Have you filed your taxes yet? In the business of blogging, taxes are the biggest drag. For most of us at least. In fact, you many be reading this post in procrastination of actually doing your taxes. But no matter how much you try to avoid the subject, you can't escape it.
I'm in no way a tax accountant, but I've been a blogger operating as an independent contractor for over six years, plus I think I may have been an accountant in another life, so I've learned a few things about filing your taxes as a blogger. And regardless of whether you have a tax accountant file for you, file yourself, or use a service like Tax Robot and TurboTax (which I just used for the first time and highly recommend), you should always have an understanding of the tax man. These six tips are a great starting point.
I can't stress this enough. Everything must add up, and if you get audited you'll be thankful you stayed organized. A few examples of things you should keep record of:
- Emails: Especially when it comes to blogger SWAG, bartering, free trips — keep record of conversations. That way you can always retrace your steps — it'll be right in front of you.
- Receipts: Lunch meetings, drinks to entertain potential advertisers, etc, you can deducted these entertainment expenses so keep record. I have a folder designated for receipts and make sure to clear my wallet out weekly.
- Swag: You may be receiving free stuff to review, keep invoices of these products when they arrive, and make note on the invoice as to whether or not you requested item, it was expected, you reviewed it, etc.
Know Your Forms
There are a few key forms you'll need to have a rough understanding of, and the 1099 is important.
- The 1099-misc: Anyone working as an independent contractor, who earns over $600 in a given year will receive a 1099. Some clients will send you your 1099 via snail mail, some electronically. They have until the end of January to issue your forms. Example, affiliate networks like Linkshare and Google will send you a 1099.
Q: I worked for someone and got paid over $600, but they never sent me a 1099. Do I need to claim this? A: YES. You are legally obligated to claim all of your taxable income, even if it is under $600. Other common forms: Schedule C (Form 1040), W9, 1099K.
SWAG vs. Gifts
This is a tricky one, and a definite grey area. While there are some exceptions and all situations are different, in general, the IRS considers SWAG taxable income (which you are supposed to claim), not a gift. Some high-value ‘freebies' can actually warrant a 1099! So that pair of $500 shoes you received in the mail — there may be more than a giant heel attached. And then there is bartering, similar, but different …
Bartering is Income
“Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering.” Says the IRS. similar to SWAG, if you put a banner up in exchange for a new handbag, that's income. Not just a perk of being a blogger. When does a ‘freebie' become a barter? Depends. But primarily it's when there is a will full interaction between the blogger and person providing the item, or some sort of communication. Be it for review, a giveaway, etc. Once you begin a conscious business interaction, your new pair of shoes becomes taxable income.
Itemize Your Deductions
Regardless of whether you're operating your blog mainly as a hobby generating some side money, or a profitable business you should still itemize your deductions. Itemizing your deductions means claiming piece by piece your expenses. Common blogging expenses include:
- Blog Design
- Hosting Fees
- Magazine and online Subscriptions
- Logo Design
- SLR Camera (May be a depreciable asset)
Keep Your Red Flags Lowered
Red Flags initiate audits. If your blogging expenses heavily outweight your blogging income, think twice before you file. Same thing goes for huge expenses you aren't sure about claiming. Always do you research before claiming them as to not raise any red flags.
Also, IRS.gov will be your best resource so bookmark it today. Now go do your taxes!!