, but spent $3,000 on cameras, computers, part of your phone bill, a % of your house and utilities for the office, server fees, etc. - then you "lost" $1,000.

Tax regulations in the USA limit the number of years you can lose too much money. But you can certainly break even or make a small profit....probably forever. So if you receive $2,000 and spend $1900, your entire income may be $100.

It all depends on how you file your tax return....simple or longer form. The longer form gives you more access to deductions.

 

[Mr Lucky]

In the USA I think you have to declare income above a certain amount.....in total.
Although, if people are just sending you small "gifts", I suppose many people don't.....and then, in the small chance the IRS inquiries, they say "I didn't know" and pay up.

This will probably be fine---once.

It's hard to say it's a gift though, if you have a public website that asks for money to help pay for the site upkeep. It's accepting money in return for services provided, ie a business transaction.

I think nobody accepting a few quid should now start panicking though, you are probably "under the radar" and anyway as craigiri says, if you are caught will probably be let off with a caution.