First things first. The IRS states that “You can receive income in the form of money, property or services.” As a blogger, you may receive one or all of these types of income, and with very few exceptions they should be reported by law.
Here’s a quick rundown to get you started. As always, it’s best to check with a tax professional if you have any questions or feel that you might be exempt from certain reporting requirements.
Tip: If you’re looking for an easy and free way to file your small business taxes online, I highly recommend FreeTaxUSA.com. They don’t charge anything for forms like the Schedule C.
A free product doesn’t arrive at your doorstep out of the blue. It’s there because you have a prior arrangement with a business or individual. Whether you are publishing a review on your blog, sharing across social media or simply posting your opinions on a retail site, the business is getting something of value from you, and this constitutes a barter. It doesn’t matter whether it’s tangible (a sweater) or intangible (a free month of internet hosting); if it has value and was given to you for free with the understanding that you would do something in return, report it, just to be on the safe side. Use the fair market value in your calculations.
Advertisements of any kinds that you sell or barter for are considered taxable income. This includes ads and banners on your blog, paid social media shout-outs and advertorials. If you bartered for the ad, report the value of the item or service you received in exchange – regardless of whether it is more or less than the amount you charge for advertisements. An example: let’s say you charge $50 for a 125×125 size ad for 3 months. A company barters with you by sending $75 worth of free products in lieu of cash. Report the income for this ad as $75 and not $50.
Paid or Sponsored Posts
If you posted on your blog and received something back as payment, or as a “thank you” gift, then it is considered income. This includes Paypal payments, Amazon gift cards, store credit, goods, and other types of compensation. If someone paid you to guest post on your blog, report that as income.
Paid or Sponsored Giveaways
Some companies compensate bloggers just for running a giveaway, either on their blog or some other platform like Facebook. Report any compensation you received for posting/hosting the giveaway as income. However, if your only compensation for hosting a giveaway for someone else was social media follows (i.e. Facebook likes) and/or increased traffic to your blog, then this is not something that has reportable monetary value, as far as the IRS is concerned.
Some bloggers end up donating a lot of their review items, and it’s a very nice gesture! However, you still have to report them. In fact, you’ll most likely need to do it twice – first as business income and then secondly as charitable gifts. Just because you’re giving them away doesn’t mean they don’t exist. Look at it this way: you earn $100 at work and then you give the $100 to a local animal shelter. The $100 must be reported as income; then you can report the $100 charitable contribution as a deduction.
Do you have tips for making tax time a little easier for bloggers?