Is Looming for U.S. Domainers — Tax Day

Money due this Thursday.

It’s coming — tax day for U.S. domainers is this Thursday, April 15. To add insult to injury, April 15 is also when your first quarter estimated tax payments are due. (For some reason, the second “quarterly” payment is due just two months later.)

Here are some last minute notes as you finish up your taxes:

1. Don’t forget to deduct all of your domain-related expenses – Here are twelve to consider, counting mobile phone expenses, domain conferences, and internet access.

2. Beware tax deductions for donating domain names – If you donate a domain, you ought to probably just deduct the amount you paid for the domain. If the value has fallen, you ought to deduct less. I don’t care if someone states their appraisals were accepted by the IRS back in the day. Over the past few years the IRS has cracked down on all sorts of intellectual property donations. Firms were donating other IP, such as patents, and taking inflated tax deductions. That’s a recipe for disaster.

3. Calculate your estimated payments with penalties in mind – When it comes to predicting your estimated quarterly payments for 2010, look for your penalty threshold. Generally speaking, if you withhold or pay up to 110% of your 2009 taxes during 2010, you won’t get hit with a penalty for underpaying. (Talk to your CPA to discuss your specific situation.) So if you’re optimistic and think your profit will double in 2010, that doesn’t mean you need to double your quarterly estimated payments to the IRS. Especially since the IRS has a weird definition of “quarterly”.

4. Consider opening a SEP. A SEP IRA is great for self-employed people, and lets you postpone paying taxes on money contributed to your SEP until you withdraw it upon retirement.