Blogging is a profession that allows for a lot of flexibility and is appealing to those who wish to make their own hours or work from home. One thing some people are still in the dark about is filing yearly taxes. As a self-employed individual, there are certain things you should know about when it comes to taxes and your blog:
Certified business
The ability to make any tax deductions depends on the legitimacy of your blogging as a business. If your blog is categorized as a hobby, the IRS could deny your claims. Therefore, you will want to be sure you have made a profit running your blog and have the receipts to prove it. This could include payments received from advertising or affiliate marketing. If you are still in the early stages of setting up your blog, the IRS has an online checklist for starting a business. This helpful tool includes various resources that can make tax time much easier for you.
Deductions
You may have the ability to deduct certain business expenses. These deductions must be considered necessary for your profession, so it would not be a smart idea to try to add anything unrelated to your blog when tax season arrives. However, some items that could qualify as deductions regarding your blogging profession include a portion of your internet bill (if you are working from home), a new laptop purchased for writing, a camera for any pictures you take, or any other tech devices needed to continue running your blog. You could also possibly deduct a portion of your rent and utilities if you have a designated office space in your home or apartment.
Estimated taxes
The IRS requires individuals who owe at least $1,000 in federal income taxes, after withholding and refundable credits, to make estimated tax payments throughout the year. These are quarterly “pay-as-you-go” installments that must be paid on specific dates for each three-month period. Most self-employed people — including blog writers — and independent contractors fall into this category, because federal taxes are not taken out of their income as they make money. It is important to stay on top of the deadlines for the quarterly estimated tax payments and to be aware of how any holidays, weekends, or natural disasters could affect the due dates. Consulting with a tax professional is the best way to know if you should make quarterly payments.
Self-employment tax
Running your own blog is considered being self-employed by the IRS. As a result, you will be subject to a self-employment (SE) tax, which is the combination of Medicare and Social Security taxes that are typically split between employee and employer. If you are self-employed, that means you pay the entirety of this on your own. According to the IRS, the self-employment tax rate is 15.3% with 12.4% for social security and the other 2.9% for Medicare. Any self-employed individual who earns $400 or more must file Schedule SE (Form 1040 or 1040-SR). Also, self-employment tax must be paid, even if you do not owe any federal income tax.
If you are a blogger or are self-employed in another way, it is important to set aside a certain amount of money from your income to allow for taxes. Not doing so could result in a stressful situation.