Blogging is a growing industry that has climbed to become one of the best advertising platforms in the world. A mind-boggling statistic, for example, indicates that Tumblr had over 373 million blog accounts as of October of 2017. This means that those who are looking to join can be guaranteed two things: relentless competition and inevitable taxation.
Tax for bloggers works much like any other self-employed person. Before some major implications are explained, one must be able to answer the following question.
Is blogging a job or a hobby?
The answer to this question will determine how much an individual can take away in form of deductible expenses. Meaning, those who run their blog as a job will be able to deduct every new keyboard they buy. People who are only doing it is a hobby, on the other hand, do not qualify to subtract any expense reasonably related to the profession. The IRS recognizes that all revenue-making will have expenses associated with it. Hence why trucking companies can deduct fuel costs, Uber drivers can deduct car depreciation, and almost anyone can deduct job uniform expenses. Thus, a blog as a job will imply that things deemed necessary to fulfill that job can be taken away from the earned income.
Getting to Know the Self-Employment (SE) Tax
The IRS values their money. Actually, the IRS values their money so much that nobody can avoid paying Social Security and Medicare tax. People working as salaried employees pay half of these two taxes while their employer pays the rest. Those writing blogs, however, do not exactly have an employer. They are their own bosses, which means that they must pay both halves of the self-employment tax. It amounts to 15.3 percent, which means that bloggers who make $1,000, hypothetically, will have to put aside $153 for the SE tax. To determine who is required to pay, the IRS set a $400 threshold that, when passed, means that SE tax will be applicable.
Another problem with being one’s own boss is the lack of on-going employee withholding. Those who work for someone else get a percentage of their paycheck sent to the IRS every pay period. This way, they keep paying throughout the year because the IRS prefers to collect money on-the-go. People who will be subjected to SE tax might have to do estimated payments. This means that the blogger will have to pay up-front by estimating how much they will make on an annual basis. For example, if someone expects their blogs to bring $20,000 for the year and their tax liability to amount to $2,500, they will have to send four checks to the IRS amounting to $625 each. Payments can also be made weekly, bi-weekly, or monthly.
A Lack of Form Still Requires Payment
This type of knowledge is usually foreign to those not in financial services. After all, only those like Rusty Tweed know the hidden corners of the U.S. tax and revenue system. In order to recognize how much someone has earned throughout the year, there are things like W2s and 1099s. For bloggers, 1099-MISC forms will be used to see how much they made. The problem is that these forms are only issued to those who make more than $600. If a blog on one website made $300 while a blog on another outlet made $30,000, the blogger will probably only get one 1099 form. Nevertheless, both incomes must be reported identically. The lack of a form does not mean that someone gets to avoid taxes on money earned. Thus, it is important to keep track of all revenues as there might be no way to see the exact amount made retrospectively.
If a blogger buys a new keyboard, as mentioned earlier, they might let the receipt slip. Once this happens, they can no longer claim the keyboard as a deductible expense because they have no proof of it. Hence why it is important to keep track of everything paid for that pertains to the profession. What is a way to do it? Modern tools. Nowadays, almost everyone has a smartphone so why not put it to use? Downloading a free app that scans papers can be a simple solution to always have receipts on file. Also, using free computer programs like Excel can make revenue tracking effortless so that a lack of 1099 form will never be a problem.
Getting Professional Help
Not everyone is familiar with financial services like Rusty Tweed is. This comes as no surprise since most people do not have to be. Those who find themselves overwhelmed with the amount of tax work related to their blogs should simply look for professional help. Trying to complete a tax return and failing to do it correctly can be much more expensive than paying a Certified Public Accountant (CPA) to do it.