Note: I am not an accountant. Please confer with your accountant or tax professional for your personal finances.
Taxes. We all hate them. No matter whether you’re liberal or conservative. We all hate having to pay them. But we like having paved roads and standing bridges, so we have to pay taxes.
When we work for an employer, we receive a W-2. Our employer makes sure that the proper taxes are withheld for us. As bloggers, we need to make sure that we take care of this on our own. However, it gets a little murky.
Should I file? How do I know if I need to file taxes for my blog? Will the IRS know?
So being that it’s tax time I thought this little post was in order.
Last year, I bought an inexpensive e-book covering taxes for bloggers by Nikki Hughes, a bookkeeper turned blogger. For only $5 you get all your questions answered, with scenarios to illustrate the tax law. The only downside is that (as of writing this post) her website seems to be down. However, you can still purchase this useful e-book here: Your Blogging Business: Tax Talk & Tips from a Bookkeeper Turned Blogger.
Here is a small summary of what you can find in this book:
Do I need to file a tax return?
Bloggers are individuals who just happen to be self-employed through our blogs. So as far as tax filing is concerned, are we individuals or businesses? We’re actually sole proprietors. The IRS says that a sole proprietor is “someone who owns an unincorporated business.”
Most likely than not, we don’t need to file a separate return from our individual tax return. However, we have to fill out a Schedule C form if we qualify as self-employed.
How do I qualify as self-employed?
In a nutshell, if your net income (the amount you keep after all your expenses are accounted for) is $400 or more, you have self-employment income.
For example, if your gross income is $1,000, and you have $600 in expenses, your net income is $400.
Anything $400+ and you’ll have to file a Schedule C in addition to the individual tax return (Form 1040, 1040A, or 1040EZ).
What are examples of income and deductions?
Let’s say you make $200 from ad sales, $300 from sponsored posts, and $150 from affiliate links. Your income is $650, and since it exceeds $400, it is taxable income.
However, let’s say you just switched to WordPress and you spent $200 on hosting fees, plus $150 for the transfer, that makes your net income fall below $400. Those are all deductions (business expenses). You would not need to file a tax return for your blogging income.
What are examples of taxable income?
- affiliate sales
- ad spot sales
- sponsored posts
- paid reviews,
- freebies (details on pages 20-21).
What are examples of business expenses?
- Advertising – paying for an ad spot on a blogger’s sidebar
- Contract labor – contracting someone to design your blog for you
- Depreciation Expense – so, say you buy a new MacBook for blogging. You take a portion of that expense once a year for the next 5 or 7 years and report that portion as a depreciation expense each year (p.25)
- sponsored posts
- affiliate earnings
- gift cards
If any of this confuses you, Nikki provides partially filled out forms to help you get started on your taxes. She also explains the form 1099 and how you might need to issue one to a blog designer, or even a giveaway winner. (That’s just one of many reasons not to give away any prize worth over $600).
Nikki also goes above and beyond detailing what other business expenditures you can claim, such as a portion of your mortgage or rent. She even explains the differences between personal expenses and business expenses (the differences aren’t always clear!). Every blogger should have this resource handy.
Another good resource, updated to reflect 2018 taxes is the The Blogger’s Simple Guide to Taxes: A Guide to Saving Time and Money
Free Blogging Income Tracker:
For all of my readers and fellow bloggers, I created a simple minimalistic Excel document to track all of your blogging income and expenses. I already included formulas that add up your total income, total expenses and calculates your net income for each month. There are 12 sheets in the document, one for each month. Feel free to personalize it with your colors of choice. Download the sheet here: FREE Blogging Income Tracker.
If you need more rows, just right click on row 19 and select ‘Insert row’ and another row will be added. (You might need to adjust the sheet for the formulas to work. hover at the bottom right of cell H19 or L19 until a + appears. Click and drag until the last row of your data and the formula should adjust).
Need more information?
The following two sites have chock full of information for bloggers.
- 10 Legitimate Tax Deductions for Bloggers Making Money Online
- 101 Tax Deductions for Bloggers and Freelancers