Blogging or Business or Both?
This is an excellent time of year to put up a few thoughts about the business side of on-line earning … especially blogging which is right now where most of my income is derived.
Of course, when you talk about ‘income’ it’s nearly for sure that you are going to see the dreaded word ‘taxes’ in the same paragraph, if not the same sentence. Well, I’m a little weird (you say you already knew that? *smile*). I really don’t care that mush about paying taxes. For one reason, I get a lot of benefits out of the taxes i pay. For another reason, I’ve always been a US citizen and frankly, if you look at the taxes people in most other developed countries pay, we Americans get away with murder. And for a final reason, I structure my income and expenses fairly effectively to minimize the taxes I do pay.
Now I won’t lie and say I haven’t made some real tax boners in my day … but I’ve never been in any tax trouble and I’ve always come out pretty well. here’s a few current thoughts on how you might structure your life online to minimize the bite … it’s early in the year so this is the time to start thinking about next years tax time to gain maximum benefits.
Act Business-Like:
If you are blogging to earn income you are conducting a business … or at the very least a hobby-business under IRS rules. Most bloggers that I talk to spend a lot of time moaning about what taxes they do pay and some go to elaborate lengths to try to hide income … often by schemes pretty transparent to the folks at the IRS … they’ve seen most trick people think are ‘original’ and probably quite a few more. Myself? I report every cent that I actually earn … there’s at least three good reasons to do so:
First, it’s illegal not to report income. Surely you remember cases like the infamous Al Capone, Eliot ness and the "Untouchables". etc. Well none of those tough-talking, straight-shooting crime-fighting G-Men brought Capone down … eagle-eyed, dull as dishwater, diligent accountants are the ones who sent Capone to prison … for income tax evasion by failing to report income. frankly, trying to ignore a few thousand bucks from Google AdSense in order to avoid the taxes doesn’t sound like a very good gamble to me.
Secondly, you wind up losing out on future benefits in many cases. I’m an older man … I already have a couple pensions coming in so I am not living and dying on what Social security is going to pay me. But even at the 15% plus ’self-employed’ rate I may have to pay on that Google income, I’m money ahead to declare and pay … unless I plan to die really soon. It’s all about return on investment. Want to put the money in some other investment vehicles instead of Social Security? Fine, that’s a worthy goal too. But you still have to declare it and take the right steps to get your justifiable deductions. Hiding income is just the wrong way to go.
And my last point under this subject is … if you aren’t showing income, how are you going to take any legitimate deductions? What if you can declare some income and wind up getting back ‘more’ than you put in? It’s certainly possible … but there has to be income there to begin with before any tax advisor can do you any good.
Take Business Deductions:
Actually I made a mistake yesterday that prompted me to write this article. I drove to a big mall 10 or 12 miles from my house and while I was there bought a cheap headset to use with my computer for an audio blogging project I am using. My mistake? I don’t even remember where the receipt for the headset is and I didn’t log the miles I traveled nor keep the receipt for the food I bought and later blogged about. This is at least the second blog post (you can read about the big trip here if you’d like).
So am I saying that trip was all tax deductible because I am blogging about it and thus using the trip to earn money? I certainly am. There are basically two categories of people earning on online… especially in the blogging community. The first group get carried away by the idea of somehow ‘getting ahead’ of the government by exaggerating deductions … they act like every they touch is deductible. In almost all cases these folks are wrong, and they are often riding for a big fall … if they get called in for aline-by-line individual tax compliance audit they may even find out a lot about what happened to Al capone. At the least, they’ll pay fines and additional taxes … you can’t really deduct the corn flakes you east every day and expect the IRS to ‘buy off’ on that.
But the second group .. although they will never have to worry about prosecution, are making what may be overall a more costly mistake. these are the folks who ‘don’t believe in deductions’. Silly. The IRS Tax Code itself declares that it is every citizen’s right to minimize their tax liability by all legal and supportable means. There is even language in many IRS publications that tell you that while the publication may suggest a certain way to do your taxes, there may be other, equally legal ways.
So whatever the IRS does not specifically tell you that you can not do, there is at last a good possibility that you can do. You can always be like one of my personal heroes, NASCAR legend "Smokey" Yunik, who was famous for trying things that weren’t listed in the rule book and when challenged replying … "It didn’t say I couldn’t".
A good place to start learning about the "rule book" on this subject is at the IRS’s own self-employment/small bushiness resource page, here.
Get Proper Advice:
I’m not an account, lawyer or any other tax professional. Typically, especially if your business is young, or in a growth spurt, you need advice. Where do you go?
Please, not to one of those store front chain stores. The guy in the suit on the other side of the desk likely knows less than you do about taxes … he’s had something like a 7-week training class and gets paid based on how many extras and upsells he convinces you to buy. "Tax Preparation" companies, in my view, just milk you for doing what you might just as well do yourself.
An accountant? yes, possibly, if you really have an accounting issue/problem. An accountant can be a very important member of a business team … but tax advice? Nope, never. Most accountants are not experts on taxes and they tend to be very conservative by training. They certainly aren’t the kind of resource you’d look for the be creative in your tax filing … and they have a very cortical fault … information that you give them and conversations you have with them are not confidential.
I’ve written somewhat extensively on this tax advice issue before … see this post on legs and lies here, for just one example.
If you are going to pay for tax advice … and you should, when you feel you need to … never use anyone except a tax attorney. S/he is a person admitted to the bar and thus required to have proven to be competent in the law. An accountant need not know the difference between a $50 misdemeanor or a 20 year felony. And most importantly … under state and federal law, conversations you have with your attorney are privileged. You can feel free to lay out your proposed ’savings scheme’ and if it violates the law, your attorney will tell you … but be able to keep the conversation secret. If you are ever pulled in for a detailed audit, or worse, get hauled into court on a tax case, you are going to feel really foolish if your accountant winds up in the witness chair … because s/he not only can’t invoke any privilege claims, they are required by law not to withhold any information you may have asked them for.
Open and shut case to me, you need paid advice, you need to consult a tax attorney.
Related posts:
- Instead of Blogging for a Business, Make a Business From a Blog
- Will You Have Enough After The IRS Takes Their "Bite"?
Related posts brought to you by Yet Another Related Posts Plugin.
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment