7 Frustration-Free Tax Tips for Bloggers Roundup

NOT legal advice

I am not a tax professional. This blog post is for informational and educational purposes only. Please see your accountant, the irs website, and/or your tax preparer for current regulations and laws concerning income you earn. This information is geared toward U.S.A. residents. 

photo: “Angry Pretty Women” by anankkml via http://freedigitalphotos.net

1. Blogging is a Business

From the perspective of the IRS, working as a blogger means you run your own business. ~ Turbotax blog

Any extra income you earn no matter how small is to be reported as income. I pay taxes (although small) on my freelance work. It is still income so it is my responsibility to report it. I’ve never made enough to not get the earned income tax credit so there is a clue at how ‘lucrative’ this is for me.

Key Takeaways: 

• ALL income needs to be reported
• Self-employment tax MUST be paid even if you don’t own Federal Tax
• You now pay taxes on a quarterly basis plus it is estimated
• Due dates: April 15, June 15, September 15, and January 15
• As a business you may take reasonable and necessary deductions however, you must make a profit (see complete article on TurboTax)

2. Tax Tips from a Bookkeeper Turned Blogger

Amy did a wonderful review on the book Your Blogging Business: Tax Tips from a Bookkeeper Turned Blogger. I also have this book and it is a great little primer. The website is no longer live but you can purchase the book on Amazon for $4.99. If you plan of purchasing it, do so with Amy as she gets a small commission.

It’s a solid little book, with information I’m sure a lot of bloggers (particularly newer ones) will appreciate. ~ Amy Lynn Andrews

Key Takeaways:

• This book is a basic non-exhaustive guide for new bloggers
• Amy recommends it for bloggers who earn more than $400
• Written in an easy to read conversational tone + from a bloggers’ perspective

3. Put All Your Business ‘Bucks’ in a Row

Even if you only make $5 think of your blog as your business. Changing this mindset will help you in the long run especially if you are blessed by overnight growth and income.

When it came time to do my taxes, even though I made so little, it took me hours to sort everything out. ~ Jim Wang

Key Takeaways: 

• Get an EIN, Business Checking, Credit Card, and Incorporate (LLC) from the start
•  Change all accounts from personal to business
• Profitable blogs research S Corporation (read more from Jim Wang)

4. Swag is Compensation

The Craft and Hobby Association Trade Show happened earlier this month and I’ve been ooo’ing and awww’ing at all the yarn and crafty goodies that bloggers received. The IRS unfortunately regards these as compensation not GIFTS. What does this mean? You must report it even if you end up donating it. 

 I can only tell you that if you are audited and you’re taking deductions for going to a conference, the IRS has every right to ask you if you claimed the value of the swag as income. ~ Sara F. Hawkins

If there are discussions about doing reviews, writing about the company on your blog, tweeting, or creating social media impressions, you may have created a business relationship.~ Sara F. Hawkins

Key Takeaways: 

• Promotional, Swag, Products for Review, Giveaway Prizes, Gift Cards, etc… must be reported as income
• 1099 Misc forms will NOT come from your affiliate or revenue sharing sites any more so it is up to YOU to keep accurate records
• YOU must pay taxes on income you earned even if you didn’t reach the minimum payout
• Complimentary Trips and Dinners Out are Taxable Income (read more great tips on SaraFHawkins)

5. Hobby or Business – Report and Pay 

This article by Amanda Henson for Blogging Basics 101 is very similar to the one by Sara F. Hawkins but I’ve included it as sometimes reading something from more than one angle helps in clarification.

The IRS also states “[y]ou have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions.” ~ Amanda Henson

There is a list of supporting posts and resources at the end of this article so read more from Amanda on Blogging Basics 101.

6. Did You Accidently Start a Business? 

Seems like just yesterday you were the only one reading your blog, but then you started getting comments – from other people. Companies took notice and suddenly you started seeing some re$idual$. You know what I’m talking about: cabbage, moolah – cash! To you, it might be just a little mad money, but the IRS has a different take. ~ Kristen P-SocialSpark-HRBLOCK guest post

I did not start blogging with the intention of making money, most people don’t. After a few years I decided I’d like to make money to help pay for hosting, domain, and other expenses. I started with affiliate marketing, tried advertising, and eventually started selling my own products. It just happened. How about you?

Key Takeaways:

• It doesn’t matter where the money came from it is still taxable
• Hobby – not in it for profit and engaged in infrequently
• Blogging is main source of income = now a business
• Self-employment taxes are paid for income over $400

 engaging in an activity regularly and with the intent of making money in a field in which you have expertise ~ definition of Business

Read more great tips from guest blogger Teresa L. Clark, H&R Block for Social Spark 

7. Reporting Income under $600 

Kelly Phillips Erb – The Taxgirl (Forbes) offers some great educational information as a contributor to Forbes. I’ve always been unclear about the ‘$600 rule’. Basically I understood this to mean that if I earn $600 I need to pay taxes and will receive a 1099 Misc.

I’ve qualified for a number of years now but simply gave it to the tax guy and he took care of it. Last year was different as a new form was introduced. This year for the 2013 tax year the 1099 Misc will no longer be sent unless you earn at least $20,000 (and/or 200 transactions). HUH? Kelly talks about this in her post for forbes.

Key Takeaways: 

• The ‘$600 rule’ is for the Payor NOT the one being paid
• Keep accurate records
• Report everything
• Failing to report even a $1.00 check will be fined and interested accrued

IRS Circular 230

IRS Circular 230 notice: In order to comply with requirements imposed by the IRS, I must inform you that any U.S. federal tax advice contained in this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this blog. ~ thetaxgirl

Tomorrow is another Tax tips article so be sure to return or better yet, sign up for blog updates.

A couple of things to note for #31CBBC peeps: (all are optional)

• Comments are welcome and encouraged
• Visit the FB group and add your post for the day to the pinned post if you’d like to receive at least 2-comments on your post.
• Join the Crochet Business Blogger G+ Community
• Community Event: Crocheting a Business Podcast 12pm PST – How the Purple Panda Helps to Increase Your Sales
  
• Add your blog url to the #31CBBC linky (not the post url) – this will help you identify who is participating
• As you are visiting other bloggers, take note of any similarities you have or complimentary projects/services you have. This is a great time to jot down the blog name and get to know the blogger behind the blog.
• Don’t stress on writing a post each day. A picture with your thoughts, a video, a top 5 list, or simply a quote on why you like crochet all counts as a post.

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