US Taxes and Blogging--How?

[Asten]

I've been researching this, but I'm getting frustrated, so I thought I'd just ASK.

I'm tax ignorant, and I'm preparing to make a blog that I intend to make money from, starting with Adsense. I want to be completely legal about the process, but my ignorance is driving me in circles.

At first I'll consider it a hobby, because this is an experiment. I don't know if I truly have an interest in blogging long-term, but I want to see what I can do with it. I'm unclear how taxes work with something that's a hobby and making under $600 (or $400? I've seen both figures) a year.

I also don't intend for it to stay a hobby if I do enjoy it and pursue it seriously. Eventually it'll become a business. I've heard you can become a "sole proprietorship," but that it isn't always the best route. I'm not familiar with owning your own business, so I'm unclear on how to become a business, what options there are for bloggers, and how to do taxes accordingly.

I would not be surprised if there are articles/blogs out there detailing this already, but I was having a hard time tracking down ones that are aimed at the tax and business ignorant. Feel free to point me toward these.

[Sandstone]

Good question. I've been wondering the same thing myself.

[SnerpGoodWord]

Adsense, when you sign up, will collect tax information. If you make enough money that they send you a check ($100) they will also send you a W2 just like any other income. You then pay taxes on it just like a job.

I've never had Adsense connected to a corporation for tax purposes, so I have no idea how that works. But in general unless you're making many thousands of dollars from it, there's no reason to create an incorporation.

[Fred Tracy]

Hmm, I've already gotten my $100 check from AdSense, but I never thought about the tax aspect. Whoops.

Looks like I need to follow this thread. Does anyone know the questions posed in the OP?

[SnerpGoodWord]

Originally Posted by Fred Tracy

Hmm, I've already gotten my $100 check from AdSense, but I never thought about the tax aspect. Whoops.

Looks like I need to follow this thread. Does anyone know the questions posed in the OP?

Did you give tax info (real name, address etc. to google)? You should be getting a W2.

[Sandstone]

I thought W2's were only issued if you made more than $600?

[Fred Tracy]

Originally Posted by SnerpGoodWord

Did you give tax info (real name, address etc. to google)? You should be getting a W2.

Yup I did. Well, that's good news. At least I don't have to worry about it.

[SnerpGoodWord]

Originally Posted by Fred Tracy

Yup I did. Well, that's good news. At least I don't have to worry about it.

If you don't see a W2, then declare it as income with no W2.

[Asten]

Hm okay, I think I understand--at least until I decide to turn it into a business instead of a hobby, and considering that probably won't be for quite some time (if ever), I guess I'll approach that when I get there. Adsense makes it easy--guess it's a good way to start.

Of course if someone who does know about blogging/taxes as a business and wants to reply, please do. I know I'm not the only one wondering these things.

Thanks for the replies!

[BitterFlower]

This is a good article for hobby tax reporting. It gives you an overview of what choices you face during tax time:

Tax - Hobby Expenses - H&R Block

To sum up the article (with some clarification in italics):

-Hobbies-income falls under regular income (added to your income) any deductions are limited to up to hobby income or 2% of adjusted gross income, whichever is less.

-Business-income falls under a different schedule or return (such as Schedule C for sole proprietors who file a 1040). You will be responsible for self-employment taxes, which are separate and in addition to income taxes. You have no limits for deductions in relation to the business.

As far as the business types, I can break down the types briefly here. I would consult an accountant before formally deciding on a business structure, though.

Sole Proprietorship-All income is directly added to your income. You also accept all the liabilities and debts of the business. If someone sues the business or the business owes money (i.e. loans), then your personal assets and credit are at stake.

Limited Liability Company-A hybrid business type that that has the benefits of a sole proprietorship--(its income is combined with yours) and the benefits of a corporation (limited liability as far as debts, lawsuits etc.). I know of a lot of one-man businesses that run as an LLC, which I personally think is best for a real business that has only one person or a small team. Be careful to keep your LLC records and money separate from your personal ones; it is still technically a separate entity and needs to operate as such to receive the limited liability protections.

Corporation- There are S-Corporation and C-Corporations. Generally what we see on the news as "corporations" are C-Corporations. The filings are more formal and you have to keep detailed records of your business. There is no liability for you as a shareholder in the company (even if you are the sole shareholder), but the income is a little trickier. The Corporation's income is its own income (which is taxed at its own rate on its own return), and any income you take from the Corporation are also taxed as dividends. An S-Corp handles the owner distribution a little differently, but I'm not too familiar with S-Corps so I won't go into too much detail.

I HTH and good luck with your blogging!

[Asten]

Thanks for the ideas, clarifications, and the link!