When it comes to finances as a blogger, things get super complicated and tricky, especially as you begin to earn more income from blogging. Mo money, mo problems, right? In fact, more and more bloggers have become full on business owners thanks to successful blogs. If you make any money at all from blogging, you must report that income to the IRS. Along with following business practice laws and hiring contractors (like a web designer or photographer), it is vital that you file your taxes appropriately. The first thing I have to say is that it is best to hire a professional to help you do this. Making a mistake could lead to serious consequences. But in order to help you get started, here are some tips I’ve learned from filing my taxes as a business. (Note: I have an LLC, but I file the same forms as an individual would and it has no effect on my tax filing status)
It is so important to keep records year ’round. Every time you get a payment from a sponsor, every time you pay your photographer, any time any money is exchanged for your blog for any reason at all, write down the date, the amount and a short description of the transaction (ie “sponsored post” or “one hour photography session”). This will be used to calculate your net income and determine how much you owe to the IRS. Always keep your receipts. You will only need these if you get audited, but it makes things MUCH easier and smoother if you do.
Revenue is all the money you get from your blog, including “gifted” items. If these items are sent as payment for a post on your blog/social media, you must count the fair market value of the item as income. If a brand sends you gifted items that you were never previously contacted about or on a no strings attached basis, and you truly consider it a “gift”, you are not required to report those items as income. In fact, they are the ones who should be paying taxes on the gifted items. This is why lots of bloggers do not accept gifted items in exchange for blog/social media posts; they’ll end up owing money for something that they didn’t earn any income from. If you receive gifted items, be sure you keep track of the price and record it as income. Don’t freak out if you forget to record that lipstick a brand sent you. Changes are the IRS isn’t going to come after you for a $10 item. Just do your best to keep track and be honest and ethical when you file your taxes.
Expenses is where you can have the most effect on your taxable income and therefore your amount owed to the IRS. Let’s do some math:
Revenue – Expenses = Net Income
Net Income – Itemized or Standard Deductions = Taxable Income
The more expenses you have, the lower your taxable income, which means the less taxes you will have to pay. Obviously being honest and ethical is the most important thing, but you’re not doing yourself any favors by not counting that coffee date you had with a fellow blogger. If you talked about blogging at all, that was definitely a blog-related meeting and you need to write that ish off, girl! Do you think a big corporation skimps on expenses? Hell no! So why should you? Things like photo props & DIY supplies, purchases for review posts, lunch meetings, photography, design, and even a portion of your internet and phone bills are all expenses. One expense that is often overlooked is the milage write off. For every mile you drive to a blogging-related event or meeting, you can subtract $.55/mile as asset depreciation. Just be sure to keep track of it and write it all down, mile for mile.
If you’ve ever worked with a brand or PR agency on a campaign for more than $600, they were required to send you a W9 to fill out. They use this form to create a 1099-MISC that they submit both to you and to the government. They count this amount as an expense and you are required to count it as income. If you hire someone and pay them over $600 in one calendar year, you need to get a completed W9 from them so you can create a 1099-MISC and send it to them by January 31. You will also file this form with the IRS as an expense. For example, I will be filing two 1099-MISCs this year: one for my photographer and one for my assistant, who are both hired on an independent contractor basis.
It works similarly with Paypal. PayPal is required to submit a Form 1099-K both to you and to the government if total income is over $20,000. This form reports the income you received via PayPal. You do not have to submit all these forms individually, but it is helpful when calculating your income. Just make sure the total amount matches up with the income you report because the IRS already has that income on file for your SSN or EIN. If you report less than what the IRS already has on file, they will totally know you are lying!
Well, now that this is the longest blog post in the history of the world, I’ll conclude by saying again that I am not a tax professional and you should consider hiring one when you do your own taxes. This is what I’ve learned from meetings with my CPA and lots and lots of research. I hope you find it helpful! And please comment with any added points.
Are you filing taxes on behalf of your blog this year?
Photo by Johnny Cheng.