Tax Tips for Bloggers: Four things every blogger should know about taxes

The blogging profession has expanded rapidly in the past several years. Because of the popularity of blogging, it is important that the blogging community understands the tax laws that apply to the profession. Like any other job, when you earn money from your blog, you must report and pay taxes on the income.

While you may be employed by a blog, generally speaking, most individuals in the blogging community are self-employed bloggers; therefore, it is crucial for you as a blogger to understand the tax laws surrounding self-employed individuals.

Below, I will detail four tips that every blogger should know about their tax situation. Those tips include estimated tax payments, self-employment tax, business versus hobby analysis, and deductible expenses.

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Tips for Bloggers: Four things every blogger needs to know about taxes

1. Estimated Tax Payments

As a blogger, you must know about estimated tax payments! For those who have worked for a traditional employer, you know that taxes are withheld from your paycheck throughout the year. Unfortunately, as a self-employed blogger, you must remember to make estimated tax payments throughout the year because automatic tax withholding does not apply to self-employed individuals.

So, how do you pay estimated tax payments? Well, as a self-employed individuals, you must pay quarterly estimated tax payments if you expect to owe $1,000 or more in taxes for the tax year. The due dates of the estimated tax payments are April 15, June 15, September 15, and January 15 (of the following year). To avoid interest and penalties, it is crucial you pay your estimated taxes each quarter. You can estimate your tax payments by using the Form 1040-ES found on the IRS website to calculate the estimated tax payments relating to your blogger income. Additionally, you can pay the estimated tax electronically or via check by mail. You now know about estimated tax payments. Please share this estimated tax payment tip with other bloggers!

2. Self-Employment Tax

As a blogger, you must know about self-employment tax. To help plan for the self-employment tax on your blogging income, you should budget out an amount to pay the tax at year end. Self-employment tax consists of social security and medicare. As a self-employed blogger, you are liable for both the employer portion and employee portion of the self-employment tax. Additionally, it is important to note that the self-employment tax is in addition to your federal income tax liability; therefore, self-employment tax is due whether or not you owe federal income tax.

You should utilize the Schedule SE found on the IRS website to calculate the self-employment tax. you owe on your blogging income. Self-employed bloggers may claim 1/2 of the self-employment tax paid as a tax deduction. This tax deduction is an above the line deduction for all self-employed individuals paying self-employment tax.

You now know about self-employment taxes. Please share this self-employment tax education with the blogging community.

3. Business versus Hobby Analysis

The IRS requires you to prove that your blogging business is truly a business and not merely a hobby. This standard of proof applies to all activities that may be categorized as a hobby. The business versus hobby distinction is important because the IRS only allows you to take business tax deductions if your blogging business qualifies as a business under the criteria of the IRS. So, what criteria does your blog have to meet to qualify as a business?

In determining if your blogging activity constitutes a business, you should start with your goal of profit. To quote the U.S. Supreme Court, "If one's activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby, it is a trade or business." Additionally, you should utilize Reg. Sec. 1.183-2 to help determine your intent to make profit. The regulation section utilizes a 9 factor test to determine if your activity meets the criteria of a business or a hobby. 

The determination between a business and a hobby can be challenging. Unfortunately, the burden is on you to proof your status as a blogger. Follow the guidance from above to help you determine your category. I highly suggest consulting with a tax specialist to help in the business versus hobby determination.

4. Deductible Expenses

As hinted at above, a self-employed blogger may deduct business expenses related to his or her blog business. The business expenses must be reasonable and necessary for your profession. So, as it relates to the blogger profession, the business expenses must relate specifically to running your blogging business. These related business expenses can offset your reportable 
blog income, which is obviously a huge benefit in that it lowers your tax liability as it relates to your blog business income. Remember, if your blog activity qualifies as a hobby, you cannot deduct business expenses.

Below, I will detail some examples of expenses that may qualify as reasonable and necessary for the blogging profession; however, it is important to consult with a tax adviser to ensure your expenses meet the business expense deduction criteria as determined by the IRS. The following may be considered deductible business expenses:

• Supplies - this includes but is not limited to any equipment, electronics, etc. that are essential to your blogging business
• Advertising - this includes but is not limited to social media advertisements and others that promote your blog
• Software - this includes but is not limited to computer applications and cloud-based services
• Education - this includes education expenses, such as certification program fees, that are connected to your blogging business
• Learn about the lifetime learning tax credit here. 
• Home office - this includes a space where you do exclusive and regular business in your home
• Please consult with a tax adviser about calculating your home office deductible expense as this deductible expense requires expertise 

If requested, I can write a more extensive list of deductible business expenses in the future.

In conclusion

The blogging community should know and understand the four tax tips discussed here. These tax items directly affect you in the blogging business. By understanding estimated tax payments, self-employment tax, business versus hobby determination, and deductible business expenses, you will effectively and efficiently file your taxes as it relates to your blogging business. Please share the four things every blogger should know about taxes with other bloggers in the blogging community.

As always, please comment below any questions you may have about the blog tax tips discussed above. 

Disclaimer

Textbook Tax does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.