Domain names are uncharted territory for the U.S. Internal Revenue Service (IRS).
Tax time creates headaches for domain name owners, especially those with large portfolios. Sure, we know we need to report parking income on our tax returns, but how do we account for purchases, registrations, and sales? If you ask your CPA you’ll probably get a blank stare.
CPA Sandra K. Brooks has released a new guide called “The Domain Tax Guide, 2007 Edition”. I just finished reviewing the guide and recommend it without hesitation. Here’s what the guide covers:
1. Domain names are uncharted territory for the IRS. Brooks was only able to find one reference to domain names by the IRS. This leaves a lot to interpretation.
2. What are the various ways to organize your domain name business, such as corporation or limited liability company? What are the benefits of each?
3. Domains can be classified as capital assets or business assets, and there are various tax consequences for this.
4. How you do your taxes depends on if you’re a domain dealer or domain marketer/developer.
5. How to account for domain registration fees, and how this is different from domain purchase fees.
6. What the “useful” life of a domain name is and why this is important.
7. Which deductions, such as home office deductions, you can take if you are in the domain name business.
I found the guide easy to read despite being written by an accountant. Many accountants have difficulty writing about taxes in a way we can all understand. (Full disclosure: I have a degree in finance, but I still think you don’t need to understand numbers to think this guide is easy to understand).
The Domain Tax Guide can be purchased online for $79.00. This seems like a fair price to me. Heck, that’s less than my accountant charges for an hour of his time.
Stephen Douglas says
I’ve been a domainer since 1999, and I’ve known Sandy Brooks for over 25 years. Not only is she a fabulous person, but she’s extremely smart and has the respect of everyone she’s ever worked for. As a professional domain consultant and friend, I was supportive of her efforts in creating this guide since she’s assisted me with tax filings for my domain business the last several years. She knows her business better than most accountants I’ve used.
This guide is extremely well-written, thorough, but very easy to read. Andrew is right-on for doing a review of the Domain Tax Guide, it is a must-own for anyone who buys and sells domains.
Stephen Douglas
Successful Domain Management™
DomainRelevance.com
“Own Your Competition™”