When it comes to blogging and taxes, “Taxgirl” — who has two graduate degrees and an internship at the Internal Revenue Service — sums it up nicely: while blogging is relatively new to the tax scene, the law is the law and the rules haven’t changed.
Professional blogging is a business, and as with any business, the first step is to designate the type of business you plan on operating.
A business can function as a sole proprietorship, partnership, a limited liability company (LLC), or a corporation.
Each entity has a different tax requirement.
As Elle Martinez with TurboTax points out, a business that earns income is expected to pay taxes regularly in the form of estimated taxes.
General quarterly taxes are due:
April 15th – 1st quarter of the current year
June 15th – 2nd quarter of the current year
September 15th- 3rd quarter of the current year
January 15th – 4th quarter of the previous year
There are several ways you can pay your quarterly taxes.
* Online -Electronic Federal Tax Payment System
* Phone – Please choose the option applicable to your business:
* 1-800-555-4477 (businesses)
* Mail – Check the IRS to see which location is appropriate for you.
Deducting Business Expenses
According to the IRS, when it comes to deducting business expenses, a business expense must be both ordinary and necessary.
“An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.”
And the IRS stresses that it’s important to separate business expenses from the following expenses:
*The expenses used to figure the cost of goods sold
Personal versus Business Expenses
The IRS claims you cannot deduct personal, living, or family expenses. But if you have an expense for something that is used partly for business and partly for personal purposes, you can divide the total cost between the business and personal parts, and deduct the business part.
“For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible.”
Business Use of Your Home and Car
If you use part of your home for business, the IRS claims you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation.
And if you use your car in your business, you can deduct car expenses. But if you use your car for both business and personal purposes, you must divide your expenses based on actual mileage.
Blog Related Business Expenses
Running and earning income from a blog does take work and keeping documents on the related expenses can help you come tax time. If you maintain accurate records, you can deduct your qualifying business expenses from blogging when you file your taxes.
While not a complete list, here are a few business expenses Elle Martinez suggests:
*Office Equipment: Office equipment like the computer and printer depreciate, which you can include on your taxes (provided they are devoted to business use).
*Office Supplies: While most of my work is done online, I do have to replenish my office supplies like copy/print paper, printer ink, and pens.
*Subcontractors: I have a staff writer for one of my sites that I pay monthly. We both keep records of the invoices and the payments.
*Website Expenses: Running a website often means paying for hosting, the domain name, and possibly privacy services.
Other Business Expenses Suggested by The IRS
*Employees’ Pay – You can generally deduct the pay you give your employees for the services they perform for your business.
*Retirement Plans – Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees’ retirement.
*Rent Expense – Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
*Interest – Business interest expense is an amount charged for the use of money you borrowed for business activities.
*Taxes – You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
*Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.
This list is not all inclusive of the types of business expenses that you can deduct. For additional information, refer to Publication 535, Business Expenses.