It is a real accomplishment to learn how to organize, manage, and operate a successful blog. While others are stuck in traffic on their way to a day job, you have the luxury of relaxing in a pair of your most comfortable sweats while investing your time and energy in something you love. But running a great blog is only half of the equation. What do you do when it comes time for calculating your taxes? Here’s what you need to know about blogging and taxes.
To File or Not to File
The American tax code is quite complex but the general formula you need to know when it comes to blogging and taxes is if you are making any money, you’ll need to take this into account when it comes tax time. The second consideration is whether your blog is a part-time hobby for you or an actual business.
If you’ve just landed your first ad or occasionally post an affiliate link that earns you a couple of bucks, does this qualify your blog as a business? The most important calculation to make is not how much money you earned but how long you’ve been operating your blog (for profit).
Over the past five years, if your blog has generated income for you (no matter how small) for three or more of those years, then your blog is considered a business by the IRS.
If you are the owner and operator of the business (blog) and it is your primary source of income, then you’ll likely be filing as self-employed. If this is the case then you will be responsible for paying your taxes on a quarterly basis (every three months) rather than in one lump sum at the end of the year by using a Schedule C form.
If your blog qualifies as a hobby with only a limited amount of income and/or has been generating income for fewer than three out of the past five years, your tax situation will be far different.
You must count all income, even just a few dollars from a single affiliate link when you file your taxes but you’ll just add this total to your combined income on your tax form when you file.
If your total income (blogging and otherwise) was less than $400 in the past year, you won’t need to file a tax return.
Profits and Deductions
Assuming your blog qualifies as a business, your next step is to calculate your net profit. The total amount of money generated by your blog is one number. All businesses have expenses, which for bloggers might include buying products/services that you review, transportation, blog conferences, design elements of the blog, hosting fees, and other costs.
Deduct the total number of legitimate blogging-related expenses from your total income and use that information to calculate the necessary data for your self-employment tax returns.
Many bloggers regularly or occasionally receive free gifts from companies in exchange for a sponsored post. Technically speaking, all income, including income from free gifts, barters, partnerships, and royalties are to be included when calculating income.
If your blogging is truly a business, the best way to keep track of expenses, gifts, and other income-related activities is to document them throughout the year as they occur. Filing Schedule C forms on a quarterly basis will require you to be organized.
If your blogging is more of a hobby and gifts or freebies were only occasionally sent to you then you probably don’t need to worry as much about calculating their value when it comes time to report your income.
Once you have all of the information together that you need to file, you can use online tools like a tax return calculator to help you figure out if you will owe money or get a tax return.
As with all tax-related issues, the best advice is to consult with a professional if you have any questions or concerns.
This guest post contribution is courtesy of Burnett and Brown, Oklahoma City tax lawyers, and Oklahoma City business lawyers serving the greater OKC area.
Monday 22nd of February 2016
Thanks for sharing these reminders with us Alaina...especially the gifts. I need to go back and make sure I have all the products I received last year on my list.
Have a great week.
Monday 22nd of February 2016
You're welcome! Have a wonderful week as well!