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Wednesday, January 28, 2015

Tax Tips for Bloggers

Tax Tips for Bloggers via www.productreviewmom.com
 Disclosure:  I am not a accountant.  Please use this post as helpful tips but if you have any questions please consult with a tax professional.  Post contains affiliate links.


Making money online is a great way to supplement your budget and help break the cycle of living paycheck to paycheck. However, there are a few things to consider before you start on this journey. They all revolve around the taxman, and how much you will owe at the end of the year. Here are some tips to help you handle whatever the IRS may send your way.


Make Sure You Have Records of Income and Expenses

 

If you are audited, the best way to end the process is to provide them with every piece of information they could possibly want in a manner that is easy to understand. In a spreadsheet, write down every expense directly related to your business. Site hosting; email hosting, document creation tools, even Copyscape all needs to be written down.



Know When You Are Required to File Taxes on Your Income

 

To be safe, report every income that you have received even if you made less than $400.  Use the spreadsheet method discussed above to keep track, and be prepared to have an exact number when it comes time to file.



Estimate How Much You Will Owe in Taxes

 

This is the basic formula when computing federal taxes on self-employment income - 15.6% for self-employment taxes. Take half of that value, and subtract it from your income. That amount is what you multiple by your income tax bracket, minus all deductions. Therefore, you have a rough idea on how much you owe.



For instance, say you only worked for yourself and made $24,000 blogging. That means your self-employment taxes is $3,744, out of which $1,872 can be deducted from your income. That means your initial taxable income is $22,182. The standard deduction for a single head of family is $9,070. This means your taxable income is $13,058. The first $9,075 is taxable at 10%, with the rest falling into the 15% tax bracket. That means the federal income tax for the year will be $1,504.45. Adding in the self-employment taxes, you will owe the federal government a total of $5,248.45 or approximately 22% of your income. 



If you did not owe income tax the year before, you are set this year regarding estimate tax payments. However, you will be subject to quarterly estimated taxes for the next year. The first estimate is due on tax day, so be ready to handle that as well. The trick is to figure out how much you owe and make the prerequisite payment. Some sole proprietors pay monthly, making it a regular bill that does not raise any problems.



Relax

 

Tax law is a complex endeavor that can be handled easily with some planning and plenty of documentation. A good rule of thumb is to set aside a third of your income for taxes, and pocket what remains at the end of the year. It is better to set aside (though not give the government) too much than not enough!




Are you a blogger? How do you prepare for tax season?

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10 comments

  1. Thank God for my accountant. There is SO much to consider during tax time. Just started to use Intuit Quickbooks and it has made such a difference

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  2. Thanks for the info! I'll definitely be working with an accountant on this one!

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    1. Yeah I work with a accountant now since I'm earning a lot with my blogs and don't want to make any mistakes.

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  3. Great advice! I spent most of my weekend working on my taxes as a blogger and small business owner. The upside, once I enter in everything into a spreadsheet my CPA husband does the rest! While I make nothing near 24K in blogging I did report the small amount I got paid per post. I also saved any and all receipts related to my business and blogging, including office supplies, blog posts, events, parties, meals, travel, mileage. In the end it pays to be organized.

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    1. Looks like you're off to a great start with your taxes Sarah. I just finished with my 4th quarter taxes and will be doing my yearly taxes soon.

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  4. These are such great tips that I need to file away for when I begin monetizing my blog.

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  5. It's that time again and anyone can use these helpful tips. Thanks for sharing this Louida!

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  6. This is some good information that I will keep in mind when I start to monetize my blog. Thanks for sharing

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