Congratulations on your new business! Wait? What? That's right. Your business. Are you a blogger who sells ad space? Do you model c/o clothes? Well, then, you have a business. Business income and any related expenses are required to be reported to the IRS and your state and local taxing authorities.
Well, I only made like $1,000 last year selling ad space and I didn't receive any 1099s so I'm all set.
Actually, you are required to report all income on your tax return regardless of the amount or the receipt of a Form 1099. It doesn't matter if you made $50, $5,000 or $50,000. It's income and it's reportable.
I find that it is often assumed that if one earns less than $600 and does not receive a Form 1099, the income is not taxable. This is not correct. The $600 mark is related to the filing requirements of Form 1099, not of reportable income. Tax rules and regulations can be extremely complex and if you should have any questions regarding your personal tax situation or whether or not you have income, you should consult a tax advisor.
[It should not be assumed, however, that cash money equals income. For example, if you resell some of your kid's too small clothes, that most likely would not be considered income. The loss on the sale of personal items is not reported on your tax return. That dress from Gymboree cost $30 and you just sold it for $10. And, no, don't think about starting up a company for loss purposes. Hobby loss rules will take care of that idea.]
But those clothing companies sent me those dresses for free so I don't really have income from that. They didn't pay me anything.
But they did. Bartering is the exchange of goods or services without exchanging money. And it's taxable. If a company sends you an item to keep in return for your review of that item on your blog, you, in effect, sold ad space. The fair market value of those "freebies" is taxable income to you.
I just bought a new laptop and a camera to use for blogging so I can write off those items.
I always laugh at the term "write-off" because it reminds me of a Seinfeld episode. Equipment such as computers and cameras are not expensed or "written off." They are depreciated over their useful life, which is determined by the IRS. Computer equipment is depreciated over five years, for example. The resulting depreciation expense is a deduction.
Do you ever use your laptop for personal use? Do you pay bills while using it? Shop? Email friends and family? Play around on Pinterest? Well, then you cannot depreciate the entire cost of that item because it is not used 100% for business.
Fees and expenses that are 100% related to blogging, such as domain fees, fees paid for website design or advertising expenses that you pay, should be deductible. You may want to think twice before claiming that 100% of your internet fees paid to Verizon are a business expense. Or that your dinner at a fancy restaurant was a blog expense because you blogged about it.
[This post was written to make you think.]
Disclaimer - The above discussion should not be taken as tax advice. Please consult a tax advisor regarding your personal tax situation if you should have any questions or concerns.