Let’s face it: taxes are the least enjoyable part of any business. Blogger taxes are even worse because we’re much better with words than numbers.
That doesn’t mean taxes have to make you miserable. With some help, you can stop worrying about how you’re going to file your taxes and start focusing on how to reduce them. Sounds fun, right?
Please note that you shouldn’t use this article for tax advice. These are lessons learned from four years of experience preparing taxes professionally. However, you should only use this article to help ask your accountant the right questions.
Do Bloggers Pay Taxes?
If you make money online, you probably owe taxes on it. A couple of classifications help determine if and how much you owe.
Your Blog Is a Hobby
Unfortunately, you can’t deem yourself a hobby. As a lecturer at one of my tax conferences stated, “I can deem myself the Queen of England, but that doesn’t make it true.”
The IRS has nine guidelines to help you determine if your side income is a hobby. For example, you may have a hobby if:
- There aren’t “businesslike” records of your blog’s income and expenses.
- You don’t spend consistent time on your blog.
- You haven’t run a profitable blog in the past.
- Your blog spends more than it earns. Usually, this means you haven’t made a profit in three of the last five years.
You don’t have to match every point on the list because it’s more of a framework to help learn the general understanding of what the IRS considers a hobby. However, this ambiguity is a big reason why using a professional accountant is wise.
If your blog classifies as a hobby, that doesn’t mean you’re exempt from taxes. It just means you report your income differently.
You’ll report your blog revenue as “Other Income” on your tax return and pay income tax on it. You won’t have to pay self-employment taxes, but you can’t deduct any blogging expenses either.
I mean, this is the IRS. It can’t be that easy.
You’re Making a Modest Living from Your Blog
Congratulations! You don’t have to pay writers or make thousands of dollars every month to have a business. Your side hustle is a full-fledged online business if your blog regularly earns more money than you spend on it.
Further Reading: Don’t be discouraged if you’re still in the startup phase. Check out this article on how to make money blogging and put in the work. Then you’ll be on your way to running a lucrative business.
Unless you have an LLC, you’re what’s called a sole proprietor. As far as tax forms go, you’ll report your blog income on your personal tax return.
It requires a form called Schedule C, which is more complex than the reporting used for hobbies. On the plus side, you’re allowed to deduct expenses now.
Like a hobby blog, you’ll pay income taxes. Unfortunately, you’ll also have to pay self-employment taxes to cover social security and medicare taxes.
Usually, your employer shares that burden with you. Since you’re self-employed, you have to cover all of it.
Your Business Is Thriving
Suppose you’re earning way more than an expected salary from your blog. In that case, it’s time to separate your personal taxes from your business taxes. You’ll need to create a separate tax entity and complete a business tax return before finishing your regular tax return.
The most popular option here is to create an S Corporation (or S Corp). S Corps are handy when you’re earning a full-time income because they allow your business to pay you a salary.
Instead of paying self-employment taxes, you’ll pay payroll taxes on your salary. The perk is that any extra profits from your blog are only subject to income taxes.
How Much Do Bloggers Pay in Taxes?
We’ve covered which types of taxes you’ll need to pay. Now it’s time to talk numbers. For 2021 tax returns, your rates should fit within these guidelines:
- Federal Income Tax Rate: Ranges from 10% to 37%
- State Income Tax Rate: Ranges from 0% to 13.3%
- Self-Employment and Payroll Tax Rates: 15.3%
Excluding payroll taxes, these taxes apply to the net income you report. If you’re a hobby blogger, that’ll be your total income without expenses. For businesses, it’s the difference between your income and your expenses for the year.
Don’t panic over those top rates. You’ll only pay those high federal and state amounts if you’re pulling in a high income. But taxes add up fast, which is why proper planning is so important.
Top Tax Deductions for Bloggers
You can reduce the amount of money you owe at tax time by taking advantage of deductions and avoiding penalties.
Tax deductions (or write-offs) are relevant expenses used for blogging. Unless you’re still a hobbyist, you can use these deductions to offset any income earned from your blog.
Popular tax deductions for bloggers include:
Whether you use an affiliate link management plugin like Lasso or an SEO tool like Ahrefs, you can deduct it as a blogging business expense.
All those plugins and subscriptions you have for your site are tax-deductible. Web hosting, Adobe, Grammarly, and Mailchimp? They’re all deductible expenses!
Bloggers may be computer savvy, but it doesn’t mean we don’t enjoy a trip to Staples. Planners, notebooks, calendars, post-it notes, pens, and pencils used for blogging purposes are tax write-offs.
Good news! If you binge-watch blogging courses and webinars, you can deduct any of those costs. Within reason, write off those tools, books, communities, and lessons that teach you to be a better business owner or help you maintain your blogging skills.
You need to be careful with this one. You can’t just take a trip to Spain for a month, write one blog article, and deduct all those expenses. However, you can deduct reasonable travel expenses. Are you traveling away from home and attending Affiliate Summit? That counts.
Google, Facebook, Twitter, and other social media ads are pricey. Deduct them!
Contract Labor and Freelancers
Contract labor will probably become one of your most significant expenses when your blog grows. If you’re sending people money through PayPal to help maintain your business, all those payments will reduce your tax liability. That means writers, virtual assistants, and graphic designers are all deductible.
Tip: Make sure you file 1099’s for any independent contractors you paid more than $600 this year.
This expense is another one to watch. Every blogger is working from home at some point, but you can only take the deduction if you use that space solely for work.
Let’s say you have a desk in your living room where you usually write your blog posts. It’s where all your computer equipment and podcast gear lives.
If you (or other members of your home) use the space for non-business purposes, you can’t take the deduction.
However, if you sometimes write from the couch, it doesn’t exclude you from claiming that desk space. You just can’t add the couch space to your deductions if your family also watches movies there.
You need to make sure that whatever home office space you’re deducting is used only for business.
Just because I didn’t mention it on this list doesn’t mean you can’t deduct it. Business expenses have to be ordinary and necessary. That’s kind of vague, but be reasonable and always check with your tax professional when you’re uncertain.
Examples could be PO Box fees, giveaways, or related expenses specific to your niche.
The QBI Deduction
The IRS added this beautiful and headache-inducing deduction in 2018. Depending on how much income you earn, you may be allowed to deduct up to 20% of your business income from income tax.
Let’s say you earned $100,000 from your blog this year. If you take the 20% QBI deduction, you’ll only pay income tax on $80,000. You will, however, still calculate self-employment taxes on the total $100,000.
Takeaway: If I haven’t convinced you to hire a CPA yet, can I sell you on it now? CPAs can help you determine if you qualify for the deduction and how much to take.
Avoid Penalties by Paying Estimated Taxes
Since you’re not having regular withholdings from a paycheck, you need to pay your blogging taxes in advance. You can’t wait until tax time and write a huge check.
The general rule is that you need to pay estimated taxes if you expect to owe more than $1,000 with your tax return. A standard estimate is to set aside 30-40% of your blogging profits.
If you’re in a higher tax bracket or a state with high tax rates, you’ll want to save more. But if you’re in a lower tax bracket or a state with a 0% income tax rate, you don’t need to reserve as much.
Check with your tax advisor to see when you need to pay your state estimated taxes. While you’re at it, make sure your state doesn’t have any additional taxes you need to pay.
You have the option to pay all of your federal estimated tax in April, but it’s most common to pay four equal payments throughout the year. For 2022, the deadlines are:
- April 28, 2022, for the first payment.
- June 15, 2022, for the second payment.
- September 15, 2022, for the third payment.
- January 17, 2023, for the fourth payment.
The IRS can penalize you if you underpay your estimates. However, you can usually avoid this penalty by:
- Owing less than $1,000 in taxes when you file your return.
- Paying the lower amount of 90% of your current year’s taxes or 100% of last year’s taxes.
- Paying all of your estimates on time.
Helpful Tax Tips for Bloggers
Proper planning and tools can save you time, money, and stress. Even a few improvements will show great results when you file your taxes.
1. Open a Business Bank Account
You’ll need to identify all your blogging income and expenses. Opening a separate bank account is the easiest way to do it.
When your affiliate commissions come in, send them here. When you need to buy a new laptop, run it through that account.
Then when tax time comes around, you don’t have to sort through all your accounts trying to remember what was personal and what was for your blog. Plus, it shows the IRS you’re serious about your business and will add validity to any numbers you report on your return.
2. Track Income and Expenses Throughout the Year
It’s not just what you spend. When and how you spend it also matter.
For the love of all things holy, don’t cram your receipts into a shoebox (or inbox). Keep them organized and make a habit of going through your income and expenses regularly.
Think of opening a bank account as gathering the data. Tracking the information adds it up in a way that means something.
Proper bookkeeping means you’ll keep track of everything from January 1 to December 31 for that tax year. You need to know what you spent that money on, so you can have a proper tax classification for it.
For example, if you spend $18 at Amazon, identify it. Is it a new notebook? Categorize it as an office expense. Is it an elementary CSS book? Then categorize it as an education expense.
If you have a little extra money to spend, there are plenty of software options out there to help you with this. My favorite is QuickBooks Self-Employed, especially if you need something to cover your personal finances.
QuickBooks Self-Employed has everything you need to track your blogging income and expenses.
- Calculates quarterly estimated taxes
- Easily sorts business expenses
- Connects to thousands of banks
- Higher tiers are expensive for new businesses
It’s well-known, has options to help with your estimated taxes and deductions, and even links to TurboTax.
Plus, that QuickBooks subscription is tax-deductible too!
3. Hire a CPA
One of my favorite business professors taught me that every successful entrepreneur needs the 3 A’s:
- Agent (i.e., insurance agent)
I’m all for DIY-ing as much as possible, but there are limits. Unless you’re a pro at any of these, you should hire an expert.
CPAs will save you more than they cost by maximizing deductions and protecting you from novice mistakes. Also, think of the opportunity cost. Your time is most valuable when creating content and earning more from your blog.
At the very least, go to a CPA for your first year, ask plenty of questions, then do it yourself. Small business owners should be asking these questions anyway.
When looking for a CPA, ask if they currently work with bloggers, writers, or influencers. Many CPAs have experience working with small business taxes. That doesn’t mean they understand your industry.
The more legwork you do beforehand, the less you’ll pay your accountant. If you keep clean records, their job will be easier, so they’ll spend less time on your return.
If you decide not to use a CPA, find software that fits your experience level. A few of my favorites:
Tip: If you have limited income, you may qualify for free software. Visit the IRS Free File page to learn more.
What is an LLC? Do you need one for your blog?
An LLC is a limited liability company. Forming an LLC means you’ll separate your blog’s liabilities from your personal liabilities. If someone sues your blog for whatever reason, your house, car, and other assets are safe.
For tax purposes, you have options with LLCs. If you’re the only one who owns your business, you’ll make an election to file a Schedule C or an 1120-S for S Corps. LLCs with multiple owners can choose either Partnerships or S Corps for their business entity.
You don’t need to establish an LLC for your blog, especially when you’re new to blogging. It does have its merits, though, and everyone should at least consider starting one.
What is the filing deadline?
The federal deadline is roughly the same time every year. It fluctuates based on holidays and weekends.
For the 2021 tax season, tax day is April 18, 2022. You can also elect to extend your return’s due date to October 17, 2022, but the IRS will still expect full payment in April.
If you’re filing a business tax return separate from your personal return, your filing and extended deadlines are March 15, 2022, and September 15, 2022.
State deadlines vary, so make sure you confirm your state’s deadline ahead of time.
What tax forms do you receive for blogging income?
As a blogger, you’re most likely to receive forms 1099-MISC, 1099-NEC, and 1099-K. (You pronounce 1099 as ten-ninety-nine.) You’ll probably receive multiple forms every year.
These forms tell the government how much money you received. It’s important to note that most people need to earn $600 before any affiliate network or company files a 1099. Sporadic information is another reason why it’s so important to keep track of your income throughout the year.
Even if a company doesn’t send you a 1099, you still need to report any income you received from them.
Filing Your Taxes Gets Easier
This article is by no means a step-by-step guide for filing your taxes as a blogger because it would take dozens of IRS documents and too many cups of coffee to do that. Even without all the rules, the tax jargon alone takes time to learn.
Everyone’s tax situation is different, and I suggest you go out and find a CPA to help make sense of yours. It’ll get easier as you work with them or DIY all your tax returns. You could even say it’ll be less “taxing” the more you do it!
Ready to boost your blog’s income and work towards S Corp status? See how Lasso can help.
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