One question that I receive nearly every week from readers is what I do about taxes since I am now a full-time freelancer/blogger. This is a topic that I have been promising for quite some time now, so I’m glad I can finally publish it!
Tax tips for bloggers isn’t exactly the most exciting topic in the world, but it is something that needs to be discussed. As a blogger/freelancer, I have noticed that there are not many articles out there about the subject.
Why is that though? As a blogger, taxes can be a scary thing to think about, especially if you are new to the area or if you haven’t been saving for taxes as you go.
Here are my tips to have a successful blogging/freelancing business while doing your taxes correctly.
Remember to keep an accurate record of everything.
One thing that I am really guilty of is being extremely disorganized, and lets just say that this is really hitting me hard right now.
I have receipts and papers all over the place, and I already know that I have lost many receipts. This is probably my number one tax tip for new bloggers. For my 2014 taxes, I have been working on staying organized as I go and I have separate folders for everything.
However, for 2013 I am not so lucky. I am still organizing everything so that I can do my taxes, and it is not a pleasant experience.
Always try to keep everything organized and keep a receipt for everything that is related to your business. Also, it is wise to keep a detailed note of what you spent and why you spent that (such as in an Excel sheet). It may seem overboard to some, but the IRS doesn’t like rounded numbers and guesses. They want the exact figure.
Remember to pay estimated taxes.
If you are new to blogging or freelancing, then your tax bill once the year is over may surprise you. As a blogger or freelancer, usually taxes are not taken out when you are paid.
With every payment that you receive, you should be setting aside a certain percentage for your taxes. You should not be touching this money, and it may be best to completely push this tax money out of your head so that you don’t consider it “yours.”
Paying your taxes is something that you will probably underestimate the amount you have to pay if you haven’t contacted an accountant or done any research. Estimated taxes are due every quarter. You should try to figure out what you should be paying, because if you don’t pay them at the correct time and the correct way, then you may have to pay a penalty.
Below is when estimated taxes are due.
- April 15th
- June 15th
- September 15th
- January 15th
Don’t forget that you also have to pay self-employment taxes.
You will most likely have to pay self-employment taxes, so do not forget to account for that as well (if you used to work for someone else, your employer used to help cover this).
There are ways to help lower this by forming different types of entities, but this is something that you should contact a lawyer or accountant about if you do not know what you are doing. Articles to read about this include:
What if I just blog in my free time and work for someone else full-time? – You will still have to pay self-employment tax on your blogging income.
You can read further about this on the IRS website.
There are things that you can do to lower your tax bill as well.
In order to lower your tax bill by claiming deductions, you need to prove to the IRS that your blogging business is an actual business and not just a hobby.
If the IRS believes your blogging business is just a hobby, then they may not approve of your deductions. According to the IRS, you can prove this to them by showing them that you have earned a profit, the time that you put into your blogging business, and so on.
Anyway, after you have determined that you have a true blogging business, you can then deduct certain expenses as long as they are legitimate and necessary for you to run your business. I wouldn’t advise deducting every expense that you can find or imagine up, as some will trigger an audit.
Always be wise with what you chose to deduct and make sure that you have good reasoning and proof to back up your claim.
Different items that you may be able to deduct include:
- Your home office. Always be careful with this though as a home office can trigger an audit since many people fake this.
- Household expenses if your office is in a room in your home. This could include a share of the business’ amount of rent (be realistic with this – if your mortgage is $1,000 and you are claiming that rent on the room is $1,500, that will most likely not work), electricity, gas, trash, sewer, etc.
- Office supplies and furniture.
- Internet expenses.
- Applicable phone costs.
- Meals. You can only deduct 50% and there has to be a legitimate reason for this. Keep good record of who was there, when it was, and what was discussed.
- Advertising and business cards.
- Certain car expenses.
- Conference fees related to your blog. An example would be if you attended FinCon.
- Website related expenses such as for hosting, design, and so on.
Note: Please keep in mind that I am not a tax professional and I never was. I complied all of the above information by doing research and contacting some accountant friends. When I tell others that I used to be a financial analyst they tend to bombard me with tax questions and I am not sure why 🙂 The above post is meant more as a guide but you should always contact an accountant or a lawyer if you have any questions. Each case does vary with each company/person, so everything does not apply to everyone.
Are you a blogger? How do you handle tax time?
What tips do you have for a new blogger trying to manage their taxes?