Self Employment Taxes for Bloggers.
There are some real benefits to being your own boss. You can make your own hours, decide what projects you want to work on. There are a few drawbacks though.
One thing you need to keep in mind when living the self-employed life? Self Employment Taxes.
Bloggers are not exempt from this tax. They follow the same rules as other small businesses.
Here are some of the frequently asked questions and tax tips on self-employment taxes for bloggers.
Self Employment Taxes for Bloggers: FAQ
Self Employment taxes don’t need to be scary and they don’t need to be overly complicated come tax time. Here are the main things you need to know as a blogger, especially one just starting to make money.
How do I know if I am self-employed?
This sounds like a silly question, but it is a good one to figure out before you move further through this process.
Are you a sole proprietor or independent contractor? Are you a part of a partnership that carries out business? In short, are you in business for yourself?
If you are a blogger you are most likely are a self employed business. If you accept payment for your blogging activities and don’t work for someone else, you are self-employed. This doesn’t need to be full time either, part-time activities count too.
What are self-employment taxes?
When you have a traditional job, the kind where you get a W-2, you have taxes withheld from your pay. These, amongst other things, include your FICA taxes. You split these with your employer. They pay half and half is taken out of your paycheck.
When you are self-employed you get the full payment, all of that employment income, without any deductions taken out. But that doesn’t mean you get out of paying the taxes.
What you need to be paying are the Social Security taxes and Medicare Tax.
What is the self employment tax rate?
The current tax rate for self-employment taxes is 15.3% on the first $128,400 net income. This breaks down to be 12.4% for Social Security and 2.9% for Medicare taxes.
Once you pass that limit there is an additional 2.9% on the excess over $128,400.
How do you calculate how much you actually need to pay?
This is just simple math. Multiply how much you make income from blogging(the net earnings) by 0.153 to get the amount you owe.
If this makes you nervous you can use one of many self-employment tax calculators available online. I like this one: Self Employment Calculator
What forms do I need for my self employment tax?
Self-employment taxes are filed using Schedule SE on your income tax form 1040. (This is the tax year 2018 version.) There are long and short versions, but don’t worry. There is a flow chart on the form to help you determine which one you need to fill out.
When do you pay self-employment taxes?
There are two main ways to pay your self-employment taxes. The first is to pay them in April on your regular tax return. This is an acceptable way of paying if you think you will owe less than $1000 in self-employment taxes.
If you think you will owe more than that you will want to be making estimated tax payments throughout the year. The best way to know if paying estimated taxes is a good idea for you is to talk to your financial professional about tax planning. But I’ll give a brief outline of how these work.
How do you make estimated tax payments?
Estimated tax payments are made quarterly. (As such they are often called quarterlies.) This means they are usually due April 15, June 15, September 15, and January 15. (You will want to double check these dates every year as they can be impacted by weekends and holidays.)
Paying quarterlies helps to eliminate a big tax bill. I don’t know about you, but I would rather do little tax prep and get a tax refund as opposed to owing a bunch of money in April.
These estimated payments can be paid using 1040-ES vouchers (found with Sche SE). You can also sign up for the Electronic Federal Tax Payment System which allows you to pay your taxes with your credit card.
How do you know how much to pay for estimated tax payments?
As you get established in your business and have a consistent income you can make estimated payments based off of how much you made last year.
If you have fluctuating income or are just starting at your business (hello, blogging!), you can make payments based off of your real-time income. This means you calculate your payments based off of the previous quarter’s income.
(Need help tracking your income and expenses? Try this simple method: Blog Bookkeeping Organization)
I’m not going to go into too much more detail on estimated payments at this time. If you are just starting out in the blogging world you are unlikely to need this right away. But, as always, talk to your tax professional about your blog income and the potential tax implications that come from it.
Are there any self-employment tax deductions?
This all sounds kind of depressing. You get to be your own boss but you pay twice as much. Don’t worry, it isn’t all that bad.
You can deduct half of your self-employment tax costs from your net income. The IRS counts it as a business expense. So really you aren’t paying more than if you had traditional employment.
Talk To Your Tax Professional about Self Employment Taxes
If you use a program like TurboTax it can help guide you through the self-employment tax world. But when in doubt ask for help. There are penalties for incorrect and late payments, so it is better to be safe and get help from your tax professional.
Here is some additional information to help you out: