NOTE This is an older post that has been updated with information from wonderful friends in the comments and things I have learned over the years! Last updated: January 2018
WHO: Blog owners & operators that make any money over the year (including all those product payments in reviews & giveaways!) EVEN if blogging or owning an etsy shop is not your full time job! If you make any money (or spend any money on your blog as a business) then you are required to report it on a Schedule C if you are a sole proprietor. You may also be able to report it under hobby income if you are not a registered business.
WHAT: When doing your taxes you need to account for the money you made off your blog as well as your other job(s)
WHEN: Taxes are due April 15th so make sure you sit down to get them done before hand! The sooner you turn in your taxes, the sooner you can get your refund! YAY.
WHERE: I recommend making a little work station at home with all you tax documents, receipts, and blog information and carve out a couple hours to get it all taken care of and done with!
WHY: Because the government wants to know how much you are making and wants to make sure you are playing by the rules.
HOW: I am not claiming the title “expert” on any of this, but I want to share with you what I learned from doing my blog taxes for the first time ever this year. I hope it helps you feel more comfortable about the whole blog taxes thing and helps you stay organized and on top of things for future years.
I had no idea I needed to worry about blog taxes this year. I work full time and I blog as a hobby, the thought to file my blog income was not anywhere on my radar. (Now in 2018 as a full time blogger it is definitely on my radar!) But wherever you are in this journey, know that you need account for the money you made and spent on your blog.
I wish I knew the exact amount I made off the top of my head. I wish I had a spreadsheet with my earnings and spending but, I’ll be honest, I had nothing of the sort! I looked up my Passionfruit account, racked my brain for all the giveaways & reviews I had participated in 2013, and spent a good while looking through my PayPal account history. It was a process but I got the biggest things from 2013 all sorted out and, in the process, I created a pretty great system to keep track of all my 2014 earnings & expenses! (It helps looking at the bright side!!)
CREATING A SYSTEM
I know the thought of blog taxes can be intimidating to many (I know it was and still kinda is to me!) but when you create a system, it can actually be easier than you think. In the simplest terms, there are two categories you need to focus on INCOME + EXPENSES. I recommend creating an excel word document or google doc titled “Taxes (year)” with two pages, income and expenses and recording EVERYTHING as it happens.
On the income page it is important to record all forms of income. For bloggers income can come as money from ads or selling product as well as products for reviews and giveaways and sponsored content. Make sure you are recording what it is, the value/cost, if it is a product or cash, and the date (Amazon affiliate Sales , $35.34, cash, 2/28/14 )
On the expenses page it is important to record all the expenses your blog costs you. Here you record things like blog maintenance & education (domains, blog designs, new laptop, blog conferences, blog community groups, classes you took, etc.), things purchased specifically for blog posts, giveaways, blog related thank you gifts, office supplies and office space for blogging, and and pretty much anything that you pay for because you blog. Make sure when you are recording all this information in your spread sheet you are including what it is, cost/value, date, and purpose (lifetime influence network membership, $200, 02/15/14, education).
DO YOU NEED TO RECORD REFERRAL MONEY?
If you receive money for referring your friends to a website (Minted, ThredUp, Stitch Fix, etc) you do not need to record that money anywhere. You would be receiving that money whether or not you had a blog – that is an incentive they do for their marketing (you become their ad!). They write the gifted money off on their side of things but you do not need to worry about this at all when filing your blogging taxes!
WHAT ABOUT GIFTS (no obligation to blog about it)?
If someone sends you a “thank you” gift or a “I love your blog” gift and makes it clear that it is not for a review, it is just for you, then you do not need to record it! Even if you end up posting it on social media, it was a gift and so you do not need to record it. there was no exchange for goods or services (EX. product in exchange for a review).
HOW ARE GIVEAWAYS RECORDED?
Giveaways are a funny little thing in themselves. All giveaways that you purchase the items for will go on your expenses – like if you gave away a $20 Starbucks card and you bought it than it needs to be recorded on your expenses. If the giveaway product was donated (Lindsay Letters gave you a print to giveaway) then you need to record it in two places. It is a source of income because Lindsay Letters is giving you that print to giveaway and there is an exchange for goods or services. BUT it also needs to be recorded in expenses because the giveaway costs you that print. It ends up canceling out but it helps you remember to be recording everything and it also looks really good if you were to get audited (you are showing everything and not hiding anything!)
HOW ARE PRODUCT REVIEWS RECORDED?
If you are given a product to review in a post you need to put that on your income page. If Lulu Lemon sends you a new workout outfit to wear and then share with your readers, that is an exchange of goods and services and counts as a form of payment.
WHAT IF I BUY SOMETHING TO BLOG ABOUT IT?
If you saw that Hello Merch was offering 50% off and you grabbed a new sweatshirt to show off to your readers, you can write that off! You bought the sweatshirt with a blog post in mind and were eager to review it to share your joy with your readers. That experience counts as an expense. Think of things you would not purchase if you did not own a blog (blog planner, stitch fix, etc. ) and record those under expenses. Don’t go crazy over board with this – stick to purchases that are honestly for you blog and that you use blog money for (not personal allowance or fun money). If you go overboard on writing everything off (coffee for my blog fuel, my $1000 bed for my blog dreams, $15 wool socks for my feet in the winter when I want to blog on the couch…) you make yourself a target for the IRS.
TIPS & TRICKS
1. Even if you make little to no money on your blog (or etsy) I encourage you to create a google doc tracking all your income as well as all your expenses. It is a good practice to get into and also makes you aware of what is really happening with your blog monetarily. It is also great just in case you have a wonderful year and end up making more money than you ever imagined. If you already have it all recorded it is easy to file it with your taxes!
2. I recommend Turbo Tax for everything. Do all your regular taxes (your other jobs, husband’s job, giving, loans, intrest, ect) and then they also make a space for you to enter your self employment. You may get to a place in your business where you need a CPA to help you sort through everything – we moved to a CPA in 2017 and it was so worth it.
3. Consider how much of your office space (gas, electric, water) is being used for blogging and put that amount on your expenses. PS: also be wise about this don’t go crazy overboard with deductions.
4. Don’t be alarmed if your expenses are larger than your income at the end of the year. For the first three years the IRS expects that trend in a small business but the goal is to eventually make more than your expenses (it would be nice to have some take home, huh?!)
5. Enjoy the process! I know if sounds crazy to work on your taxes but it is actually pretty fun seeing where you money is going and how it is being spent. You spend so much time and energy on your blog – you should take care of it!
** If you see something wrong please correct me! I don’t want to be doing it wrong for the next forever and teaching everyone else to do it wrong as well!