Inside: You’re earning money with your blog, now what? You pay taxes! It’s not fun, but it’s absolutely necessary. This post covers everything you need to know about blogging taxes and tax tips for bloggers!
It’s tax season! For most, that’s not something to be excited about, but, for me, I love it. I work for a online tax preparation company, so I’ve learned lots of good information about filing taxes and tax rules over the years.
Do bloggers have to pay taxes?
Yes! This is one of the biggest blogging questions next to how to make money blogging. Income earning bloggers do have to pay taxes! Since I’m a blogger, and now a small business owner, I’ve picked up a few tax tips for bloggers and small business owners that are super helpful!
In some of the Facebook groups I’m in, I’ve seen lots of posts from fellow bloggers/business owners who are freaking out about having to file and how to do it. Tax planning for bloggers can be confusing. Since I have the background and information that most bloggers/business owners don’t have, I decided to come up with a few tax tips for those who may be filing as a blogger/business owner for the first time or 50th time.
FULL DISCLOSURE: I am NOT a licensed tax professional. I do not give out tax advice. However, I will give you the exact wording from the IRS on certain tax situations and where you would enter it on your tax return. It’s valuable information that you should have, but if you have any questions at all on how much you need to enter or whether you should enter something, please consult with a tax professional.
OK let’s jump in!
Where do you report blogging income?
First, blogging and small business income is reported on a Schedule C for Profit or Loss from Business. You may receive some 1099-MISC forms from companies or agencies you’ve worked with and those should be entered into a tax preparation software and then recorded on a Schedule C.
If you have a Limited Liability Company (LLC) you would enter your business income/loss on a Schedule C since if you are the single owner of the LLC. If your LLC has more than one partner, you would file Form 1065.
What blogging income do you report?
The IRS says, “You must report on your tax return all income you receive from your business unless it is excluded by law. In most cases, your business income will be in the form of cash, checks, and credit card charges. But business income can be in other forms, such as property or services. These and other types of income are explained next.
Bartering is an exchange of property or services. You must include in your gross receipts, at the time received, the fair market value of property or services you receive in exchange for something else. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as the fair market value unless the value can be shown to be otherwise.” (https://www.irs.gov/publications/p334#en_US_2016_publink1000313351)
So what does this mean? If a company gave you some clothes and you agreed to post about them, you have to report the fair market value of the clothes on your return. This is something that I haven’t had to report before so it will definitely add income to my return this year.
For those who are involved in Direct Sales the IRS says:
- Income from sales—payments you receive from customers for products they buy from you.
- Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you.
- Prizes, awards, and gifts you receive from your selling business.
You must report this income regardless of whether it is reported to you on an information return.” (https://www.irs.gov/publications/p334#en_US_2016_publink1000313419)
Please also note that “if you make or buy goods to sell, you can deduct the cost of goods sold from your gross receipts on Schedule C. However, to determine these costs, you must value your inventory at the beginning and end of each tax year. This applies to you if you are a manufacturer, wholesaler, or retailer or if you are engaged in any business that makes, buys, or sells goods to produce income.” (https://www.irs.gov/publications/p334#idm139891818115696)
You can find more information about cost of goods sold here.
What blogging taxes am I responsible for?
The IRS says, “Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. Use Schedule SE to figure net earnings from self-employment. The 2016 SE tax rate on net earnings is 15.3% (12.4% social security tax plus 2.9% Medicare tax).” (https://www.irs.gov/publications/p334#en_US_2016_publink1000313194)
So what this means is everyone has to pay Social Security tax and Medicare tax. When you work for a company they take that tax out before you get your paycheck, but when you’re self-employed that tax doesn’t come out automatically, so you have to pay for it when you file your return. But to combat that 15.3% you get a SE tax deduction on line 27 of your return.
You also have to remember to pay the general income tax.
The IRS says, “Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments.
Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.” (https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes)
Hopefully that’s some good basic information about filing your return. The following are questions I got asked in my blogging FB group that are a little more specific:
Do you have to make a certain amount before you have to file?
Here’s what the IRS says about filing a return:
“You have to file an income tax return for 2017 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 Instructions for Form 1040.”(https://www.irs.gov/publications/p334#en_US_2016_publink1000313173)
Net earnings means gross profit minus qualified expenses. So if all of the money you made with your business minus the expenses you had is more than $400, you need to file a return. You’ll also need to file a return if you meet any of the qualifications on page 8 here (this includes almost anyone who made more than $10,000).
And don’t forget that having a LOSS from your business is something that should be reported too. A business loss is something that can lower your overall taxable income.
So I recommend entering your business information regardless of whether it was a gain or loss just to see how it affects your return and because it’s better to be safe than sorry with the IRS.
Can you only claim your blog as a business if you show profit after 3 years?
This question is getting profit confused with loss.
In general, the IRS will expect you to report any income you made throughout the year on your return. (You can check out taxable and nontaxable forms of income here.)
“The general rule is that if you have not turned a profit in at least three of the prior five years, the IRS will categorize your business as a hobby.” (https://turbotax.intuit.com/tax-tips/small-business-taxes/when-the-irs-classifies-your-business-as-a-hobby/)
So if you’re taking a loss on your blogging/small business year after year, the IRS will assume it’s just a hobby and won’t allow you to deduct those business expenses on your return anymore. (You can read more about the hobby vs. business distinction here.)
What are some things you can deduct/claim as a blogger?
- Monthly hosting fees
- Annual domain costs
- Design/logo Fees
- Internet access fees—this clearly includes DSL and dial-up, but don’t forget charges that you might pay away from your home or office such as wi-fi charges in Internet cafes
- Paid blogging platform charges (such as Typepad monthly charges or “add ons” through WordPress)
- Design or word processing software—this includes Photoshop, Illustrator, Word and similar programs for business use
- Keyboards, mice and other periphery
- Web cameras
- Digital cameras—and memory cards
- Blackberry, Treo, iPhone charges
- Business cards
- Web advertising – text and banner ads
- Prizes for giveaways and contests
- Transportation—this includes mileage for car transportation, train and bus fare for public transit, cab fare, airline tickets
- Dining while away on business
- Hotel charges for overnight conventions and business travel
- Professional advice (from lawyers, accountants and tax preparers)
- Office supplies—pens, folders and post-it can add up!
- Books, magazines and subscriptions
- Professional affiliation and membership dues
- Conference fees—such as for BlogHer and BlogExpo
Just remember that the expenses have to be “ordinary and necessary” for your business according to the IRS. Unfortunately I don’t see clothes, hair, makeup, etc. listed anywhere so those are probably things you should leave off your return (and should actually add as income if you were given them free in exchange for a post of some kind). However, if you bought supplies specifically for a blog post or were required to buy a product for a sponsored post, that’s something that you can deduct.
You can also deduct expenses for the business use of a home as long as that part is exclusively used as your principal place of business. (See Publication 587 for more information on the home office deduction)
For items like a laptop, camera, phone, etc. you’ll want to enter those as depreciable assets on your Schedule C. You’ll also be able to enter how much you use those items for personal use and how much you use them for business. (See Publication 946 for more information on Depreciating Assets)
If you aren’t an LLC can you deduct income from a blog?
I addressed this above, but, if you have income from a blog you should enter it on a Schedule C on your return because you operate as a sole proprietor. You don’t have to have a LLC.
You enter any income you made and then you can enter any qualifying business expenses. If you had a gain from your business, it will add it to your taxable income. If you had a loss, it will subtract it.
I also want to point out that any tax preparation software should be able to handle these situations for you. You shouldn’t have to do all of this by hand.
I hope these tax tips for bloggers and small business owners were new and helpful for you and you can prepare your returns confidently this year! You’ve got this!
I love sharing blogging advice, so here’s more! Now that you’ve learned all about blogging taxes, check out these 6 Secrets To Success For New Bloggers!
Was this information helpful? Do you have any questions about blogging taxes that weren’t covered in this post? Let me know in the comments!
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