Confessions of a Six Figure Professional Blogger

How a Problogger Handles Taxes

October 22, 2009 | Blogging

A few days ago, I got an email in from a reader with the following:

All the talk (you and others) focus on how to get all this money in a short amount of time- but nothing discussed about paying taxes on all this income.

So, I thought I would address this for everybody.

tax_bill Yes, just like any other business, we pay taxes. I maintain my accounting records for the business in Quickbooks, and I have an accountant who does my taxes for me every year. I could do my own taxes if I were so inclined, but it is worth it to have a CPA do it. I am not a tax expert. I don’t follow all the different rules regarding deductions. And at the end of the day, I just hate accounting. :)

The taxes which would need to be addressed are:

  • Sales taxes (if applicable). If I sell a physical product to somebody within the state of Florida, I collect sales taxes. I have to pay that to the state once per quarter.
  • Employment taxes. I have to deduct income taxes, social security and Medicare and pay that to the tax man once per quarter.
  • Income taxes. I have an S-corporation, so my income carries over to my personal taxes and that’s where I pay it.

As for any tax breaks or tax loopholes, I only apply the same basic stuff anybody else does. To my knowledge, there are no loopholes. But, I do deduct things like:

  • Hosting expenses
  • Cost of goods sold.
  • Labor/Service costs.
  • Travel expenses when I travel for business.
  • Any educational/service subscriptions I pay for.
  • Internet service, business phones, etc.
  • Etc…

Essentially, if it is a legit business expense, I deduct it. On top of this, my wife and I have other deductions on a personal basis which helps gets the tax bill down at the end of the year as well.

Generally, I do not pay estimated taxes. Perhaps I should, however it doesn’t appear to have ever been an issue. I just pay the whole bill at the end of the year.

I personally do not set money aside for taxes. With all the deductions and everything, my tax bill has never been unmanageable for me. Plus, I try to get my taxes back from my accountant as early in the year as possible so that I have some time to prep for the tax bill (if necessary).

In general, it gets to a point where you can begin to ballpark your tax damage. I know how my income compares to the year prior, and I also know what my expenses and deductions are.

Blogging for a living is no different than any other business when it comes to dealing with the tax man.

If you enjoyed this article, you might also like...

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  4. January 2009 Blogging Income Report
  5. What Do I Do All Day? [Problogger]

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  • troyeckhardt
    The 1040 ES estimate is based on a part of last year's taxes, and it can include anything you want it to include (as far as the "self-employment" tax goes.)

    Ask your CPA if you are paying penalties for not remitting estimated taxes - I bet you are. You should be, according to The Code.

    How do I know? I'm an accountant who's trying to escape that mess and make some money blogging!
  • No doubt...use a CPA. Just don't even question it. Also don't question whether or not you should incorporate. Running a separate legal entity for your business is something any accountant is going to recommend, and for good reason. Get references, choose carefully, and keep them accountable, but use a CPA.
  • I hate filing up taxes. Still we have to do it. Different country have different rules when it comes to filing tax. We just have to study them. I think online income taxing is still very new to 3rd world country. Some of them don't even have to details on how online income tax.
  • I think the office in the home is a big deduction when you have an office setup for blogging and online activities.
  • If you start paying quarterly estimated taxes, make sure you reserve enough to deal with self-employment tax at year's end, which - to the best of my knowledge - isn't covered in the computations for the 1040 ES form. I found this out the hard way. It was unpleasant.
  • I haven't seen too many online "money-makers" talk about taxes, so it was refreshing to see someone keeping it real :) Great post David!
  • ShannonOD
    The end of the year tax bill nearly kills me with anticipation so just this year I have started paying quarterly to avoid any unpleasant surprises and so that I never over-estimate my travel fund :-) But I agree on the CPA, I leave the headache to them :-)
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