This guest post is written by Amanda DiSilvestro.
As the daughter of an accountant, I have to say I’m not surprised that I was hounded about my taxes the minute I got a full-time job. Although it seemed like a hassle at first, I have to admit that for a writer, any information about taxes is helpful. I know that I was extremely surprised to find that bloggers/writers had so many different types of taxes to file, and I was even more surprised to find that the penalty for not understanding (and therefore ignoring) these taxes was so serious.
Blogging is a wonderful job because you are your own boss. You set your work schedule, you write about whatever interests you at the moment, and you essentially get to decide how much you’re going to get paid at the end of any given week. Although this is all very exciting when first starting a business, bloggers need to realize that they are not immune to paying taxes. Unfortunately, it can be tough to know what you have to pay and what you do not. While a more traditional job will have a paycheck taking the taxes out for you, you are on your own with blogging. If you decide to ignore your taxes, you could be in serious legal trouble.
If you don’t have an accountant for a Dad and have realized that you don’t know what taxes you need to pay or not pay, look no further. Consider some of the taxes you’ll need to keep in mind if you’re making money online:
Top 3 Things Bloggers Need to Know about Paying Taxes
- Income Tax – All businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are qualified for a tax refund.
How the income tax is used in the government is actually up for debate, but the bottom line is you have to pay. If you don’t pay, the Internal Revenue Service (IRS) could hit you with steep penalties, your property could be apprehended, and in very extreme cases you could face jail time. This is extremely important for those making money online to understand because you do not get this tax taken out of any paycheck. Therefore, you must set money aside each month so that come April 15 you will have enough money to pay your income taxes. The amount of money you will need to pay depends upon how much you make, so visit the IRS self-employed tax center to get a figure.
- Self-Employment Tax – This is a tax that someone who works for himself/herself must pay each year.
If you make more than $400 or more per year online, then you are obligated to pay this “extra” self-employment tax. This tax is typically 15.3% of your net earnings and can be filed by filling out a Schedule SE form by April 15. You can pick up these forms either at the IRS or at most banks and/or post offices. You can learn more about the Self Employment tax by visiting the Social Security Administration website.
- Claim Your Expenses (Not a Tax!) – If you are making money online, then you have the option of writing off any tools you need to make your living.
Although those self-employed have to worry about paying taxes, they also get to worry about not paying taxes. In other words, any supplies or money spent that was needed for your job is tax-deductible. For example, if you are a blogger and needed to buy a nice computer or fancy software, you will not need to pay taxes on those items. However, it is important you keep all of your receipts so that you have proof of what you bought and the IRS can take a look. You need to fill out a 2106-EZ form if you’d like to take advantage. You can also find this form on the IRS website.
Making money online doesn’t have to be stressful. Many bloggers work with an accountant or their bank to help figure out which taxes they need to pay, when they’re due, which forms need to be filled out, and how to fill out the forms. The most important thing to remember is that taxes are not something you should put off until tax time in April. Bloggers should be setting money aside each month to prepare for tax time.
Photo Credit: blogs.app.com
Amanda DiSilvestro is a writer on topics ranging from social media to business phone systems. She writes for an online resource that gives advice on topics including credit card processing to small businesses and entrepreneurs for the leading business directory, Business.com.