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So, you’ve started your blog or a side business, you spent some money getting it up and running with the hopes of making some money, and maybe you’ve even made a few bucks. Now that its coming up on tax season, you might be thinking “Do I have to pay taxes on the money I made” or “Can I use what I spent on my side business to lower my taxes”.
As an accountant who has worked with a ton of people earning a side income, trying to start small businesses, freelancers, etc, I’ve gotten tons of questions just like these. Here are a few common questions and their answers to help you.
Do I have to pay taxes on my blogging income?
The short answer is yes. If you earned any money from blogging whether through affiliate sales, sponsored posts, ads, etc, you need to report that income on your tax returns. You pretty much have to report any income from any side hustle.
Many affiliates and advertising networks will actually send you a Form 1099 at the end of the year telling you how much they have paid you for the year which they also send to the IRS. But even if you do not receive a Form 1099, you still have to include the income on your taxes.
Do I have to pay taxes on MLM sales?
Yes, if you sell any multi-level marketing products (think Arbonne, doTERRA, LuLaRoe) then you need to report income from your sales on your taxes. Basically any money you make, even if it’s just a side hustle, needs to be reported on your taxes.
Do I have to create a company or LLC?
You are NOT required to create a company in any form (corporation, LLC, S Corp, Partnership). But it may be something you WANT TO do.
Forming a company can be beneficial because it creates a separation between you and your business and can help protect your personal assets from your business assets, debts, liabilities, etc. The downside of forming a company is that there are usually additional costs and additional document reporting requirements for taxes and with your state agencies.
Hiring an attorney to help you with this can be very costly. If you are tight on a budget, check out LegalZoom and you can use their templates to form your corporation at a fraction of the cost.
What expenses can I deduct on my taxes?
In general, you can deduct all expenses used to carry on your business that are common and accepted in your line of business, and that are helpful and appropriate for your business.
This is a very broad definition and can easily get confusing. The easiest way to look at this is to separate your expenses into 2 buckets:
- Personal, living and family expenses – think rent, groceries, medical bills, etc
- Expenses used for the business – if you’re a blogger, this would be things like web hosting, Pinterest training courses, social media platforms and schedulers, even your computer. If you have an MLM, it could be the sample products you buy, your inventory, marketing materials, credit card processing fees, etc.
Now there may be some things that fall into both buckets, like your internet service at home. In many of these cases, you can deduct a portion of these expenses as well.
What happens if I’m losing money on my blog or MLM?
Generally, you may show losses from your blog or MLM on your taxes. These losses may offset other income you have earned from other sources, such as a full or part time job, or income from another business.
An exception to this is if your blog is deemed to be a “hobby” according to IRS standards.
Original article and pictures take yourhealthyfamilycoach.com site
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