Zeek Rewards

[embereli]

For anyone who has received a 1099 for 2011, what shows as income (1099s should have gone out by the 31st)? Is it the amount paid in points, cashed out and not cashed out, or is it just the amount of money cashed out? I'm not sure how points not cashed out could count as income.

[TommyH]

Originally Posted by embereli

For anyone who has received a 1099 for 2011, what shows as income (1099s should have gone out by the 31st)? Is it the amount paid in points, cashed out and not cashed out, or is it just the amount of money cashed out? I'm not sure how points not cashed out could count as income.

From what I gathered from the call last week on taxes (believe it was around the 16 minute area, would advise to listen to that if you haven't yet). You income is reported as any commissions, money from retail profit pool, etc. Where ever you saw a actual dollar, it will be reported as income.

Even if you used these funds to purchase sample bids to give away, this is still considered income. The reason for this is you had the option to pull this money out and take it as pay (even though most of us use it to repurchase sample bids)

However when you file your taxes if from your income you purchased sample bids to give away, these are reported as an expense for your business. You have to explain this to your CPA or whomever does your taxes. It does not show up on the 1099 but I think they are making an area where this will be reported so you can print it out for your taxes. I haven't seen anything in the back office as of yet for this but I did not make more then $600 last year. Might be different for people who did.

[kegx4]

Mustang auction is over final total was: $4,077.07 I was really watching that auction and kept checking on it and of course I leave to go get the kids and it's over.
So glad that it did so well

Debbie

[brt1]

Thats a nice profit for ZR (and us!)

[embereli]

Where ever you saw a actual dollar, it will be reported as income.

I did listen to the call, but I still have to hear from anyone who has actually received a 1099 for 2011. I have only heard people hearing that other people have gotten one. And I am not sure how points which COULD be turned into pay but haven't been can be seen as income since they are unrealized gains. You don't pay taxes on stocks until you sell them and realize the gain, even if they are making money.

[TommyH]

Originally Posted by embereli

I did listen to the call, but I still have to hear from anyone who has actually received a 1099 for 2011. I have only heard people hearing that other people have gotten one. And I am not sure how points which COULD be turned into pay but haven't been can be seen as income since they are unrealized gains. You don't pay taxes on stocks until you sell them and realize the gain, even if they are making money.

I am not a CPA or tax attorney, so this is just my personal opinion and not legal advice.

Your commissions and money from the daily profit share is a "realized gain" You earned that money, you have the option to just take it as cash, call it a day and spend it. That is your choice and you can choose whatever you want to do with that money. However, most will repurchase sample bids to build their business till they are at a point they want to be.

As with any other business, for example my primary business is photography, I shoot a wedding for 2k. That is a realized gain however I have my expenses that I pull from that 2k first before taxes. Such as any lens rentals, travel costs, etc. So lets say after my expenses I still profit 1500. What I do is then I put 25% of that away for taxes, 10-20% percent away for future expenses or purchases, then pay myself.

You don't pay taxes on stocks because like you said it's not a realized gain until you sell the stock whether its the same day or many years later, then you pay your taxes on the profit from the stock, plus any capital gains tax if you sell it I think in less then a year (that's what it was several years ago). Also you don't pay tax as you own the stock due to the fact that you could ultimately sell it for less then you purchased and claim it as a loss on your taxes.

Think of those people that purchase 10k in stocks or more on one day at 40 dollars in the morning, within a week it shoots to 75 dollar, they hang on to it hoping for more. Then the next morning they wake up to the news that the company is under investigation and when the market opens the stock opens at 35 dollars. Now when you do your taxes your stock is a "loss" not a "profit". Like you said stock is unrealized money as it can go either way till you sell it. Zeek is realized money as you can take the money you earned.

Zeek Rewards is a business opportunity (sort of an investment, but not in the sense of investing in stocks, 2 different beasts). You are investing your money in "your business". As a business owner you have to report all your earnings to THE MAN (aka IRS), then you have your "expenses" (sample bids, internet, electric, rent for office, etc) to deduct, and you are left with your profit which you pay taxes on. You have to prove that your expenses are for building the business. So to prove sample bids are an expense you have to show that, you made XXX amount of money on Tuesday, you purchased bids (your expense) with the XXX amount of money you made on Tuesday. These bids once sold will translate into VIP points, which is what you earn your money on.

So if you make 10 dollars in one day. You do the 80/20 split, you would still report that you made 10 dollars, however you had 8 dollars in expenses, so you ultimately pay taxes on the 2 dollars that you took as cash, but you still report you made 10 dollars to the IRS.

Let's say however you purchase 1k in sample bids. You however don't have enough customers to give these to, so they are sitting in your back office and are not VIP points. Therefore you are are not earning any money on these, so there is no income being reported for these points, you can however claim them though as an expense for the business. But once you give them away and start earning from the daily profit pool on these points you will have to report that income, whether you buy more bids or take the cash.

Because you have the "option" to cash your daily profit share, commissions, etc. with Zeek these are a "realized gain". What you do with that money though is your choice.

Hope this helps some. If I am wrong with any of this maybe some one else can shed some more light on the subject.

[embereli]

Hi Tommy,

I very much appreciate your comments. I am not trying to be difficult, just trying to get my head around money not taken out being income. I have the option to sell my IBM stock at any point, too, but until I do, until I cash the check and deposit it, that money is not income and not taxed. So it seems to me that profits still sitting in ZeekRewards should not be taxable. I didn't see any profits in 2011, so I don't know what shows on a 1099 yet. And I still have not found anyone who has actually received a 1099 for 2011.

[TommyH]

Originally Posted by embereli

Hi Tommy,

I very much appreciate your comments. I am not trying to be difficult, just trying to get my head around money not taken out being income. I have the option to sell my IBM stock at any point, too, but until I do, until I cash the check and deposit it, that money is not income and not taxed. So it seems to me that profits still sitting in ZeekRewards should not be taxable. I didn't see any profits in 2011, so I don't know what shows on a 1099 yet. And I still have not found anyone who has actually received a 1099 for 2011.

No problem. The only thing I can say is even though you are not pocketing the cash from Zeek at the moment you are still indeed taking money out. The difference is the money you are taking out you are putting back in by repurchasing bids. While it's not tangible in your hand it's still money and a profit. This money has no chance for a loss in the future like your stocks, well to a point. If the company goes under and cannot pay you what you have earned, then I don't think you wont be held responsible for it come tax time. For the most part though you will either pull this money out via check or you will use it to purchase more sample bids before anything happens.

The benefit of this is these are an expense. So say if in 2012 you made 5k with Zeek, but you used all that to repurchase sample bids to give away, your expense would equal 5k. With that said you would have no profit and no tax to pay on those earnings. You would still report you made 5k, but you would have 5k in expenses. So like you said you really would not be paying tax b/c your expenses equaled or were more then your total income.

But if you did the following. In 2012 you make 5k with Zeek, you take 50% and purchase bids you have $2500 in expenses, so you would pay tax on the profit of $2500. You can leave this $2500 in your back office and never request the check but you still have to report it and pay taxes on it even though you haven't pulled it out yet. It is still profit and income even though you have requested it in hand. Like having it in a checking account. I don't think most people will leave that in their account though without requesting a check before end of year.

You are correct with the stock. You have stock in IBM and you will not pay taxes on it till you cash it out, if you cash out above your purchase price. With that same thought process though, what happens if you wake up tomorrow morning and for some unforeseeable circumstance the IBM stock opens below what you purchase it for and keeps falling. It is no longer a "profit" to pay tax on if you sell. Sure you can hold out and pray it bounces back, but what if the worse case happens and the business goes under, you would be selling for a "loss".

The above is why you don't pay tax on your stocks until you cash it out. The market is harsh and can swing quickly in either direction. Think of what happened when the housing market crashed, all the stocks dropped like flies in their price. The DOW was down to like 7K. People with stocks for retirement could no longer retire because they can't sell their stocks for a profit. Now if you had the money that was the time to start investing with hopes the market would recover. It has slowly come back and its now back over 12k.

Think if you had enough money to buy a lot of shares at the 7k price in 2009, now its up over 12k. If you were able to purchase 100k shares, over half a million, and sell today at 12.5k you would have made over half a million in 2-3 years. Not too shabby. Even if you had 100k to invest from refinancing your home and bought 14 shares. That's close to 90k profit in 2-3 years. Like they say though it takes money to make money.

[embereli]

It is making more sense, although points being both income and an expense seems odd. I've seen some other people in other forums wondering about that, too. I'll keep thinking about it and hope it makes sense soon. I'll also keep looking for someone who has actually received a 1099.

Thanks for all your help, Tommy. I appreciate it.

[TommyH]

Originally Posted by embereli

It is making more sense, although points being both income and an expense seems like an IRS red flag. I've seen some other people in other forums wondering about that, too. I'll keep thinking about it and hope it makes sense soon. I'll also keep looking for someone who has actually received a 1099. If they haven't been mailed yet, when the legal deadline was Jan. 31, that is another red flag.

Thanks for all your help, Tommy. I appreciate it.

I am not sure of the who all has got a 1099 either. Most of the few I know just started at the end of 2011 so they did not make more then the $600 that is required to get one. Like you though I have heard of others getting their 1099. Maybe someone on this board might have got theirs and can chime in.

Points are not really both income and expense. Points are what you earn income on and not the expense. As you only get income on points once you give away your "sample bids"

The "sample bids" are your expense. Sample bids are your "product" that you purchase to give away, this is the expense.

You relate your "sample bids" to your points, to show the IRS the reason for purchasing these "sample bids" and claiming them as an expense. If you don't show the IRS any expectation for a return on your "sample bids" (expense) then they wouldn't be an expense.