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 a website design company
- 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
- giveaways
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
Paige says
I’m so glad I came across this post! I’ve been searching for this information but was always bombarded with a lot of other tax info that didn’t pertain to me. Thanks so much for sharing!
Niki Caron says
This is very helpful, thank you!
jackie says
so helpful! I’ve been keeping track of my income/expenses and just bought the ebook to have all the details I need. it’ll be good to know all the deductions I can take.
Lisette says
Thanks Jackie! I’m glad you came across this! Please feel free to share this on social media. This is honestly the best resource I’ve found!
Catie Scott says
You are the best! This was insanely helpful :)
Kristen @ Treats and Travels says
This is such a helpful post – definitely downloading that excel spreadsheet. Thanks for sharing!
Abby says
This is so helpful! Thank you for sharing!
xo Always, Abby
Lisette says
Glad I could help! Feel free to share on Pinterest!
Rachel says
This is great! I don’t make very much money from my blog, but for those who do, this can be very helpful. maybe some day if I see the dolla bills roll in, I will refer back to this. :)
-Rachel @ With Love, Rachel
Lisette says
It doesn’t hurt to keep track of things. I just started last week and I was beyond surprised!
Holly H says
We do this for our Ebay sales, but have recently pay quarterly taxes. It’s a little more work up front but you don’t get as much taken out in one big chunk.
Lisette says
My freelance musician friends also pay quarterly taxes and they swear by it. I might have to look into that as well!
Victoria Meyers says
wonderful tips! I kind of have a feeling that my blog/etsy income may pass the legal limit this year, so I definitely appreciate the insight onto what to keep track of for next years taxes!
Lisette says
If we don’t track our income / expenses, there’s no way to know! I hope my income tracker helps :)
Amanda says
Perfect post at a perfect time! Everyone hates taxes, but at least this gives a little more insight into the process. I have an LLC for my company because I run a vintage shop online. This makes tax time a little more difficult, but I have found that if you keep everything in order from the beginning, you’ll be in much better shape come April. Thank you so much for the resources you provided!
Lisette says
You’re so welcome! I’ve read up a little bit about sole proprietorship and LLC. You’re right, having an LLC is a little bit more work. I’m still a wee little blogger so I won’t need a LLC anytime soon. Good luck in your endeavors!
Kriselle says
This is very helpful! My only question is that you mention page numbers in your post. Where would I find those “pages?” I’m trying to find how freebies can be taxable income but there isn’t anything that seems to point to a page about it.
Lisette says
Kriselle — sorry if that was misleading. I was referring to the page number in the e-book. It’s only $5. Since it’s copyrighted, I can’t put all of the information on my site. I just paraphrased some important details that helps bloggers like you and I decide if we need to file separate tax forms for our blogs.
I HIGHLY recommend the e-book. It’s honestly worth much much more than just $5.
Alicia | Jaybird says
I’m so glad I found this (via Treat Yo Self Thursday) before starting my taxes. I have an income tracking spreadsheet but it isn’t quite as clear as yours, so I think I’ll have to update for 2014. Thanks for making this helpful resource!
Carol Topp CPA says
I’m a CPA working on writing a book on taxes for bloggers. I have a book on taxes for writers now and you can read a chapter on LLC status. While it’s written for writers and authors, it applies to bloggers too!
http://taxesforwriters.com/book/table-of-contents/ Scroll down to Chapter 6 on LLCs.
Carol Topp, CPA
Author Business Tips and Taxes for Writers
Lisette says
Thank you so much! I will definitely look into that!
Kim says
This is so helpful. Getting a tax I’d number has been on my to-do list!!!!
Lori Hil says
I am working on getting my blogging financial house in order! Thank you so much for this! Will share with my audience!
Katya says
Thank you, this is very helpful! I’ve heard that some bloggers prefer to incorporate their business as oppose to be sole proprietors. What do you think? Does it provide some extra tax benefits?
Also, I believe that a good way to track your business expenses and income is to open a separate account on Mint.com for your business. This website and app provide an opportunity to separate your expenses in categories (let’s say, shipping, giveaways, sponsored ads etc.) and to leave notes for your transactions. Also, you can download your account activity for a specific period of time in Excel format.
Katya says
P.S. – check out my blog, http://www.StyleSprinter.com , I wonder how you like it. Thanks!
Stacey Crutcher says
Lisette,
Great tips! I’ve managed to keep a record of all my expenses, as well as any income I’ve earned over the course of this past year. I’ve adopted a few methods of my own so far, such as keeping record file of all my sales. In addition, I really enjoyed reading about your helpful tips and will come back again to refer to this blog post for more ideas, thanks for sharing! This post was extremely helpful! :)
Mary Beth Jackson says
this is exactly what I was looking for, thank you!
Kim~madeinaday says
Hi Guys I am doing my taxes for the first time this year! I love this post, it is so informative. I decided to make a Pinterest Board and a round up on my blog and I included this post! I hope that is ok! If not let me know and I will remove it!
Kim
Em says
This is a great blog! If you’re looking for even more savings (it saved me a ton) go to DIY Tax (www.freetax.com) … it allowed me upload my returns for reference and was totally free for federal AND state returns. Anyways, a huge savings for me and I thought I’d share.
thanks again for a great blog!
Vicky B. says
Thank you Lisette, very helpful tips. I am just about to file my taxes for last year and this has clarified a lot for me. :-D
Naina says
Hello Lisette,
Just landed to your blog for the first time. After reading 4 to 5 articles, I have to say that you’re an excellent teacher! Kudos.
Thanks for explaining every bit.
Dave Russ says
Good job for this article. Even bloggers need these things.
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Aliza B says
So many people in my different blogging groups ask about this all the time. I am going to share this post in the groups so they know. Thanks for writing this up!
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Jocelyne says
OH gosh this is exactly what I was looking for. I just started blogging and I am excited. Looking forward to start doing something out of this, I am still learning a whole lot. Thank you for sharing.
Alex says
Hey there, I just saw this post in a blogging group and wanted to let you know that the $400 number you give for being self employed is not correct, according to my accountant. Regardless of how much money you bring in, you still need to file a tax return. Even if you make $1000 and spend $1000 (on ads, hosting fees, etc), you still need to file. Just wanted to let you know!
Mel says
Thank you for this! Taxes are super confusing and it’s hard to keep track of everything. This makes things easier!!
Mel | http://www.thegossipdarling.com
Gentry Adams says
Stumbled upon this as I’m trying to get organized this year and have to tell you that the tracker is amazing- EXACTLY what I needed! Thank you for this!!
Carlen says
Thank you for the help!
I am completely new, just started building a blog. I am completely overwhelmed.
Do you know how and when to record/report items that are sent to you in return for review as well as the extra item send for a giveaway to the readers? I would be so grateful. I’m 90% scared and the other 10% had courage to write you this message! Thank you SO much in advance.
Amanda says
This couldn’t have popped up in my Pinterest feed at a better time. Can tax season be over yet!?
Laura Wilbur says
This was well written; simple to understand and informative. Thank you for the easy to use income and expense tracker.
Diana says
Great post! This is by far the best information on blogging and taxes I have found. Thank you for answering this question so succinctly! Thank you! Thank you! Thank you!
Oliver Neely says
I like your income tracker, going to download that and give it a go. I think a lot of bloggers don’t think about keeping track of things, and it can be easy to forget what money you received, when and from where.
Happy Home Fairy says
I CANNOT THANK YOU ENOUGH FOR THIS! IT IS SAVING MY NECK! :-)
Rachelle Cobb says
This is exactly what I have been looking for! Thank you so much for this incredibly thorough (but uncomplicated) resource.
Pamila J. Wheeler says
Hi Lisette,
Nice Post!!
Starting a business has many steps, phases and challenges, and obtaining financing is usually the last hurdle.If your trading as a limited company, firstly you need to pay Corporation Tax.Most businesses are likely to register for VAT, this will be added to the end of all of your invoices, and this money is given straight to HM Revenue and Customs.Thanks for sharing this valuable information.
Belinda Compah-Keyeke says
Great post. Thanks for the downloadable sheet!
caroline mendes says
Hi! You’re easily my new favorite channel on Youtube. I’m so glad I came across your video on YouTube where you share tips on finances. Although I’m trying to download your FREE Blogging Income Tracker and the link is not working anymore. Is is possible to still download the excel link?
Best,
Caroline
Lauren says
This is SO helpful!! Thank you. Thank you. Thank you!!
Baby says
Awesome post! Keep up the great work!
kitchen says
Awesome post! Keep up the great work!