It’s freelance tax time – are you ready?
Ah tax season. Taxes can be confusing even under the best of circumstances, and who has those? Add in divorce, child tax credits, college loan interest, home credits and so on and even the most prepared start to get a little loopy. Case in point, I’m pretty sure I reworked my taxes at least five times last year, which wasn’t entirely my fault (see below).
In any case prepared or not tax season is here. Following are some tips…
Do bloggers even pay taxes? Yes if you earned an income that’s over $600 $400 (see comments – my bad) from blogging in 2009 it’s considered income. Income in the U.S. is taxable.
Am I a freelance writer or an employee? It depends on how someone is paying you. If you freelance for a company and they take monthly taxes out of your monthly pay then you’re an employee – even if you’re sitting at home working. If you work for a client and you get all the money you earn up front (i.e. in your paychecks) with zero taxes taken out you’re freelancing – even if you pay a visit or two to the client’s company home base. Where you work doesn’t define you as a freelance blogger or not, it’s how you’re paid that defines you. As a freelance blogger you may get both types of pay (with tax taken out and no taxes taken). An easy way to get ready to do your taxes is to place all your tax deducted W-2s into an employee pile and all your 1099s into a freelance pile.
Is Google income real income? In the eyes of the IRS, income from Google and other advertisers is still income and can be taxed. Read “Will I have to pay taxes on my AdSense earnings?” for more info.
Get ready early. Part of the reason I ended up redoing my taxes so much last year was because clients failed to send me my 1099s. Much like income, it would appear that tax forms for freelancers are also an oversight. Sigh. Technically 1099s (from US clients) are supposed to be sent out by January 31st, but there’s some February wriggle room in there that employers like to take advantage of. In any case you should contact your clients this month asap and give them a gentle reminder that you exist. In fact
And on that note… related to the above you may have to send 1099s to other people if you did indeed hire someone to help you out with your blog, and paid them over $600 during 2009. If this is you check out 1099s are a snap – meant for childcare workers, but a good resource none the less.
Be super careful about deductions. There’s a lot you can deduct, but you have to make sure it’s legit. For example, you can’t write your computer 100% off unless it’s completely and totally used for work. No writing grocery lists on it or letting the kids play games on it. Also, if you deduct you’ll need proof. Example; all those freelance magazines you buy for research (say for freelance queries) are deductible but you’ll need proof of purchase.
My “I am so not a tax pro disclaimer” – The above said, I’m not a tax pro. I’ve been doing my own freelance writing and blogging taxes for years so I have some experience but if you get hung up it’s best to one, check with an actual tax professional and two, visit the official IRS website. Lastly, I’ve rounded up some of the best blogging + tax related pieces I could find and you can browse them below…
- 7 Things That Every Blogger Should Know About Tax AND 46 Tax Deductions that Bloggers Often Overlook both by by Kelly Phillips Erb of Taxgirl – a blogging tax mama who seriously knows her stuff.
- 101 Tax deductions for bloggers and freelancers – this list has a few questionable items on it in my opinion, but is useful overall.
- Mrs. CPA Answers Your Questions Regarding Blogging and Taxes – plenty of useful info in this series of posts.
- Handling a Windfall Profit – ah, it sounds so nice but getting a bunch of sudden income can also screw you over in regards to taxes.
- Tax Time Tips for Freelancers – a great general know-how piece for writers and bloggers.
- What Every Freelance Writer Needs To Know About Taxes – tips from this community!
So, how excited are you about taxes this year 
Good tips. I have one question and another suggestion.
The $600 amount? Actually, although I’m not a trained tax pro but a journalist who’s written about taxes for more than a decade (and the last four as a freelancer), I believe any amount earned is taxable and should (must) be reported.
If you make $400 or more in self-employment income, then you also have to pay self-employment taxes, the freelance equivalent of Social Security/Medicare withholdings from employee paychecks. Details from the IRS at http://www.irs.gov/businesses/small/article/0,,id=98846,00.html
You get to deduct 1/2 of the SE taxes you pay on your Form 1040 as one of the adjustments/above-the-line deductions at the bottom of that form’s first page.
Also, if you have self-employment income, you can save for your retirement and on your taxes by opening and/or adding to a self-employed retirement account, such as a SEP-IRA or Keogh (although for 2009, the Keogh had to be established by 12/31/09). In the same tax return section where you deduct the SE taxes, you can deduct your SE retirement plan contributions. You have until 4/15 to make the contributions or, and this is a bonus for SE folks only, until 10/15 if you file for an extension to file your tax return.
Oh man, hence me not being the tax pro
Yeah, you’re right. I think I had my brain wrapped around paying clients not making income when I wrote 600. It’s $400. Thanks for the correction! The self-employed retirement account stuff I know – I had to close out a 401K a long time ago when I went freelance and changing it up to IRA (or other like-wise option) is what my tax accountant friend told me to do. BUT not being the tax pro, I think that opening a retirement account help (in specifics) is beyond my blogging know-how – I really think that should be discussed with your accountant, who can take your lifestyle, earnings, all of it into consideration.
some clarifiction on the $600 (I answered my own question).
A payor doesn’t have to issue a contractor (i.e., freelancer) a Form 1099 unless the payment is for $600 or more. But that’s an employer/payor rule, and doesn’t have anything to do with income earned by a freelancer and our tax reporting/filing responsibilities.
It is the company that is not required to send 1099’s for less than $600. This number has no bearing on your (freelancer’s) taxes or tax return. Your taxable income is ALL income made from ALL companies. So if you get 10 payments of $500 each and don’t get a 1099 for any of them, that doesn’t mean you’re off the tax hook. You report that $5,000 as income.
This lack of good third-party verification of self-employed income is why such workers/taxpayers are prime audit targets. The IRS depends on us to correctly report all our income and since there’s no way to easily double check that we are, too many folks don’t.
We missed each other commenting. Last year that’s what I actually ended up doing – reporting sans a couple of 1099s. BUT I kept records so it was easy to look up. I think that’s a whole other post about record keeping vs. taxes specific. Everyone needs a spreadsheet tally IMO because one, you do make those oddball $450-$550 checks and two, you can’t assume that even if you do make over $600 that a US client will send you your 1099, and lastly, only US clients are required to send you a 1099 even though the gov considers any income you make as a resident income.
This has been so helpful. Thanks so much. Its all so confusing. I need to figure out if I want to go to my regular acct or find someone knew who is more up on the blogging stuff.
very good reading, thank you so much for this article