I’m Blogging and I’m Making Money Doing It….What Do I Do Now?

Bookkeeping for Bloggers

I‘m Blogging and I’m Making Money Doing It….What Do I Do Now?

As an EA and a certified bookkeeper I get asked questions like, “what do I do now that I am making money from blogging?” Or, “what information should I keep for filing my taxes?” I had no idea that people were making a living from blogging. These online diaries known as weblogs or ‘blogs’ have morphed into a cutting-edge phenomenon that has provided a platform for the internet’s next wave of innovation and moneymaking opportunities. For those of you who are thinking about getting into blogging and are wondering some of the ways bloggers are making money from this well here are some of the ways they’re doing it. They are putting advertisements on their blog like Google AdSense which is an easy non-technical way of generating income. All you need to do with AdSense is copy a code and paste it on your website. Another way is to be in an affiliate program which allows you to post a link to the company’s product on your blog and if someone clicks through your blog to their site and orders, you would get a portion of the sale. Also, you can make money from private sponsorships and when your blog becomes really established with readers you can expand by offering memberships to your website to gain access to exclusive content on your blog. There are a lot more ways to generate money by having a blog but those mentioned are the most popular. However I’m not here to tell you how to make money I’m here to explain what to do when your blog starts to generate money and to give you some resources to help you navigate through the process.

business or hobby

Well as I stated earlier you can make pretty good money blogging. As you start making money your blog becomes your business and the way it works is this: For tax purposes, a business is any activity in which you regularly engage primarily to earn a profit. You don’t have to show a profit every year to qualify as a business. As long as your primary purpose is to make money, your blog should qualify as a business (even if you show a loss some years). Your blogging business can be full time or part time, as long as you work at it regularly and continuously. However, if your primary purpose is something other than making a profit—for example, to communicate with your friends or make your opinion known—the IRS will find that your blog is a hobby rather than a business.

Keeping good books and other records and carrying on in a professional manner can constitute that you are running your blog as a business. Working on a regular basis and earning a substantial profit, even after you’ve had some losses in the past will help show that you are serious about trying to make it a success. As a business, you now have to claim all income; even the free stuff you get, unless it’s labeled as a gift or corporate sample, is considered income. If your blog qualifies as a business, you’ll be able to deduct your business expenses from the income you earn from the blog. If you have a loss, you’ll be able to use it to reduce your taxable income from other sources such as wage income and investment income. It’s also worth noting that your expenses shouldn’t really outweigh your income (although sometimes it’s unavoidable in your first years of business, taking into account start-up costs and so forth). Keeping receipts, a separate bank account and all other documentation is a great start for getting your business organized for tax time. It also shows that you are running your blog as a legitimate business. Once you’ve established that you are running a business, it is now time for you to set up an entity structure (LLC, S-Corp, C-Corp).  I do not recommend that you be set up as a Sole Proprietorship.  I do encourage you to speak to your tax professional about the tax implication of each entity and what will work for you.  Check out this link for more information on whether you’re considered a business or a hobby.

deductions3

So then what things can a blogger deduct? Just about anything that is directly related to your blogging business and is necessary and reasonable in amount. Below are some categories and expenses a blogger could deduct.
Internet fees
Website hosting fees
Domain name cost(s) and renewals
Business Travel

Transportation costs: car mileage; airline tickets; taxis; buses; trains
Hotel costs for business trips
Costs of conferences, plus all related expenses
Continuing Education
Further education classes
Webinars
Business podcasts
Meals
Meals are only deductible as an entertainment expense when provided to a customer or client. In general, only 50% of the cost of the business meal can be deducted; other rules limit “lavish or extravagant” meal and other expense deductions
Depreciation
Fax/scanner/copier equipment
Computer equipment/Laptop
Furniture
Supplies
DVDs and CDs related to your blogging
Movie or theater tickets, etc., if related to your blogging
Stock photo purchases for your blog
Film, Web & Digital cameras
Props
Dues & Subscriptions
Books and magazines used for research
Research sites that require a subscription
Memberships to professional clubs and affiliations
Advertising
Business logos and graphic design fees
Business cards, letterhead and other stationery
Online self-promotion fees (that includes banners and AdWords costs)
Legal and Professional Services
Search Engine Optimization services and fees
Website design and/or maintenance fees
Tax preparation/Bookkeeping fees
Business incorporation costs
Costs for Trademarks or Copyrights
Home Office Deduction
You can deduct the part of your home you use exclusively for blogging as an expense, including a portion of the rent, water, heating bills, insurance and so on.
Office Expenses
Business equipment rental
Tax and accounting software
Postage costs
PayPal and Bank fees
Post Office Box fees
Prizes and giveaways
For more information on deducting business expenses check out this link.

keeping track3So now you know what you have to do, here are a few options you have for keeping track of your income and expenses.

First, hire a bookkeeper. Of course I would tell you to do this because I’m a bookkeeper (wink). Some may think it’s too expensive which is understandable if you’re not really making a substantial amount of revenue, but for those making a living at this may want to consider it because in the long run you could save a lot of time and money when it comes tax time. It is definitely the easiest way to go because you can just drop off a box of receipts to a bookkeeper and pay them to organize, align and produce a package that will help you file your taxes or even pay them to do your taxes if they are also licensed tax professionals.  A bookkeeper will have complete and up to date records of all your business interactions, produce professional reports and ensure your books are accurate. If you don’t have the funds at this time to hire a bookkeeper there are other ways to keep track of your activities: For example you can use Microsoft Excel to keep track of your business income and expenses.  It’s much easier to keep track of every activity if you have a separate bank account for your blogging business.  Another way would be to use an online accounting program; I’d recommend using Wave Accounting or FreshBooks.  These online programs usually have bookkeepers or accountants, as their advisors. These folks can help you if you get stuck or have questions or just want advice and it’s FREE.  FreshBooks have limitations but you can upgrade if need be. When you decide you’re ready to purchase software you can always contact a QuickBooks ProAdvisor and they can help you choose the correct QuickBooks package and give you special discounts. Most of the QuickBooks ProAdvisors can be contacted via email or phone to help answer any questions you may have with your QuickBooks. Click this link to find a QuickBooks ProAdvisor

This quick introduction definitely does not compare to meeting with or speaking to a certified bookkeeper, accountant or enrolled agent (EA). It is only meant as a quick guide to get you started with keeping track of your business activities. If you are able to meet with a bookkeeper, I highly encourage you to do so; they can be great resources to have.

If you have any questions please email me and I’ll be glad to answer any of your questions.

Debbie Thomas, EA, NRB

22 thoughts on “I’m Blogging and I’m Making Money Doing It….What Do I Do Now?

  1. I had found your blog a while ago, but I was glad for the reminder on SITS today – as I get closer to possibly beginning to make some money on my blog, I need to be informed. Thanks for this helpful site! Happy SITS Day!

  2. Good online bookkeeping for bloggers is GoDaddy Bookkeeping — I’ve tried several others and really appreciate that it imports all your transactions from bank accounts, credit cards and Paypal. But the thing I can never find online is what a chart of accounts for a professional blogger should look like and what should be classified where. For example, web hosting. Traditional businesses call that “advertising.” But for a blogger, it seems more like Cost of Goods Sold. And how about various paid plugins? I could go on and on.

      • There’s a free version that I used to use, and one for $10 a month that I now use because it lets you keep more historical info. Sounds like I should have an account called “Operating Expenses” — as I said, I’ve looked all over for tips on creating a chart of accounts for blogging (and the magazine articles and books I write) and just can’t find any info. I’ve spoken with two accounting/bookkeeping firms in my area, and they had no clue about such a business, so it seemed sort of ridiculous to pay them when they seemed to be even more clueless than I. Maybe this would be a good series for you to address!

  3. Great tips! Thank for this! Found you via SITS sharefest!

    Questions: How do you account for giveaways on a blog? We run a lot of them through local businesses, but we don’t technically get anything from them as we pass them on to our readers.

    • Hello JoAnn, thanks for stopping by! To answer your question: Hosting a giveaway on your blog may have tax consequences. Your requirements as the host vary depending on the value of the prize. If the giveaway prize is valued at $600 or more – or if one person wins multiple giveaways, and the total prizes awarded in the year exceed $600 – you are required to send the winner a Form 1099-MISC. Check with your sponsor, they may take care of that for you. If not, then it’s your responsibility. Also, as the host, it’s your responsibility to make sure that the giveaway is set up legally – which means you don’t want to accidentally turn your giveaway into a “lottery.” As you can see this was not a simple answer but I hope it answered your question. Great question though, I think you just gave me my next blog post idea. 😊

    • Thank you so much for dropping by! Believe me after looking at your blog I’m sure you will be generating revenue in no time. If you ever have any questions about bookkeeping/taxes for your blog or photography business – feel free to ask. Thanks again and have a wonderful ShareFest Day!

  4. I found this post on Saturday SITS Sharefest. I have been wondering if I should classify my blog as a business on Pinterest, etc – and you have answered a lot of questions. Thanks! Happy Weekend!

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