You may not know this, but I am a licensed CPA (Certified Public Accountant). This means that I received my Masters in Accounting, passed the CPA exam and am licensed to practice Accounting. In fact, my full-time job outside of blogging is Accounting.
I am also a member of various Facebook groups dedicated to the blogging community. I see so many questions surrounding taxes (and so much incorrect information being shared) that I thought I would share my knowledge. Disclaimer: While I am a licensed CPA, tax law is very complicated. There are exceptions to every rule and I would recommend you consult with your own CPA.
Blogging and Taxes – Frequently Asked Questions:
Do I have to report income from blogging on my tax return? If you are profitable, yes. If you have made a profit from your blog in 3 of the last 5 years the IRS considers you a business and you must report your income. Also, if you worked on your blog regularly for the purposes of making a profit, the IRS may still consider your blog a business and you must report your income.
What is considered income? “Income” is not just cash. Essentially, anything that you receive for free that has a value MUST be reported as income. You were sent free product to review? Report it as income. You stayed at a hotel for free in exchange for social promotion? Report is as income. *Clarification: If a brand sends you something as a gift (with no expectation of you), you do not have to report that as income. However, if a brand sends you shoes with the expectation/agreement that you will feature them in a blog post then that is considered income. You are performing an advertising service for that brand and the shoes are your form of payment (income).
Do I have to report income from a company if they paid me less than $600? YES! A business is required to ask for your W9 (and then issue you a 1099) if they pay you over $600 (either in cash or value) in a year. The IRS also receives these 1099s and uses them as a way to catch individuals/businesses that are not reporting all of their income. So, *technically* if a company pays you less than $600 and does not issue you a 1099, then the IRS does not know about this income. However, NOT reporting this income would be a form of tax fraud.
Can I deduct expenses related to my blog on my tax return? Yes, but the amount depends…
- If you are profitable – Congratulations, the IRS now considers you a business. As a business, the IRS allows you to deduct expenses up to the amount you earn.
- For example, if you earn $5,000 from blogging you can write off blogging-related expenses in an amount up to $5,000.
- If you are not profitable – You can still deduct expenses UP TO your income amount. So, if you earn $5,000 blogging but your blog-related expenses are $6,000, you can deduct $5,000 of your blog-related expenses. The excess $1,000 in expenses can be carried forward to offset future income.
What expenses can I deduct? The list of expenses that you can deduct as a blogger is long. Some of the more common expenses are: the costs related to your blog itself (domain name fees, hosting fees, blog template, etc), advertising expenses (business cards, logo fees, etc), equipment (computer, camera, software, etc). You may also deduct a portion of your household expenses (rent, utilities, etc) if your home is your office. There is a formula for this and your CPA/tax software (affiliate link) will be able to help you calculate the amount of your deduction. Note: If you are a fashion blogger, you technically should not deduct the costs of your clothes. The only way that clothes are tax deductible is if they are required uniform (like a postal worker). My assumption is the same for makeup purchases.
Do I need to make quarterly estimated tax payments? YES. At a “normal” job, your company would deduct taxes from your paycheck and remit these taxes to the IRS on your behalf. Since you do not work for a company that is deducting taxes from your income, you will need to make estimated payments to the IRS every quarter. The due dates for these payments are April 15, June 15, September 15 and January 15. However, there is a minimum threshold. Based on my research, if you did not owe taxes in the prior year, or if you do not expect to earn more than $1,000 in blogging income – then you do not have to make estimated tax payments.
Should you save your receipts? Yes, yes, yes. In any profession, you could be subject to an IRS audit. You should save all of your receipts to support the numbers that you reported on your tax return.
*While I am a licensed CPA, tax law is very complicated. There are exceptions to every rule and I would recommend you consult with your own CPA.