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Okay so having filed my taxes as a sole proprietor for my blogging for the past several years here in the United States, there were some things I knew to collect before hand that could be listed as expenses and others that need to be reported as income. These are some of the tips and information that I have compiled though you should always check with your accountant or tax person you work with and make sure you have everything you need to file your taxes and take advantage of everything you can write off.
When Do You Need 1099?
If you earn more than $600 from a single company or source then you will need (should) collect a 1099 form from that company or service. These 1099 forms are reported to the government and make it easier for you to collect and combine your finances.
Now, I only had 1099 forms from IZEA, Google and Amazon and most of my earnings came in various small payments spread out among many different advertisers. In this case you must report all of this income and you need to have good records (transactions / correspondence) in case you are audited.
Compile all of your blog earnings for the year from all sources of income which could include banner ads, text link ads, link sales, product sales, sponsorships…etc
As either a business or a sole proprietor you can write off a number of business related expenses for your blog. These can include the following:
- Web Hosting Fees
- Advertising (Adwords, Banner purchases…etc)
- Hiring Writers / contractors (graphic design / articles…etc)
- Giveaway Prizes
- Domain Registration
- Mileage driven to any blogging events
- Registration / fees related to attending blogging events
- Materials (Business cards, physical print media)
- Internet (Portion used for blogging)
You may also be eligible to write off a portion of your home, this involves taking the amount of square feet for your home office and factoring the cost of utilities and cost related to that portion of your home used for your blogging business.
Again, check with your accountant but go to your accountant with all your annual expenses for electricity, mortagage payments, rent…etc and see what is eligible. Make sure you have the square footage of your home / apartment and the work area to collect the eligible amount for write off.
When hiring writers or contractors to write for your site, something you need to be concerned about is if you pay more than $600 in a year to a single contractor who is a U.S. citizen. You will be required to report that payment and send the individual a 1099-MISC if you do pay somebody that much. Generally this isn’t an issue if you hire a variety of contractors through services like e-Lance, Freelancer.com, oDesk, Fiverr….etc but if you work specifically with the same person often you may end up paying them over the $600 mark which requires extra forms to fill out and provide on your part. Again, this only applies if you are hiring contractors from the U.S. to work for you and pay out that much, if you are hiring a contractor Internationally this rule does not apply.
Always check with your accountant on what is eligible and what isn’t, but as you can see from filing my 2011 tax year as a blogger I had a total of $9,156 income with $5,051 in expenses, this brought my net income of the year to $4,104 for my blogging activities and was my highest ever.
I work an average of 20 hours per week as a part time blogger, so if you divide this for all hours in weeks in a year (20 x 52 = 1040) and then divide my total income ($9,156 / 1040) this means my earnings came to $7.84 per hour from running my own blogs. This is just above minimum wage in the United States, but at least I was blogging from my home and didn’t have to spend time away from my family to earn that little bit of second income. Note, income varies significantly and some months the rate would have been $15 – $20 per hour, with others being $2-4 per hour, this is only the beginning too as my income has doubled each year so far since I have been blogging.