Blogging and Money and Taxes - Oh My!

December 8, 2008 11:47 AM

blogging as a business and taxes - it can't be so difficult! Or can it? The Plan - spouse and I want to start a travel blog (we love to travel and are *good* at it!) as a business. You know, run some google ads, make a little money. Actually, if we make enough to cover our travel, we'll be happy (until the eventual greed kicks in). Soooo... if we're going to make more than $600 here in America, the IRS is going to want it's share. But two can play at that game! We want to take all the deductions we can (home office, website costs and, of course, our travel). It will just be the two of us, no employees. But therein lies the confusion...

As this will be a partnership (rather than a Corp or LLC), can we carry losses over to our personal incomes (initial research says yes, hivemind says... ?)

Any advice from anyone who has a blog making money?

Any advice from anyone running a web-only based business?

Any advice from anyone who doesn't meet the above criteria but is 99% sure they know what they're talking about?

Do you recommend a business tax id number? A business bank account? A business anything else?

Do we pay estimated quarterly taxes? Even if we're losing money?

What about employee tax of 15%? Pay that too? Quarterly? Even if we're losing money?

Any online references you recommend?

Super duper thanks in advance!

posted by catcatwomanman to Work & Money (15 answers total)

Do we pay estimated quarterly taxes? Even if we're losing money?
Generally, yes. If you expect to have taxes over $1000, you should pay quarterly. Also, are you married filing jointly? The standard deduction will be $10,900. Itemizing deductions less than $10,900 won't help you. Travel can be expensive, though. You need to sit down and talk with a CPA.
posted by mattbucher at 11:56 AM on December 8, 2008

I'm in (or have been) in a similar boat, and my research indicates that you're putting the cart way before the horse. The horse isn't even born yet! That is, step 1 is making money, step 2 is getting an accountant, and step 3 will be getting lawyer. You can even wait until your mythical $600 appears, since you don't have to worry about anything until you're taxable and why you'd even go through setting up some LLC or whatever at this point is beyond me (but alas, others probably have better-sourced opinions here). Even though a good chunk of your ownership questions will be superseded by marriage and property laws wherever you live, until the money shows up you'd probably do just as well to just type something up with both of yours' understandings about the business and sign it. Just something to show in court to document this stage of the enterprise.

Besides all that negativity, good luck!
posted by rhizome at 11:57 AM on December 8, 2008 [2 favorites]

Apologies in advance for not even trying to take a guess at your questions, but I am not your accountant. But someone should be, and that person is exactly the right person to ask all of these questions and more.

I put off getting an accountant for a very long time. I have a brutal "do it myself" streak (which explains the long self employment streak). But when I finally did... Oh wow. First of all, if I had gotten one when I started I would have saved myself more than $20,000. Secondly, I don't have to worry about all that stuff you just asked about. If I have a question I just call 'em up.

So go talk to one now, before you earn any money, and then you can sleep more soundly.

(For some of your questions your state of residence might color the answers a bit.)
posted by Ookseer at 12:09 PM on December 8, 2008

Do you recommend a business tax id number? A business bank account? A business anything else?

Yes, yes, and yes -- most definitely on all three. And get a credit card for any and all business expenses, and use it only for business expenses.

But before you do any of that, talk to an accountant who specializes in small business.
posted by *burp* at 12:46 PM on December 8, 2008

Echoing rhizome, try to earn the money first. I don't know about corporate taxation, but a good text book for income tax is the South-Western Federal Taxation: Individual Income Tax book. You don't have to get the 2009 edition, but it will give you a general overview of income tax concepts. Of course, Congress tweaks the tax code every year (because they can), so just know that things will change. That's why accountants have career.
posted by curiousZ at 12:52 PM on December 8, 2008

Response by poster: OP here. Quick answers to a few of the questions and one new question:

We want to form a Partnership, not an LLC. "Keeping it simple" is our motto.

We do file jointly and we itemize (our mortgage deduction is more than the standard).

We live in the center of the known universe: Missouri.

Any idea what an accountant will charge for an initial consultation?
posted by catcatwomanman at 1:02 PM on December 8, 2008

Rhizome's answer could also be put as, "Relax. You may never have these problems." To reach about $500 a month in Google ad revenue, you need at least 300,000 unique visitors a month. Getting to that point, for most bloggers--more than 95% of them--is an impossibility.

I earn money on my blog (note I didn't write "make money"). My advice is to talk to an accountant about how to deal with a hobby that earns you money. That's it.
posted by Mo Nickels at 1:05 PM on December 8, 2008 [1 favorite]

Hey, *burp*, why are you so pro-getting a business checking account? They seem much more expensive, generally, than personal checking accounts.
posted by amtho at 1:38 PM on December 8, 2008

I run an online business. I use a blog to get clients for consulting, speaking engagements, etc. I work with these clients online. I'm not sure I understand what your plans are, but here are some random thoughts that don't appear to have been addressed yet by other commenters:

Your question gives me the impression that you're not clear on what is a "partnership" vs. an LLC, etc. You might look at publications by Nolo Press for help with that. My LLC cost $85 and 10 minutes online.

I travel. I don't count the travel as a business expense unless I'm traveling to a place for a business reason (to give a talk). If I'm just traveling because it's cool and I continue to write my blog while I'm in the new place, it doesn't count as a business deduction because the travel wasn't necessary for my business. This could, of course, be seen differently for a travel blog; you might Google "travel writer deductions" and then talk to a tax-savvy accountant.

Also, it's hard to qualify for the home office deduction, because you need to use the "office" 100% for business or be willing to keep a log of business vs. personal use and meet some other qualification that I don't remember because I stopped even considering it at that point.

You might see the Nolo Press book "Deduct It" for extremely helpful explanations of what is deductible.

I'm not sure what you mean by an "employee tax." If you mean the self-employment tax (covering your own Medicare and Social Security), yes, you pay it if you make enough money to owe tax.

Frankly, I don't think you'll be making much money with a blog and Google ads, so I wouldn't worry about quarterly estimated tax at this point. I also think it's very unlikely that a blog could support a travel habit unless you're using the blog to sell information products or something like that.

Even if you're not making much money, I would recommend keeping track of all business expenses using something like Quicken so you can tell what you're making and so your tax forms are easier to complete.

I don't remember what my accountant charged for an initial consultation. It might have been free. If I remember right, his hourly rate is between $100 and $200.
posted by PatoPata at 1:40 PM on December 8, 2008 [2 favorites]

I'm the CEO of a small LLC. I've spoken with but never found it necessary to have an accountant. I did have a lawyer set up the LLC but that was because of multi-party ownership.

My first bit of advice is to buy the Nolo book Form a Partnership. It will likely answer about 75% of your questions for about $25. While you're at it, you might want to pick up Tax Savvy for Small Businesses.

My second bit of advice is keep business and personal funds separate and account for business funds. Use seperate accounts and credit cards. You'll probably want to make an initial investment in your business to fund the first year of operations. All of these issues are what the Nolo books are going to help you with. I have not read the partnership book, but have read other Nolo books concerning LLCs.

My understanding is that businesses that do not make a profit within a few years are not viewed favorably by the IRS, especially if they seem like a hobby being passed off as a business. And from what I read above, I'm not sure you ever intend to make a profit. At the very least, you should have a recorded business plan that describes how you plan to make a profit before getting into this. I don't see Adsense generated income paying for a 5 star hotel in Bermuda. Maybe some burgers at the local drive-thru though.

Good luck!
posted by McGuillicuddy at 1:43 PM on December 8, 2008

I have a blog that makes enough cash to cover a lot of the expenses involved in the activity that the blog is about. That's about $2500 a year. I'm delighted with that, frankly, as I had zero intention of making money - I just was writing - and then the thing took off.

But I don't make anything from Ad Sense. I mean, there have been months where I make 7 cents. Amazon also does zero for me, except in cases where there has been Unusual Item and I have had occasion to genuinely write about Unusual Item, and then I get some cash for the next three weeks off affiliate sales (and even then, the real profit comes in when someone buys Unusual Item... and six other things).

You're going to have to get thousands and thousands of visitors to make Ad Sense pay off. It pays far, far less than most people think.

The other thing to keep in mind is that ad revenue is DRYING UP. PPC (pay per click) is where the money is going now. That's a lot harder to generate.

To make any kind of real cash you're going to need sponsors, people who give you a chunk of cash for their ad/name/text on your blog.

I know this wasn't your primary question and I don't mean to put a damper on your enthusiasm! But this is not, say, 1998, where I put ad banners in five places on a popular site and could make $3k a month when things were busy.

To your tax questions - IANAA or an attorney, but based on my own experience:

::The IRS cares about intent. Are you taking classes, do you advertise, do you engage in activities that can demonstrate without a doubt that you are a professional? It's not even about profit per se, because you can be an artist who spends a year on one sculpture and then sells it for far less than it cost you to make in terms of raw materials. But the 'rule' about having to have a profit within X years or it's automatically a hobby is not true. But, if the intent is "let's start a blog so we can write all of our travel off" that's going to become clear.

A great resource that's a little off-center in terms of 'traditional' advice is June Walker and her book Self-Employed Tax Solutions. You do not need separate accounts, separate credit cards - there's a lot of great info on her site. My accountant doesn't agree with her methods on everything but I've made my own decisions there.

Judging by your questions, you really, really need an accountant. There are plenty out there that will charge you sliding scale based on what your business is making (mine did). If nothing else, get one and then learn from them and then go off and do it yourself, but I can't see ever getting rid of mine. I don't have to worry about figuring out depreciation, and she'll tell me if something's deductible or not and what the risk would be in deducting it, etc. I think my accountant is worth every penny.
posted by micawber at 2:19 PM on December 8, 2008

"if we make enough to cover our travel, we'll be happy"

If you make enough to pay for your sun-cream think yourself lucky... No offence, but $600 (a month/a year/a decade) is never going to happen.
posted by 0bvious at 2:21 PM on December 8, 2008

You will find this link interesting: nerdynomad.com. She's making enough on link sales/clicks/ad sales etc. to pay most of her travel although she has a ton of sites, most just created to sell links without much content.

I've been tempted to do something to generate a bit of cash from my travel site (I'm been the #1 Google hit for years for a certain popular travel term) but I haven't been able to bring myself to do it. One of the most common emails I get from my readers is that they like how clean and readable the site is, which is because of the design and the lack of ads and 'filler.' Every person leaving on a trip seems to have a blog (with ugly ads) these days. Good luck, I think you need to give yourself a few years of generating content (or a lot of luck) to fund your travel.

I can tell you like to plan and over think everything so I'll give you one tip: start the blog and start writing today. Today. Don't wait until you're done with the new template design or until you get the finances sorted, start generating content today.
posted by Bunglegirl at 5:29 PM on December 8, 2008

Sorry, amtho -- haven't been around for a while.

I'm pro- business-banking-account. A business checking account will definitely cost you, but you should be able to find a business savings account for free without much of a problem.

Having dedicated accounts for business makes it easier to separate business transactions from personal transactions, and business accounts also more easily link up with FEINs, which comes in handy, as well.
posted by *burp* at 10:58 PM on December 15, 2008

The message board at Travelwriters is a good place to hang out and explore these questions with the pros.
posted by Scram at 9:48 AM on March 27, 2009