If you are earning an income blogging, freelancing, running an online business then you’ll likely need help with your taxes. I started thinking about the additional tax consequences of running a blog last year when I started earning a modest income.
Previously, my taxes have been relatively simple. I earn a regular salary and I file jointly with my wife, who also has a regular job. Every year, we get our W-2’s from our employers and fill out our tax documents. This year, in addition to my normal salary, I have some additional income from my blogging.
Of course, if you are running a blog or ecommerce website, you don’t have an employer that sends you paperwork at the end of the year. You have to keep track of your income yourself. You are operating essentially as a business or freelancer. You have different tax considerations that you would as a simple employee.
For example, in my case, my computer died on me half way through the year. I was unable to blog without a computer, so I had to purchase one in order to continue operating my blog. My new computer then becomes a business expense. I needed to keep track of that against my earnings as it changes the tax calculations for purposes of income.
I also had to consider questions about how my internet service might be counted as a business expense. How about technology products that I purchase for review on my blog that subsequently earns me affiliate income?
I also operate my blog out of my home office. Am I then able to write off a portion of my mortgage as a business expense?
These are questions that are way beyond my meager expertise in the tax field: as in they aren’t simple plug in fields in turbo tax…
So now what?
In my first year, my blogging income was so low, that I could still get by with doing my own taxes. However, as time went on, my sources of income grew and I knew that my finances were becoming more complicated.
These are things that I never really thought about when I first started this blog. When you first start a blog, income is more of a hope than a reality. It takes time before you even start to see significant traffic. Then the income starts trickling in by pennies and dollars. At that point, it’s simple tracking the couple hundred dollars for tax purposes.
However, as your blog grows and becomes more profitable, you start to realize that your taxes will get complicated.
I did a couple of things to help track my finances when I started making more money from my blog:
- First off, I started making sure all my income and expenses came and went from a dedicated account just for the blog. This way, I could easily track my profit for the purposes of reporting my taxes at the end of the year.
- Secondly, I started to track my blogging related expenses more carefully. I not only tracked my expenditures, but I also kept in mind the reasons why each purchase was a blogging related expense.
- Thirdly, I started to think on different business expenses that I may need for my blog. I realized that I needed to balance my expenses against my profit better or I may incur other tax consequences. By ensuring that my profit is balanced out with my expenses, I can keep my profit lower so I don’t raise my overall tax bracket too high
- Finally, I started investigating getting a tax professional. I know that when my taxes started getting complicated, I needed a professional to make sure that I am claiming all my deductions and expenses. In the long run, this will save me money. Many people often Need Help to Claim Tax Back. I wanted to be preemptive and make sure I’ve investigated all avenues to save of my taxes up front.
When starting an online business, tax consequences are often an afterthought. But I think it’s a good idea to think ahead and plan for success. Think about what you would do if your budding online business were to take off and start earning good income. Will you have serious tax consequences? Do you need to look into having a professional assist you with your taxes? There are likely many ways that you can adjust your expenditures and claim deductions you didn’t even know about. Planning ahead can save you money when it comes to taxes.