Let me preface this post by letting you know that I am not a tax professional. This post is solely informational and should not be construed as tax advice. You should contact a tax professional with any questions you may have to make sure that you are following the law.
It is that time of year again. The time when everyone starts thinking about taxes and bloggers start asking questions of other bloggers. “Can I deduct this?” “Should I declare that?” There are so many questions and answers floating around that I get confused every year! So, I started scouring the internet to get my answers. Here are 4 common tax myths I have heard in blogging groups and why they are not true.
Myth #1: My blog is just a hobby, so I don’t have to declare it as income.
According to the IRS, you are considered a business “if you have a profit in at least three of the most recent five tax years.“1 So, if you have ad revenue, sponsored posts, etc. and make more money than you spend on your “hobby,” you are considered a business. Basically, if you depend on the income from your blog you have a business and need to declare the income on your taxes.
So, if you believe your blog is a hobby, you don’t have to declare the small income you get, right? No. “If you blog for fun infrequently and you make money only occasionally, then it’s probably a hobby,” said Jennifer Rempe, tax analyst at The Tax Institute at H&R Block. “Just remember that you still need to report this money as income on your tax return.”2
Myth #2: I don’t have to declare review items as income.
Many bloggers receive products in exchange for writing a review on their blog, or sharing on their social media. Is this income? I think Sara F. Hawkins said it best in her post filled with tax tips for bloggers (this is a must read): “while many bloggers frequently talk about the cool products that just show up at their door, most products arrive with some expectation. The company or PR rep had to get your address or possibly exchanged emails with you regarding some expectations they may have with regard to sending you their product or service. If there has been conversation where you have agreed to try their product or service and then write about it, the brand or PR rep is sending it to you with the expectation of getting something in return. That is the fine line separating ‘random stuff dropped off by hot delivery guy’ (not taxable income) and ‘item provided for something in return’ (taxable income). If you’re sent a product for your use to help facilitate a giveaway you’ll be doing, that item you received is taxable income.“3
Myth #3: If I donate my review products I don’t have to declare it as income.
This is definitely not true! Again, Sarah F. Hawkins says it well “Here’s the general rule: If you don’t report it as income, you don’t get to take the charitable deduction. That ugly sweater Aunt Martha gave you? Donate it all you want and take the charitable deduction. She gave it to you because she loves you. Nothing about it will be considered taxable. However, if the item would be taxable income you need to report it as such if you want to get the benefit of a charitable deduction. This is definitely one of those ‘you can’t have your cake and eat it too’ type of situations.“3
Myth #4: I made less than $600 (or received a product that was less than $600) so I don’t have to declare that income.
This myth comes from the fact that businesses do not need to send a Form 1099 to bloggers who made less than $600 from them during the year. Just because you don’t receive a Form 1099, doesn’t mean you don’t have to declare the income. Yes, the IRS may not know about it, but it is still income and therefore needs to be treated as such.
And one last thing…
Although it is not a myth, I did learn something new as I was researching this article. As a blogger who makes money, I should be paying quarterly taxes. “If you are a self employed blogger and your blog is profitable, are you making periodic estimated tax payments to the government? If not, you could potentially be charged interest and penalties depending on your situation.“4 Eek! I should look into that more.
Do you have any blogger tax myths to share?
Sources and recommended reading
- Tax Tips for Bloggers by Intuit (TurboTax)
- To Report or not to Report: Blogger Tax Tips by Teresa L. Clark, H&R Block
- Tax Tips for Bloggers by Sara F. Hawkins
- Financial Planning for Bloggers by Guest Author on Problogger
- Do You Barter? The IRS Wants Its Cut by Robert W. Wood
- Free expert advice included with H&R Block tax prep software (affiliate link)