SLC-S21W5: How to Handle Amazon Taxes

Greetings dear friends, it's week 5 in the Steemit Learning Challenge on the topic How to Handle Amazon Taxes. This is indeed a wonderful topic which I have learnt one or two things from while reading through the course and I will like to share it with you all through my participation in the homework task.

Source

Research and Explain

Find out the tax rates for self employment income in your country.

In my dear country Nigeria the tax rates for self employment income is based on the Personal Income Tax (PIT) system. So self employed are to pay their taxes through the Federal Inland Revenue Service (FIRS) a body which is incharge of tax in the federal level or if the individual is dealing with the state then he will be making his payment to the State Internal Revenue Service.

According to research, payment of tax to either Federal Inland Revenue Service (FIRS) or State Internal Revenue Service solely depends on the location of the individual. If you are at the regions where the federal agencies collect tax then you pay to the federal but if you are at region where the states collects tax then you pay to the state.

Based on calculation, the steps to calculate the rate which an individual needs to pay his or her tax is seen below.

Taxable Income for Self-Employed Individuals: When we talk about taxable income for self-employed we are referring to all the earnings gotten from business after removing the expenses.

Tax Rates for Self-Employment Income: To calculate tax rate, graduated tax rate is used for the Personal Income Tax (PIT) system and a good example can be seen below.

Annual Income (NGN)	Tax Rate (%)	Tax Rate (NGN)
First ₦300,000	7%	21,000
Next ₦300,000	11%	33,000
Next ₦500,000	15%	75,000
Next ₦500,000	19%	95,000
Next ₦1,600,000	21%	336,000
Above ₦3,200,000	24%	768,000

Allowable Deductions and Reliefs: There are allowable deduction and relief for Self-employed individuals in Nigeria which include Consolidated Relief Allowance (CRA) which is usually 1% of gross income, pension contributions, life insurance and many more.

Filing and Payment Requirements: It is the duty of Self-employed to compute and fill payment requirements for the annual tax this is to help them make a proper calculation so that they are not over taxed. If the professional for tax tells them the amount the can be able to compare with theirs to see if there is a difference. Also, there are places that pay tax monthly and others that add penalty for lateness in payment.

Additional Taxes: Mostly, aside the usual tax, there are additional taxes added here in Nigeria such as the development levy and the value added tax. All of these in some cases are calculated and added for payment.

Discuss whether Amazon Affiliate income qualifies for any deduction.

Amazon Affiliate income in most jurisdiction all around the world is consider a taxable income and Nigeria is not left out. So yes, Amazon Affiliate income qualifies for deduction based on the nature or types of expenses incurred by the business as well as the law guiding the tax in the area. Though I will like to discuss some factors that must be taken into consideration to determine if Amazon Affiliate income qualifies for any deduction.

Nature of Amazon Affiliate Income: The nature of your income in Amazon determine if the Amazon Affiliate income qualifies for any deduction. When you earn on Amazon via your referral link then it is categorised as self-employment income or business income.

Deductions on Amazon Affiliate Income: The tax law of Nigeria allows individuals or self-employed to deduct expenses they incurred and in the case of Amazon some of the deduction done in Amazon affiliate include Website-Related Costs, Marketing and Advertising, Content Creation Costs, Internet and Utilities, Office Expenses, Professional Services and Training and Development.

Documentation Requirements: For this deduction to be done, you have to have all receipts of your expenses intact and also separate business expenses from private expenses so that there will be no conflict when the calculation of the tax is done.

Tax Treatment of Affiliate Income: Amazon affiliate income falls under the Personal Income Tax (PIT) for a self employed business and also follows under the Company Income Tax (CIT) for a registered business. Both of these categories allows deduction if the align with the tax law which is wholly, exclusively, necessarily, and reasonably.

Amazon Tax Form Submission

Describe the process of submitting a W-9 or W-8BEN form (based on your residency). Provide screenshots (hide sensitive information) if possible.

To submit the W-8BEN form in Nigeria is very important for all businesses which are earning some money from the U.S. based platforms such as Amazon, Google etc., the main aim of having this form is to help you calculate and pay your taxes so that you don't hold taxes you are supposed to have paid. The process of submitting this form can be seen below.

W-8BEN Form: Non-U.S. Persons: This form is specifically designed to notify the U.S tax agencies that the individual is not a citizen of the said country and also to help claim reduced tax rate.

As stated earlier you are to fill this form only if you are a Non U.S citizen like a Nigerian earning from U.S based entities such as Amazon, freelance YouTube and others.

Below are the steps to fill and submit the W-8BEN form.

Step 1: I ensured that I was properly logged in to Amazon affiliate account as you can see from the screenshot below

Step 2: I clicked on my profile and then selected account setting which lead me to the provide tax information where a form is given to me to fill.

Step 3: A complete form was given to me after answering a few questions. The Tax Identification information came forth followed by the Tax Identification number (TIN). See both screenshot below.

Step 4: Here you sign the form and then include the date when you are submitting the form. If printed then you sign manually both if not you sign electronically.

Step 5: Go ahead to submit the form to the requesting entity such as Amazon or YouTube as the case may be.

Tax Filing Process in Your Country

Explain the process of filing taxes in your country using online portals if available. Include steps and resources specific to your country.

In my country Nigeria tax portals include Federal Inland Revenue Service (FIRS) and State Internal Revenue Services are the basic portal used for payment of taxes and the steps to do that are seen below.

Identify the Relevant Tax Authorities: Federal tax such as Personal Income Tax (PIT), Value Added Tax (VAT) and the Company Income Tax (CIT) make use of the FIRS TaxPro-Max Portal whereas the state tax make use of the State Internal Revenue Service.

Register for Tax Identification Number (TIN): One of the major requirements needed for filing taxes in Nigeria is having the Tax Identification Number. You can get this via online registration via the link FIRS TIN Registration Portal where you will provide your details.

Access the Online Filing Portal: For federal tax you can use the portal https://taxpromax.firs.gov.ng. Whereas for state you can use https://etax.lirs.net

Steps to File Taxes Online: If you have done all of the above then the below step is what is required next to fill the form.

• logging or create an account if you don't have any

• Select the tax type (PIT, VAT, CIT)

• Enter your income details

• Calculate payable tax

• Submit tax returns

• Make the payments by generating Remita Retrieval Reference (RRR) and paying online or in the bank.

• Obtain a tax receipt which is a clearance certificate of the tax.

Reflection

Why is it important to manage taxes properly for online earnings?

There are many reasons or importance to why we must mange taxes properly for our online earnings and a few of the reasons are seen below. Compliance with government directives and scrutiny is the major reasons. Lets discuss in details below.

Legal Compliance: Every country has a law and this include tax laws so there are penalties associated with not paying of tax so to avoid all of these one must try to pay his or her tax.

Financial Stability: With the deduction in taxes business can make some savings for themselves which can be access in the future and also with tax payment they will be able to make an accurate calculation of their budget.

Credibility and Business Growth: For your business to grow, transparency and accountability must be seen to build trust from the people and the government so that help and assistance can come anytime.

Avoiding Double Taxation: With good calculation of tax, you can be free from double taxation which is payment of too much tax compared to the expected.

Long-Term Benefits: One of the major reasons why tax is encouraged is because of the long term benefits associated to it because you get to be paid pension at your retirement which is part of the money you earn.

What did you learn from this process?

Through this process I have learnt and gained a few knowledge about tax. At the moment aside from the offline work I do, there are no task attached to my earnings as it is just on trading and the government has not officially taxed individual traders.

Through I have learnt that a proper record of one's expenses must be taken into consideration to be able to give clear overview of his business and calculate his task effectively.

Also I have learnt that money for tax must be paid in due time to avoid penalties from the tax body or organisation.

Also I learnt that paying of tax is a long term investment which those who are making the payment will benefit from in the long run especially during their retirement period.

Lastly, I have also learnt that it is important to consult experts in the field of tax to be sure that we are on the right track in the calculation to avoid overspending of money for tax.

Finally I wish to invite @josepha, @solaymann and @dove11 to also join this contest and share their participation if they haven't done that.

Cc:
@hamzayousafzai
@neelofar