2.24.2012

TAX TIPS: For Bloggers & Small Business Owners


All month long join me here as I welcome amazing contributors with one thing in common
we love our business {blog/shop/etc} and we want you to love yours too!
To keep up to date with this series view all posts here.

You have heard from so many wonderful contributors in this series about how to find your brand, balancing life with your business, being true to yourself, staying inspired, tips & tricks of the trade and so much more!  Today I thought I would step in and share with you something a little more on the financial side of things.  

Let me introduce you to the dreaded world of dun.dun.dun TAXES. I would first like to let you know that it's obvious I don't moonlight as a CPA, but I'm pretty darn good at researching things!  So I'm going to share with you some of the things I've learned along the way and provide links to some other amazing resources so that you can start researching what is best for you & your business!

* disclaimer: i'm not a pro, this is not legal advice.. do your research and hire a pro if needed*


First up you should ask yourself whether what you are doing is a business or a hobby.  The IRS has guidelines that are helpful in figuring this out and if you determine you are operating as a business you should also look into this publication the IRS offers as a simple guideline as what you can deduct.
__________________________________________________________________________________
You can deduct the costs of operating your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.
______________________________________________________________________________________________

As you can see the IRS is very plain and simple in the way they describe things, which can create a lot of questions on your end if you aren't familiar with taxes or laws when it comes to your business. Taxes aren't fun, but we all have to do them.  As a blogger, shop owner or freelancer you could potentially be over looking  a bunch of deductions that in the end could be saving you a lot of money.  

It's never a smart decision to show that you spend way more then you earn (plus thats just not good to do anyway!), so be honest in what you will be deducting.  In the first year of business, start up costs are legitimate and its understandable if you take a loss even up to your third year in business.  However, if you are making income from what you do then take this part seriously.

If you work from home and meet the Home Business criteria, then part of your rent & utilities are deductible as well as what I've listed below if they are used to run a blog that generates income.

BLOGGER DEDUCTIONS
-Internet, hosting, domains, software & subscriptions
-Equipment upgrades & new devices
-Design work (layouts, logo, etc.)
-Advertising & blog sponsorships
-Furniture for studio/office space
-Cell phone & internet usage 
-Classes & e-courses
-Travel & entertainment for blog related events (think conferences!)
-Expenses for blogger meet ups, meals & outings
-Magazines & research material
-Office Supplies
-Media Downloads & Subscriptions
-Props used for tutorials
-% of home insurance (if you work in home office)
-PayPal Fees (you know, when your advertisers pay you!)
-Prizes and Giveaways (this is a tricky one so look into this!)
-Donations.. did you offer up space or a prize for someones charitable giveaway?
-Trademarks, Copyrights & all Licensing Fees
-Accounting & Legal Fees
-Is your dog a guard dog? Is your office at home? 
Then your dog is protecting your equipment & you can techinically write off pet expenses on this one (I called H&R Block to confirm and got a YES on this!)

Basically if you spent money on something to run your blog, 
you should check on it and see if it is deductible.

Most of the fees you see in the blogger list probably relate
 to your business already so on top of those...

SHOP OWNER DEDUCTIONS
-Shop fees listing, %'s & monthly rates (any store commerce such as etsy, big cartel, etc.)
-Banking and Merchant processing fees (paypal counts!)
-Supplies to make the product you sell (COGS= cost of goods sold)
-Supplies to package the product you sell (COGS)
-Supplies to ship & shipping expenses (COGS)
-Fees you paid from purchases online for supplies (including shipping)
-Trips to the post office and supplie stores? 
Part of your trips are deductible under mileage
-Booth Fees if you participate in Markets
-Products you send to be reviewed

Anything you spent on your business should be put into
 consideration if it can be deducted or not!

Keep track of EVERYTHING! I recently wrote a piece about some of my favorite programs to use for tracking & budgeting.. I swear by Outright, and you should sign up if you haven't already! Did you know the IRS now gets a report from PayPal & any credit processing companies if you made over $20,000 in a year? Yep.. if you made more then 20k last year the IRS (form 1099-k) will know when you go to do your taxes.  They won't know how much you spent out of that money in order to run your business, but they know that you made it.. so keep track & be honest!

Okay so here's the deal- if it takes you money to make money (which it does almost always) then that means that if what you spent is relevant to what you are making then you need to check to make sure it's deductible!  If you go to a tax preparer who isn't familiar with Blogging or having an Online Shop, get additional advice from another preparer- online research- or even your friends who have done this before!

Here are some links to some great resources that list about a bazillion more deductions and tips that I didn't even cover here! 101 Tax Deductions for Bloggers & Freelancers,  Blogger Write Offs,  Etsy Tax Topics,  Outrights Top 10 Tax TipsTax Considerations for the IndependentArts & Crafts: Most Popular Business Articles, Tax Tips for Bloggers from an Attorney

I would love to hear about your experience in doing taxes as a Blogger and/or Small Business owner.. if you have any tips, tricks or just advice.. please share below in the comments!

27 comments:

  1. You can claim your dog as a guard dog?? Oh that's so great! Haha, my puppy wasn't meant to be a guard, but he's definitely scary looking, so maybe they'd let that slide for me! :)
    xo Heather
    http://ahopelessnotebook.blogspot.com/

    ReplyDelete
  2. THANK YOU FRIEND!!!! I have been SORT OF keeping track of things in my first year but don't plan to do taxes quite yet because I haven't really made much money. But this year (I hope to make more money) and so I now know what I need to keep better track of! You are awesome!

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  3. This was a HUGE help. I learned a lot! And I this post should just how much I really should have known by now!! Thank you for taking your time to post this!.

    ReplyDelete
  4. Great advice Heather! The other good thing about tracking your spending is then you aren't fooling yourself. You might say "I had $20,000 in sales last year!" But if you spent $20,000 then that number doesn't seem so great. Tracking your spending every month is a great way to stay on top of things.

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  5. Great advice! Thanks so much!

    ReplyDelete
  6. So I tried to find info for my taxes for sponsorship on paypal, but couldn't find anything. Where do I look? Do they have tax documents?

    ReplyDelete
    Replies
    1. I accessed mine a few different ways.. Log in to Paypal and under History go down to reports where you can find basically all of your activity. Another one is sign up for www.outright.com and it does everything for you! I can get reports on how much I paid out per day/week/month/year =) Hope this helps!

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  7. This is so helpful! I've been reading a ton of stuff on businesses and taxes for months, but it's always nice to hear additional advice. You helped calm my nerves about upcoming taxes! Thank you so much! :)

    ReplyDelete
  8. This is awesome! I won't have to put my business on my taxes until next year(since I tarted it in January), but I'm definitely bookmarking this and going to start recording everything much better--didn't even think of including some of these things!

    ReplyDelete
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  13. As a blogger, how do I make my self an official business? Do I need to apply for a business license? I'm only making profit from google adsense, and a media relations group for each post I write for them regarding a certain product. For example I received a $150 to cost plus to purchase goods a couple times now, one was for goods that were to be given away to someone in need, the other was to put together a party. I have received a few "free" boxes of items to play around with, then have written reviews or hosted giveaways. Should I keep dollar amounts of all of that in record and how would I categorize all of it? Sorry I've not thought much about this until now.

    ReplyDelete
    Replies
    1. Each state is different for laws governing business, check with your states business website for specific information. In most cases a registered business name or sellers/resale license is required. For the income portion if you made more then $400 in a year for your self-employment it needs to be claimed. I have individual folders for each month for my blog and all my shops- i keep receipts, little notes from contributions, mileage reports if I traveled for supplies, meetings or anything business related.. etc. Then at the end of the year go back to reference it or hand it all over to your cpa!

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  14. This is an amazing collection of data. Thank you so much!

    ReplyDelete
  15. I don't know how many times I said "Holy Crap!" while reading this. Who knew all of the things you could claim on your taxes just from being a blogger? As I begin to grow my blog and make it, hopefully, into my business later, this post will be bookmarked forever. Thanks so much for this post!
    ~Christine
    xadayinthelifex.blogspot.com

    ReplyDelete
  16. So if we made less than $400 we are okay? I started my business in September of 12 so I didn't make $400 in 2012 . However, I intend to make that and more this year so I should start keeping track of all this. This post was really beneficial to me. Thank you!

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