Generally speaking, a blogger who brings in more than $400 in income during the year should report on a Schedule C and file with their annual tax return. The easiest way to do this for free is to file online with FreeTaxUSA; they don’t charge anything for extra forms that small businesses and self-employed bloggers need.
Do you need to pay your self-employment taxes throughout the year, before your return is due?
“Self employment tax” actually refers to Medicare and Social Security taxes, not income tax. Basically, since you don’t have an employer withholding, the government expects you to pay into those systems on your own.
Here are some questions and answers to help you get started.
How do I pay self-employment taxes? Generally speaking, if you expect to owe tax of $1,000 or more when you file your return this year, then you’ll need to make estimated tax payments on a quarterly schedule established by the IRS. Look at line 76 from last year’s tax return to see what you paid. Complete the Estimated Tax for Individuals 1040-ES worksheet to see how much you owe and where to send the quarterly payments.
Income received Jan. 1 through March 31: estimated tax is due April 15.
Income received April 1 through May 31: estimated tax is due June 15.
Income received June 1 through Aug. 31: estimated tax is due Sept. 15.
Income received Sept. 1 through Dec. 31: estimated tax is due Jan. 15.
The 1040-ES document also includes blank vouchers to send with your payments; you can also opt to use the Electronic Federal Tax Payment System (EFTPS).
What if this is my first time filing and I don’t have a prior return to refer to? If you had no income last year, then don’t file. But don’t forget, income that you’ve been bringing in since January of this year (depending on the amount) may or may not be subject to quarterly payments.
My income is irregular; how do I figure my quarterly payments? Just fill out the 1040-ES worksheet to calculate your tax bill for each quarter.
What if I pay too much? No harm done. Over-payments can be applied to next year’s quarterly tax payment.
What is the penalty? Penalties and interest will accrue. According to the IRS, “The late payment penalty is one-half of one percent of the tax (0.5%) owed for each month, or part of a month, that the tax remains unpaid after the due date, not exceeding 25 percent.” And then add on 3% interest.