You know you’ve landed on your feet when you find a hobby that also earns you money. Something you genuinely enjoy doing but also pays — sometimes so well you can turn it into a full-time job! If you started blogging as a way to share your knowledge, improve your writing and connect with others, you might have landed yourself in this very position. Companies pay very well to be featured on blogs because they’re aware of how much influence they have.
Even if you didn’t set up your blog with this intention when companies start contacting you and are interested in paying you to feature their links and information it does change things a little. Once you’re earning money, it means you have to declare your income and complete a tax return (even if you have nothing to pay, the tax office will still want to know about it).
In fact, the Internal Revenue Code states that all income is taxable unless it is specifically exempted. The IRS states if you work as a blogger it means you run your own business, which is covered by the same tax laws that apply to most other kinds of jobs. So what do you have to bear in mind when it comes to paying tax?
Please bear in mind, this might not be applicable to all countries.
At what point is my blog classed as a business?
If your blog is a hobby and you’ve not earned any money from it yet, but you want to in the future- this can be a bit of a gray area. The IRS says that you need to be actively engaged in trying to make a profit and this must be for at least three out of the last five years. So if you’re in this position but are yet to earn money, you should be able to set up as a business.
If you’re earning money from your blog regardless of how small, you are most likely to be classed as a business. This can be useful as you are able to claim any losses for your business on your tax return. This can be anything from furniture, equipment, insurance, even utility bills if they relate to your business.
Things like domains and hosting could also be deducted, this is something that can be quite pricey for bloggers especially when you’re not earning any money yet. The problem with cheap WordPress hosting is that it often lacks in support which can be problematic when you’re new to the game. So it can make sense to spend a little more here.
What is self employment tax?
People who work for themselves will pay self-employment tax, this is a social security and Medicare tax. When you pay this, it provides you with a range of benefits, for example, retirement, disability and hospital insurance benefits.
Once your blog earnings exceed $400 you will liable to pay this, and even if you work as an employee and pay tax on that — your blogging income will still count as self-employment income. Even if it’s just on a part time or casual basis.
So it’s something that will still have to be paid, regardless of whether you owe any federal income tax. If you withhold your tax payments or only pay based on an estimate, you will most likely have to pay a penalty. If you run into any legal or tax issues, speak to a lawyer who specializes in the field.
What is estimated tax?
Something that traditional employees of a company don’t have to worry about but which you will face as a self-employed blogger are estimated taxes. As you don’t have an employer to pay these for you (since you are essentially your own boss), you will need to pay a quarter of your estimated taxes to the IRS.
These will need to be filled out if you estimate that your tax bill will be one thousand dollars or more. Estimated tax is used to pay towards things like income tax, as well as your self-employment tax and alternative minimum tax. Again it’s worth mentioning that even if you have a full-time job and blogging is a part time or casual thing for you this will still need to be paid.
It’s separate from your main employment, so the payments made won’t count towards your blogging income. If you get stuck, you could always just hire an accountant to deal with things for you!
Have you had to deal with tax as a blogger yet? How easy or complicated did you find it?