Blogging has become a popular way for many people to earn an income working for themselves. As a self-employed blogger, you have more flexibility and freedom than a regular 9-5 job. However, you also have important tax obligations that you need to stay on top of.
Understanding small business taxes is crucial for bloggers to stay compliant and avoid any issues with the IRS. This comprehensive guide will walk you through everything bloggers need to know about filing taxes for their blogging business.
Filing Status Options for Bloggers
One of the first things to decide is what type of business structure you want to establish for tax purposes. Here are some of the most common options for bloggers:
Sole Proprietorship
A sole proprietorship is the simplest and most common structure for blogging businesses, especially when just starting out. Under a sole proprietorship, you and the business are considered legally one entity. You would report all blogging income and expenses on Schedule C of your personal tax return.
Pros: Easy to set up, no formal registration required, minimal paperwork.
Cons: No liability protection, subject to higher SE tax rates.
LLC
Forming a limited liability company (LLC) separates your business and personal assets for liability protection. An LLC is registered with your state and requires formal articles of organization. You would still report income and expenses on Schedule C as a sole proprietorship, but have liability protection benefits.
Pros: Liability protection, credibility of formal business structure.
Cons: More complex setup with state registration fees.
S-Corporation
S-corp status is preferred by some bloggers making over $50k/year. It offers liability protection like an LLC but taxation benefits as you only pay SE taxes on reasonable salary drawn. The remaining income is taxed at normal rates. You would file Form 1120-S for an S-corp.
Pros: Taxation benefits, liability protection, credibility.
Cons: More reporting requirements, must issue W-2 salary, annual S-corp fees.
Keeping Proper Records for Your Blogging Business
Thorough record keeping is crucial for bloggers to track income and claim eligible business deductions. Here are some tips:
Track All Income Sources
As a blogger you may earn income from:
- Advertising like display ads, sponsored posts
- Affiliate commissions
- Digital products or courses
- Creative services like sponsored tweets or social promotions
Have a system to track any income from these sources. Retain invoices and 1099 forms you receive.
Save Receipts for All Business Expenses
Maintain files for receipts, statements, and invoices related to any business expenses like:
- Equipment, tools, software
- Website hosting fees
- Advertising and promotion
- Travel for conferences or business research
Scanning documents to digital files can help you stay organized.
Use Accounting Software
Programs like QuickBooks or FreshBooks provide an easy way to track income and expenses. They also help generate reports for tax time.
Separate Personal and Business Finances
Have a dedicated business bank account and credit card. Don’t co-mingle personal and business transactions, which can create tax issues.
Key Tax Forms for Bloggers
As a self-employed blogger, you will need to become familiar with certain business tax forms.
Schedule C
You will report your blogging income and expenses on Form 1040 Schedule C. Totals from Schedule C will flow to your personal 1040 tax return.
Schedule SE
This form is used to calculate your self-employment tax liability. SE tax covers your Social Security and Medicare contributions since you don’t have an employer making those payments on your behalf.
Quarterly Estimated Taxes
If you expect to owe $1,000 or more in taxes, you need to make estimated quarterly tax payments to the IRS to avoid penalties. Use Form 1040-ES.
Form 1099-MISC
If you paid any contractor like a freelance writer $600 or more over the year, you must issue them a 1099-MISC by January 31st.
Home Office Deduction
Use Form 8829 to calculate the home office deduction if you work from home. This lets you deduct a portion of home expenses like rent, utilities, and repairs.
Common Tax Deductions for Bloggers
One of the biggest advantages of being self-employed is getting to take tax deductions for legitimate business expenses. Here are some costs bloggers can commonly deduct:
Domain Registration and Web Hosting
Your main blog domain name and annual web hosting fees to keep your site online are deductible.
Website Design, Development, and Maintenance
Any fees paid for website design, graphic work, custom programming, or maintenance like security plugins can be deducted.
Advertising and Marketing
Deduct any ad network fees, solo ad purchases, link building services, social media promotion costs, etc. Just retain invoices.
Travel and Mileage
If you attend any blogging conferences or travel for research, the costs are deductible. You can also deduct mileage for local transportation.
Business Insurance
Premiums paid for business liability insurance or errors & omissions policies that cover your blogging risks are also deductible.
Professional Services
Fees paid to lawyers, accountants, editors, virtual assistants, and other professionals are deductible expenses.
Equipment and Supplies
Computers, cameras, software, office furniture, and supplies specifically for the business can be deducted.
Internet and Cell Phone
A portion of your internet and cell phone bills for the time used for business is deductible if you have a dedicated home office.
Understanding Self-Employment Taxes
In addition to income tax, bloggers must pay self-employment (SE) tax on net earnings. This covers Social Security and Medicare taxes since you don’t have an employer paying those on your behalf.
What is SE Tax?
SE tax is officially known as the Self-Employment Contributions Act (SECA) tax. It is the equivalent of payroll taxes for employees, but paid by self-employed individuals.
The current SE tax rate is 15.3% on your first $147,000 of net income. That breaks down to 12.4% for Social Security and 2.9% for Medicare. Any income above $147k is just subject to the 2.9% Medicare portion.
Calculating How Much You Owe
Figuring out your SE tax due involves a few steps:
- Take your total business income earned as reported on Schedule C.
- Subtract eligible business deductions.
- The remaining net profit amount is subject to SE tax.
- Use Schedule SE to apply the 15.3% rate and calculate how much tax you owe.
- This SE tax due flows through to your Form 1040 personal tax return.
Making Quarterly Estimated Payments
With SE tax, you need to make quarterly estimated payments to the IRS to avoid penalties. This accounts for the fact that taxes aren’t being withheld from a paycheck like an employee.
Use Form 1040-ES to calculate and submit estimated quarterly payments. Typically you would pay 25% of total estimated tax due each quarter.
Claiming the SE Tax Deduction
The good news is you can take a tax deduction for half of the SE tax paid. This is deducted as an adjustment to income on Form 1040. Retain your Schedule SE so you can properly claim this deduction.
Filing Your Tax Return
When tax season rolls around, you’ll need to file Form 1040. Your blogging business income and deductions will be reported on the schedules below:
- Schedule C:Reports your gross blogging income minus allowed business expense deductions to calculate net profit.
- Schedule SE:Uses your Schedule C net profit to compute how much you owe in self-employment tax.
- Form 1040:Your Schedule C net business income flows through to your personal 1040 return. Your total profit is subject to regular federal income tax rates. Schedule SE inputs your SE tax liability.
Claiming Deductions Properly
To avoid IRS scrutiny, make sure to:
- Only deduct ordinary and necessarybusiness expenses
- Keep thorough documentation like receipts and invoices
- Take deductions in the proper tax year
- Record assets over $2,500 for depreciation over time
Red Flags That Can Trigger an Audit
Some common blogger tax mistakes that can lead to an audit include:
- Claiming 100% of cell phone or internet bills without a home office
- Deducting full cost of computers or equipment rather than depreciating
- Not reporting barter income exchanged for products or services
- Reporting business losses year after year without any profit
Using a knowledge tax professional can help avoid these red flags.
E-Filing vs Paper Filing Your Return
Most self-employed bloggers file taxes electronically using IRS e-file. This allows for faster processing and refunds compared to paper filing.
E-file also has a lower error rate, provides acknowledgment that your return was received, and gives access to your tax records in an online account.
Paying Your Tax Bill
Using Quarterly Estimated Payments
Making quarterly estimated SE tax payments through the year helps avoid a big tax bill in April. The quarterly payments apply to both your income tax and SE tax due.
Paying Your Full Tax Bill By April 15
If you didn’t make estimated payments, you must pay the full remaining tax balance owed by the filing deadline of April 15. The IRS charges penalties and interest on late payments.
Applying for a Payment Plan
If you can’t pay your full tax bill on time, you can apply for an IRS installment agreement to pay monthly. Interest and fees still apply, but this avoids harsh penalties for late payment.
Conclusion
Learning how to properly file taxes as a blogger takes some upfront work. But staying compliant with your tax obligations will save you a lot of headaches down the road.
Just be sure to stay organized with your record keeping all year long. Deduct only eligible business expenses. And don’t hesitate to consult a tax pro for guidance on maximizing your legal deductions as a blogger.
Use this comprehensive guide as a resource anytime tax questions come up. And bookmark it to refer to each year as you file your blog business taxes.
