If I build a membership website and my goal is to get as many members as possible and to generate a profit at this time, will I still need to file business tax returns? To attract members, I will pay $10 for each member that refers a new member. So if Joe recruits 10 new members he makes $100. I will charge a one time $10 membership fee. What would be my tax reporting requirements?

ANSWER

The BIDaWIZ Team's Answer:

Even though the transactions will be processed using Paypal, you will still need to file a business tax return to report the transactions for tax purposes. In fact, credit card processors such as Paypal now have an obligation to issuesa Form 1099-K if a merchant processes 200 or more transactions that total $20,000 or more during the year. So, yes you definitely have to report your income and expenses. Even if you do not generate a profit, you will still have to file. That doesn't necessarily mean you'll owe any taxes though.