The Ultimate Guide to Taxes for Bloggers

1. Define Your Blog Business

In order to properly file taxes for your blog, you need to define what kind of business you’re running.

Many people start a blog purely for fun. Maybe you’re documenting travel experiences, a self-improvement journey, or learning to cook. If this is the case for you, then any income you earn from that blog can simply be reported on your taxes as basic other income.

As a hobby, however, you won’t be able to deduct any expenses associated with the blog. On the upside, you won’t have to pay self-employment taxes on the hobby income.

If, from the very start, you intend to eventually do blogging part- or full-time, then it may be beneficial to select a specific legal structure from the beginning, which is what the next section is about.

Through integrating beautiful illustrations and captivating featured images, people will stop scrolling and remain on your page. The ultimate goal in maintaining a blog is for people actually to stop and read it, and original, bright and eye-catching images will be the first thing people see when they come across your blog.

2. Choose Your Blogging Legal Status

Once your blog is beyond the hobby stage, you’ll want to give some serious thought to choosing a legal status for your blogging business. The most common for bloggers are sole proprietor, partnership, and limited liability corporation (LLC), but becoming an S-Corp or C-Corp are also options.

For IRS purposes, you don’t have to be profitable to declare your blog a business. You can have a business loss for 4-5 years before they begin getting suspicious, and after that time you may have to classify the blog as a hobby if you’re not making more than you’re spending.

You don’t necessarily have to register as a business entity to get the blog started either, although as noted above, it can be useful if you know from the start that you want to make substantial income from blogging. 

If you’re not sure, it’s okay. If at some point you want to begin taking deductions for expenses, and/or adding partners or hiring employees, you can then consider specific legal status options.

A sole proprietor is the most common legal entity for small, home-based businesses such as blogs. In most cases, you simply go to your local county filing offices and fill out a DBA (Doing Business As) form. 

Check with your state attorney general’s office as well for any forms that need to be filed with them. As a blogger, you will not normally need a sales tax license, Employer Identification Number (EIN), or other licenses and forms.

A Limited Liability Corporation, or LLC, is another popular business entity form for bloggers, due to extra legal liability protections and tax filing options. The limited liability aspect of this business entity type can sometimes protect your personal assets, such as your family home, from being subjected to business forfeitures. 

Since this is considered a “passthrough” company for tax purposes, reporting can be very similar to reporting as a sole proprietor. An LLC can opt to be taxed as a partnership, C-Corp, or S-Corp as well, and those decisions are best made with the help of a professional tax attorney. 

Setting up a company as an S-Corp is appealing to some because it can potentially provide additional tax benefits. Essentially, you are allowed to pay yourself a salary that is taxed at your normal rate, and then pay yourself additional profits through the company as dividends. Dividend income is often taxed at a much lower rate, helping to reduce your overall tax obligation. 

However, this is a complicated tax entity that should not be chosen lightly because doing it wrong can get you into a lot of legal trouble with the IRS. Always consult with a professional tax advisor or business attorney first.

3. Consider Opening A Separate Bank Account for Blog Income / Expenses

Separating business income and expenses from personal makes record keeping and tax filing much easier. There’s perhaps nothing more tedious than trying to remember if something was used for personal or business purposes, and then tracking down the supporting documentation for the expense as well.

Separate your business and personal money from the start. Even if you do something as simple as using PayPal as a business account, and your bank checking account as your personal, it’s a good start. The easiest approach is to set up a business checking account with your preferred bank. Establishing a business checking account is a great step to proving yourself as a business for IRS purposes.

4. Understand the Different Tax Forms

As mentioned previously, hiring a graphic designer for your brand can be lucrative for a company. This way, all the imagery and graphics on your site are entirely unique to your brand and create a sense of brand recognition and consistency when people are scrolling through your site. Your audience will begin to recognize the original, stand-out images and associate them with your brand. Implementing this unique imagery will only further draw your audience into reading the post’s content. It is not a necessary step for all businesses; however, it can help take your branding and blog to the next level.

5. Keep Thorough Records of All Income and Expenses

As a business, when and what you receive or pay is important. Every dime you earn must be reported, and every business-related expense should be recorded for potential deduction. Keeping detailed records helps ensure you don’t pay more than you may have to and provides proof if needed later.

As a blogger who is just starting out, you are probably operating as a sole proprietor. This means you’ll be using cash basis reporting, and as such, you do not report income until you actually receive it.

If you earn income from an affiliate program for instance, you normally must reach a minimum amount of earnings before they’ll send the money to you. For tax purposes, you do not need to report those accumulated earnings that have not actually been sent to you yet.

The same applies for expenses. If you received your annual domain name renewal bill but have not yet paid it by the end of the year, then you cannot deduct that as an expense on your return.

Once you’ve reached the side hustle or self-employment stage with income from your blog, it’s a good idea to invest in a basic small business accounting tool or service to help track pending income and expenses.

6. Take Advantage of Deductions

When you run a business, you’re allowed to take tax deductions when you spend money on that business. In the United States, deductions must be ordinary and necessary to your specific type of business.

For example, a wedding photographer may deduct expenses related to wear and tear on their car, since they must be on site to perform basic business services. Blogging businesses are normally run from home or another static location, thus vehicle expenses won’t likely be considered ordinary and necessary.

There are, however, many things that are.

7. Pay Quarterly Estimated Taxes

Something new business owners are surprised by when it comes to taxes, is that they’re expected to pay those taxes every three months. Or at least an estimate of those taxes.

As an employee, estimated taxes are held out of each paycheck you receive. Your employer actually pays part of those taxes as well, and any overpayment is returned to you when you file your tax return. So employees don’t actually get extra money from filing tax returns, they’re simply getting the overpayment sent back to them.

Since freelancers and small business owners do not have an employer holding funds out of each paycheck, they are expected to do a similar thing themselves each quarter.

As a self-employed blogger, you’re expected to pay your own income taxes, self-employment taxes, and social security taxes. Since you are the employer as well, you must pay both the employer and employee portions.

Self-employed, freelance, and sole proprietors are required to estimate what they think they will earn for the entire year, divide that amount by 4, then send the divided amount to the IRS four times each year. Most experts advise freelancers and sole-proprietors to set aside 30–50% of their income for taxes until they get a handle on what to expect from one year to the next.

The quarterly income tax filing requirement generally does not apply to anyone who expects to owe less than $1,000 in taxes at the end of the year. If, however, you fail to prepay enough taxes through quarterly reporting, you will be subjected to late fees and fines.

8. File Your Taxes

Filing your estimated quarterly taxes and your final tax return can be made much easier with the use of software. Many business accounting tools have these features built in.

Quickbooks Self-Employed might be the simplest and most well-known. It has a smartphone app and can be used on the web, and it allows you to automatically import data from your bank accounts. For bloggers that earn money through advertising and affiliate networks, this may be the easiest and most affordable option, yet it can grow with you as your business expands.

Freshbooks is a popular cloud-based software that is popular for businesses that issue invoices. If part of your blog service includes offering guest posts to other bloggers for pay, then this software may be helpful for tracking paid and outstanding invoices in addition to other standard blogging income and expenses.

PayPal For Business is another useful tool for issuing invoices and tracking income. At the time of this writing however, it does not have a feature for categorizing expenses.

Other software and cloud-based services are useful for tracking freelance provider services and projects as well, which can be beneficial when you grow to the point of needing to hire help.