Taxes for Bloggers
Thank you to TurboTax for sponsoring this post
I always get the same reaction when people find out that I blog for a living. A slight pause, and then the question “and you can make money doing that?”
Blogging, influencer marketing, content creation… whatever you want to call it, has been the “new” form of marketing for over ten years now, but it's still a bit hard for friends, family and the general public to understand what it is we do and how we can survive doing it.
Essentially, it's running a small business.
There's so much freedom to blogging, which is one of the reasons I enjoy it so much. But there's also a huge hurdle – actually running a profitable business!
The behind the scenes of blogging is something I've only talked about with other blogging friends, up until now. Partly because it can be difficult for outsiders to understand, and partly because I thought it would be taboo to publicly talk about money to strangers on the internet.
But if you know me in real life, you'll know that some of the areas I'm most passionate about are personal finance, business and entrepreneurship. On a recent road trip with some blogger friends, they encouraged me to share more about the behind the scenes nature and all the details that go into the business of blogging.
Since tax season is here I figured it would make sense to discuss tax preparation. Whether you're a fellow freelancer or simply want a peek into the finances behind running a business, today's post will be all about tax tips for bloggers.
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How to File Taxes as a Blogger
I remember the days when I had an office job and could do my taxes in about an hour. Traditional employees have taxes automatically withheld from each paycheck, so when your employer provides you with your W-2 you had much of the info you needed to complete your taxes.
Unfortunately, being self employed, the process is slightly more complicated for two main reasons:
Income earned when you are self employed is paid to you directly by a company without any taxes withheld, so it's your job to pay those estimated taxes. Not only do you need to exercise self control (that $100 job may only be $75 after taxes) you have to pay your estimated taxes at 4 designated points throughout the year.
Generally, the due dates for estimated taxes are April 15, June 15, September 15 and January 15.
While it's often referred to as ‘quarterly taxes', if you look closely the dates don't exactly fall on the first date of the new quarter so make sure to set a reminder for yourself. If you wait until the end of the year, you may be penalized.
When you're just starting out as a small business, it can be difficult to know how much you should pay in taxes, since often your income is sporadic and you're not sure how much you'll make for the entire year.
For example, you might book a couple jobs in January, but not get another deal until March. And those projects might be signed in month one, but the cash might not actually be paid to you until month three.
The second main difference to preparing taxes when you're self employed are Social Security and Medicare taxes.
At a traditional job, you and your employer would each pay 6.2% social security tax on up to $137,700 in earnings and 1.45% Medicare tax on all earnings.
As a blogger, you're essentially running your own business and acting as both the employer and the employee. So in the eyes of the IRS, you're responsible for paying the full 15.3% (ouch).
DIY Filing or CPA?
Now for the actual filing process.
When preparing your own taxes, software like TurboTax can make the process much easier, especially when you're self employed. It can also help you keep more money in your pocket, by automatically finding industry-specific and personalized tax deductions.
TurboTax Self Employed is specifically geared for freelancers, side-giggers, independent contractors and small business owners who work in industries like:
- real estate
- consulting services
- online sales
- education services
- performing arts
- personal and beauty services
Deductible Expenses for Bloggers
You're allowed to deduct expenses that are reasonable and necessary for your job.
For bloggers, this typically includes things like web hosting, camera gear and electronics, office supplies, travel related expenses, payment processing fees, legal costs etc. Tax filing fees (like the cost of TurboTax) can also be a deductible expense!
The important thing when it comes to deducting expenses is making sure you track them.
Throughout the year, you should maintain copies of:
- Bank statements
- All invoices and receipts
- 1099-MISC forms
- Business balance sheets and ledgers
- Previous tax returns
If you haven't been doing this throughout 2019, it's ok! You can start for 2020. Let's quickly run through each…
Ideally you should maintain a separate business account. It's also a good idea to open a separate business credit card so that you can easily keep track of all your business expenses.
Document all expenses and keep all your receipts. It's important to keep the actual receipt, as the IRS doesn't consider your credit card statement charge to be adequate documentation.
Accounting software like Quickbooks Self-Employed can sync with your bank account to automatically pull in receipts and help you maintain records.
When you're self employed, you typically have a freelance working relationship with the companies that pay you. They'll classify you as an Independent Contractor or perhaps an Affiliate and during tax time, they'll send you a 1099-MISC form. (Regular employees get a W-2).
The IRS states that a company who has paid over $600 in income for the calendar year must issue a 1099-MISC form. Make sure to collect one of these from anyone you worked with in the last year and double check that form's income number matches the amount you were paid.
Have a project you worked on in December but haven't yet been paid for?
Under the Cash Basis of Accounting, you report income when you receive it. So only count the money that has actually been deposited into your bank as income.
Issue the Right Forms to Your Affiliates
Lots of bloggers and small business owners outsource work. Things like:
- using a virtual assistant to help you with small tasks
- hiring a developer to code a new website
- using a designer to create an ebook cover
You in turn, have to issue a 1099 form to any independent contractor whom you paid over $600 in the last year.
When in Doubt, Consult a Tax Expert
With TurboTax Live Self-Employed, you can talk one on one with a real CPA.
The video chat feature is available on mobile or desktop, and it's a one way video so that you can see them but they can't see you (so you can get expert help on your couch, in your pajamas!) You can either request the next available time on-demand or pre-schedule a time that works for you.
Best of all, talking to a CPA with TurboTax Live is available year-round, not just up until April 15th. It's a great service to utilize throughout the year.
Key Filing Dates
And finally, deadlines!
- Tax returns for S-Corps and Partnerships are due by March 16, 2020.
- Tax returns for Sole Proprietors and Single-Member LLCs are due by April 15, 2020.
- Tax returns for C-Corps are due on April 15, 2020 if their fiscal end-of-year is on December 31, 2019. Otherwise, it is the fifteenth day of the fourth month after the end of its tax year.
TurboTax Self Employed Coupon Code
So naturally, since I've gone on and on about how convenient TurboTax is to use and how much it streamlines the filing process, I wanted to give away a couple copies for some of you guys!
Five readers will get TurboTax coupon codes to use the service for free :)
Thank you to TurboTax for sponsoring this post
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