It’s April, and tax season is in full swing. You may have your personal finances on the mind, but have you thought about doing taxes for your blog?
If that question just hit you like a ton of bricks, have no fear. I am here to explain everything you need to know about doing your blogging business taxes before the 2nd quarter deadline in April.
(Disclaimer: This website is intended for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting professional before engaging in any transaction.)
The first thing I want you to know (and NO this is NOT an April Fool’s joke.)
Are you ready?
Okay here we go…
If you are a small business blogger, you actually need to file and pay estimated taxes every quarter as well as file your annual income tax return.
As a self-employed individual, you don’t have a company automatically making these deductions on your behalf and sending payments to the IRS. Therefore you need to file your estimated taxes quarterly.
So, what constitutes someone to fall into the category of a self-employed “small business blogger”?
Here’s the criteria:
If your blog’s net earnings are $400 or more annually.
- This includes all income associate with your blog such as affiliate income, guest posting, freelance work, and products such as eBooks or online courses.
- You can calculate your net earnings by simply subtracting your blog business expenses (website domain cost, for example) from your blog’s income (earnings from an eBook, for example) and that will give you your net earning amount. If that amount equals more than $400 than you meet the criteria.
What are estimated taxes?
Estimated taxes consist of two different taxes: self-employment tax and income tax, and you need to pay both.
Self-employment tax can also be referred to as “FICA” or “Payroll” tax. This includes Social Security and Medicare taxes.
Income tax is tax that is deducted and paid to the Federal government and when applicable, state government.
To Calculate Quarterly Payments:
First you need to determine how much your quarterly payments should be.
Start with your annual gross income. Which is the total amount of money that you have received, after deducting your expenses. For example, if your annual revenue was $200,000 and your expenses were $60,000 than subtract $60,000 from $200,000 and your taxable income would be $140,000.
Next you need to refer to the tax bracket (below: sourced from Fit Small Business)to see where you fall.
In this case, you can see that the gross earnings of $200,000 means that we would be in the Net Self Employment Income category between $400-$250K.
Next, take the gross earnings of $200,000 and subtract 92.35%. (that is the percentage reflected in the far right column) and you get $15,000. That is our self-employment tax rate.
Next multiply that number $15,000 by 15.3% (this is the total percentage of the social security tax rate of 12.4% + the Medicare tax rate of 2.9% which equals 15.4%) and that is how you get your estimated self-employment tax rate number of $2,295.
You can also use the 1040-ES, Estimated Tax for Individuals here. To help determine your tax rate.
The Important Deadlines
The 4 times of year you need to complete your self-employment taxes fall on the 15th day of January, April, June and September.
- For the period Jan 1 to March 31: April 15
- For the period April 1 to May 31: June 15
- For the period June 1 to August 31: September 15
- For the period September 1 to December 31: January 15 of the following year
How To Pay Quarterly Payments?
Once you’ve calculated your quarterly payments you are ready to file and pay them! This is the easier part!
You have a few options:
- Mail – Fill out the 1040-ES and mail it along with a check to the IRS office closest to you.
- Online -Via the IRS website
For additional information:
Check out the IRS Self-Employed Individuals Tax Center Page.