I met Holli after sending out a Tweet while in the legal session at BlissDom. I think it said something like: "I need a tax professional ASAP!". Â The information I was getting seemed overwhelming to handle all on my own. Â Thankfully, I finally met her while we were both singing along to Biggie (no joke) on the dance floor. Â Our relationship was solidified Â when she told me that I should indeed have a glass of wine while I put together all of the paperwork for my taxes. I mean, really, she's a pro! We have a month before taxes have to be postmarked. Â Are you ready? Need help? Well,Â Holli has been a CPA for 11 years and is passionate about what she does (thank Gawd!). She works with bloggers, authors, photographers, marketing specialists and hot mamis like me. Â You can find her on the Twitter, Facebook and of course at Thrive Consulting! Check her out and when you do, tell her mami sent ya! Disclaimer:Â This post is intended to be for general informational purposes about blogging, taxes, and overall IRS tips.Â Please do not consider any of this consultation for your individual tax or legal needs.Â I urge you to consult your own tax expert with further questions.Â Any advice contained in this post is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this document.Â
So, youâ€™re a blogger.Â Maybe youâ€™re a blogger who has no monetary impact from blogging whatsoeverâ€”you blog on a free hosting site, you designed your own template, and you accept no sponsored posts or ads.Â On the other hand, maybe youâ€™re a blogger who has been able to quit your job and work full-time on your blog, thanks to your sponsorships, advertisers, and page views.Â More than likely, you fall somewhere in between these two extremes.Â If so, how do you report income and expenses from blogging on your taxes?
My first tip for you is to keep track of everything.Â There are plenty of great software programs and online systems for keeping business records, but if youâ€™re small and have very few transactions, I think an Excel spreadsheet or Google Docs document works just as well.Â Any time you receive anything for blogging (yes, this includes free productsâ€”value them at fair market valueâ€”and swag from events or conferences), log it into your system of choice.Â Any time you pay anything for blogging (registering a domain name, purchasing stock photos, paying a guest blogger, paying for a template), log it.
What about big purchases, like a video camera for vlogging or a new computer?Â My general rule of thumb is: include it in your blogging expenses only if youâ€™re solely using it for that purpose.Â If you buy a new laptop, but most of the time youâ€™re using it to edit photos of your kids and listen to Spotify, thatâ€™s not a justifiable business expense.
At the end of the year, evaluate your income and expenses.Â Did you make a profit?Â I ask this question, not to make you feel bad, but because the IRS cares quite a bit about whether you made a profit (or intend to, in the future).Â If you decide that your blog is going to be a business venture for you (meaning, you intend to turn a profit going forward), you will report your income and expenses on a Schedule C form.Â More expenses than income?Â No problemâ€”the IRS only requires you to make a profit for three of the next five years, and they are especially understanding of losses in the first few years of a business.Â However (and this is a big however), if five years goes by and you donâ€™t turn a profit in your business three of those five years, the IRS may come back and ask you to reclaim all those losses as profits.Â (Confusing?Â Yes.Â Talk to an accountant or tax attorney if you want serious specifics on this.Â All Iâ€™m saying isâ€¦ be cautious.)
Decide that youâ€™re never actually going to make a profit on blogging and that itâ€™s just a fun hobby?Â Thatâ€™s cool too.Â Report your blogging income and compensation (remember: compensation is more than just cash; it also includes free products and services received) on your 1040 form as other income.Â If you had expenses, you can take them to the extent of your income (that means if you had $1000 in income and $1250 in expenses, you can only claim $1000 of expenses).Â One other caveat?Â Expenses can only be claimed if you already itemize your deductions by filing a Schedule A.
If all this seems confusing to you, I highly recommend hiring an accountant to help you keep these things straight.Â The expense may seem daunting, but in the long run, the time and worry they save you by handling your affairs may be worth it!