If you’re a blogger or other online publisher, here’s what you should know about taxes and running your business.
Bloggers and publishers include passion projects, side hustles, full-time solo bloggers, and publishers that hire contractors or employees.
One important thing to note is that publishers truly are their own businesses. It’s not like freelance writing platforms where they call you a contractor when you’re probably legally an employee.
Your content is yours to go in any direction you choose. You can partner with one or more advertising platforms and drop anyone at any time.
Publishers will usually have multiple income sources. Depending on how they’re paid, they may either get a 1099-NEC from each source or get a 1099-K if they’re paid through a 3rd party service like PayPal.
Display advertising income (selling ads) can include:
Affiliate marketing income (promoting specific products or services) can include:
- Amazon Associates
- CJ (formerly Commission Junction)
- Rakuten Advertising
- Direct deals with individual companies
Other potential sources of income include:
- Paid subscriptions
- Selling courses
- Selling products
- Charging to post guest posts on your own site
- Charging to write guest posts for other sites
- Charging to link to other sites
- Selling a site or domain name
It’s also common to do related freelance work such as consulting, graphic design, web development, or writing. If that work isn’t directly related to your site(s), it usually falls under a separate business.
If you make any money from your content, you’ll almost always owe taxes on it.
If you have a passion project where you’re barely covering your costs or spending way more time than the money is worth, check out Hobby Taxes.
If you’re in it for profit, you’ll be taxed as a business. You’ll need to pay income taxes and self-employment taxes on your net profit.
If you sell your own products and services (not advertising or affiliate marketing), check your state’s sales tax requirements before you start selling. Unlike income taxes, you usually need to register for sales tax before you start doing business.
When you’re a business, you only have to pay taxes on your income after expenses. You calculate your business profit on either Form 1040 Schedule C (most people) or a separate corporation tax return if you incorporated.
You can generally deduct anything that helps you grow or run your business. This includes:
- Domain registration
- Web hosting
- WordPress themes and plugins
- SEO tools such as Semrush, Surfer, Frase, or Ahrefs
- Writing tools such as Grammarly premium
- Stock images
- Contract writers, developers, or designers
- Advertisements that you buy
These items are also deductible but require more discussion.
Ad Management Fees or Revenue Share
If you monetize your content with display advertising, it’s common for the ad network or ad manager to get a cut.
Sometimes you only see your share of the revenue. For example, AdSense publishers get 68% of what advertisers pay. Report the money that hits your bank account and don’t deduct the 32% since it was already taken out.
Sometimes you pay the fee separately. For example, Ezoic Premium charges you in advance then you keep 100% of the revenue. Report these fees as a deductible expense and report the full revenue as income.
Either way, it works out that you only pay taxes on the amount that’s yours to keep.
Products You Buy to Review
Products (or services) you buy to review can get tricky. Basically, the IRS doesn’t want you deciding you want a new phone and then writing a review to make it a business expense.
If you buy something to review then use it for your business, dispose of it, or sell it, it’s generally OK to write it off. Note that if you sell it, the selling price is business income.
If you buy something that’s really for your personal use, it’s generally not OK to write it off even if you do a legitimate review.
You can deduct what you pay your employees, but there are a lot of tax and legal requirements that come with hiring employees. Messing things up can lead to big fines, and it’s not all common sense or about whether you tried to do the right thing.
Talk to a tax advisor and maybe a business lawyer before you hire your first employee.
Even though tax returns are due on April 15th, you have to pay taxes throughout the year. Employees do this through paycheck withholding. Businesses do this through estimated taxes.
Here’s what you need to do during the year:
- April 15th: File last year’s taxes and pay estimated taxes on your first quarter profits
- June 15th: Pay estimated taxes on your second quarter profits
- September 15th: Pay estimated taxes on your third quarter profits
- January 15th: Pay estimated taxes on your fourth quarter profits
Your first year in business, it’s generally safe to either
- Set aside 30% for taxes and make quarterly payments, or
- Use last year’s tax filing software for a more exact estimate
In future years, when you file your tax return, it will tell you how much to pay in estimated taxes the following year. If your income goes up, set aside at least 30% of the increase (more if you’re in a higher tax bracket).
LLCs and S-Corporations
Forming an LLC or corporation may help reduce your legal liability associated with your blog (talk to a lawyer). It can also make your business more official, and some brands will only work with a registered LLC or corporation.
One thing an LLC doesn’t do is save on taxes. You do not need an LLC to claim tax deductions. In fact, most states charge an annual fee for having an LLC, and some charge an additional business tax on LLCs.
Only pay for an LLC for legal or business reasons OR if you want to get taxed as an S-corporation.
Having an LLC taxed as an S-corporation can help you reduce your self-employment taxes. You may also be able to have some of your income taxed at the lower qualified dividends tax rate.
The trick to an S-corporation is before you can use the special tax tricks, you have to take a reasonable salary that’s taxed fully. So an S-corporation usually works best if:
- You have a lot of passive income from your previous work, or
- You hire contractors or employees to work for you.
If you’re in one of those situations, talk to a tax advisor about whether an S-corporation is right for you.