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Steven E. Warren, CPA, MBT,

director of taxation,

Lehrman, Flom & Co., P.L.L.P.

Adjunct professor,

University of St. Thomas

Opus College of Business

Question

  • December 9, 2012 - 12:23 PM

question

I'm a blogger and write "Keep the Tail Wagging."

I earn a small amount of money from my site. Although I don't make loads of money, I still track my revenue and expenses and record them on my annual income taxes. I even include products I receive for free (or as trade for a review) as revenue. This is a common discussion in forums and there are many bloggers who believe they don't need to track their activity because they make less than $1,000 annually or because they don't consider themselves a business. I'm certain that with business and occupation taxes, the rules change state by state. But income taxes should be pretty constant. So, should blogs that collect money file income taxes?

KIMBERLY GAUTHIER

KEEP THE TAIL WAGGING

WWW.KEEPTHETAILWAGGING .COM

KIMBERLYMGAUTHIER@ GMAIL.COM

answer

The federal government considers all income taxable unless the law provides for a specific exclusion. While there are numerous exclusions such as qualifying municipal bond interest, the first $250,000 of gain on the sale of a qualifying personal residence, and qualifying life insurance proceeds, there is not an exclusion for blog income.

As long as your business is not considered a hobby under the tax law (and it does not sound like it is), federal income taxes are assessed on the income after a reduction for qualifying deductible expenses. Self-employment tax is also owed on 92.35 percent of your net earnings from self-employment when that amount exceeds $400.

When your business is considered a hobby under the tax law (Google: ''Is-Your-Hobby-a-For-Profit-Endeavor'' to find the IRS definition), qualifying deductions are only allowed to the extent of income. Further, they are reported as itemized deductions on Schedule A. The other main difference is that net income under the hobby rules is not subject to self-employment taxes.

The above assumes your business is unincorporated. Incorporation typically requires the business to pay you for your services. Filing payroll tax returns and submitting payroll taxes to the government would be required, plus filing a corporate income tax return and paying any corporate income taxes owed.

STEVEN E. WARREN, CPA, MBT,

director of taxation,

Lehrman, Flom & Co., P.L.L.P.

Adjunct professor,

University of St. Thomas

Opus College of Business

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