If you’re a writer, you know that money doesn’t always come easy. While you work on that next New York Times Best Seller, you have to do something to make a living. In other words, the idea that you can actually make a decent living through blogging online is exciting. You get to write about topics that interest you, interact with people about your articles, and watch the money roll in. However, it’s important that you make sure you stay legal while you do all of this great writing.
Now don’t let the title fool you: It is completely legal to make money online through blogging. However, many bloggers find themselves having to take out a small business loan come tax time because they were blinded by the excitement of all those dollar signs. When you make money through blogging, taxes are generally not taken out of the money you are sent. This can sometimes make the job very confusing, so consider the three things you should be keeping in mind as you make your money from blogging:
How to Make Money Online and Stay Legal
1. Income Tax – A traditional paycheck usually already has income taxes taken out of the total, so people sometimes forget that this isn’t the case when you’re making money online. With direct deposit, many people do not even look at their pay stubs to see how many taxes were taken out. This makes it extremely easy to forget the importance of the tax (at least when it comes to dealing with the IRS). When you are making money on your own, it is important to keep track of how much you are making and then set aside some money for taxes. If you want to know exactly how much money you will owe, consider visiting the IRS self-employed tax center or H&R Block tax calculator. Fill in your information, and they will take care of the math for you.
2. Self-Employment Tax – If you’re making money online through blogging, it means you are self-employed, or an independent contractor. Therefore, this means that you must pay this additional tax on top of your income taxes. You pay these taxes by filling out a 1099 form and filling out the appropriate boxes. Self-employment tax is generally calculated as 15.3% of your net earnings. This tax usually only applies if you make more than $400 or more per year. For more information on the tax, visit Oblivious Investor.
Although this is probably not the best news you’ve ever heard, independent contractors do have a few perks when tax time rolls around. These perks come when you claim all of your expenses.
3. Claiming Expenses – Anything that you use when blogging online is tax-deductible. For example, if you had to buy a new laptop in order to blog or you needed to meet a potential editor for lunch; you can write both of those off come tax time. All you have to do is make sure you keep all of your receipts and you should get a tax break with no questions asked!
Worrying about your own taxes is sometimes tough for someone who makes their money by blogging online. At the end of the year, the amount of money you owe is going to seem like a lot, but the truth is you would be paying the exact same amount if you were working for an employer. In the end, it is important to remember that you love your job. If you didn’t have to pay taxes like everyone else, you would have a lot more competition.