Yikes! It wasn’t until I went to BlogHer and attended a session about the business side of blogging that I realized that I will earn enough income this year to need to file a tax return. I’m considered self-employed by the I.R.S. because I will make more than $400.00 this year. I’m a little nervous about the rule that says I’m supposed to be paying estimated quarterly taxes though; I haven’t paid anything to anyone yet.
I also had to read the Self-Employment Tax Law to figure out if I am considered an employee or an independent contractor. Most of the paid blogging companies I write for have required me to fill out a W-2, so I assume I will get an end of the year statement from those companies to use when filing taxes. I just don’t want my husband and I to end up owing money, which is what is going to happen if I don’t start setting some money aside to pay the taxes.
There are also deductible expenses for working from home, and I’m planning to consult a tax professional to make sure that not only do I claim all the deductions I’m entitled to, but also that I don’t claim any that I really can’t. Chris and I once were friends with a couple who sold Amway, and they thought that everything they did was a business expense. We would go out for dinner, they would pay for it on their Amway credit card, and claim the dinner as a business expense! Needless to say, they were in for a big shock at tax time.
One thing I do need to do in order to both make it easy to separate my work time from my personal time and show the I.R.S. that I really do work from home is create some kind of home office. We don’t have a room we aren’t using, so we are looking at carving out a space in our large back room that the boys use as a playroom. I’ve been looking at office desks and workstations, which is lots of fun because they come with all kinds of neat drawers and dividers and so forth. I just don’t think the I.R.S. will take me as seriously if I wave my hand at my couch and say “there’s my office”!
I’ve been wondering what to do when tax time comes around. I haven’t done much digging into it yet! Guess I should..
Oh and your blog of the week on my site!
Unless you are at the top of the earning list, do not sweat it. If you owe taxes one year, then the next year you must start filing quarterly.
The PTB programs will send you a 1099-Misc. You will claim it as income and then write off your computer, Internet service, business cards, travel to Blogher, etc.
If you wind up making too much, you are able to save up to 2000 per year toward an IRA. You will have to pay Social Security tax at end of year.
Stopping by for Click & Comment Monday.
Michelle-Stop back by MomReviews and read the comment I got after yours from my friend Eileen, who has experience with filing self-employment taxes. She left me some great advice in her comment.
And wow, thanks for choosing me as blog of the week! I’m so honored! I wish I had a better profile photo though
Eileen, thanks so much for the valuable info. I’ll just have to see what happens at tax time. One thing that was mentioned at BlogHer was that even if a PTB company doesn’t send a 1099, you still have to claim the income, but not unless it’s over a certain amount. I don’t think you have to claim making five dollars from Google Adsense, do you?
I will consult a tax advisor for all the deductions I can take. I wouldn’t have thought of writing off business cards, my BlogHer expenses-can we write off PostieCon? It is a business networking trip after all.
I’m coming to your blog to find someone to visit on your blogroll and to officially sign up for Click and Comment Monday
I never do the estimated thing, but then again I never owe at the end of the year because we balanced it out with the claim number that Brian uses and it all seems to work out in the end with us still getting an okay refund. Whew. I have also found that a lot of times the standard deductions are better than the itemized deductions, at least for me anyhow. Although, now that I have an actual office and my own computer instead of working out of the living room I can claim those things this year! Hooray.
Loretta-We have always had a better return using the standard deduction as well. You get a pretty decent credit for having three kids!
I’ll just have to see how much money it really is, it might not be enough to bump us up to the next tax bracket, at least not this year. Maybe next year my blogs will get better Page Rank and I can make more money with them! LOL
You have your own office? I would LOVE to have a room all to myself with a door and everything.
I wouldn’t sweat it too much. As far as I know, you didn’t need to be paying quarterly if this is your first year out. Plus, some portion of your internet access, all of your hosting, and many other office supplies wil be deductible. Just keep track of it, and keep up with things so you’ll be organized enough to file your returns on time!! I have a love hate relationship with Quickbooks!
Kristie-Thanks for the tips! Quickbooks, huh? Oh, and I can deduct office supplies? Which means I can indulge myself in my love of trips to Office Max? Sweet!
You will get 1099′s from most people if you’ve made over $400 or $500. For the other income you still have to report it even if they didnt send you a 1099 unless your total of all streams of income is under $400 or $500. I can’t remember which exactly. Anyway, there are lots of deductions you can take including your domain names, hosting,business trips, business advertising,etc. Turbo Tax online makes it very easy for you. Plus I wouldn’t worry about paying quarterly federal right now. You can do that next year depending on how much you make.