Taxes Archives - Inspired Bloggers University

While I am not an accountant, these tax tips for bloggers will help you be more organized and know what to expect on tax day. Just keep in mind that your best bet for staying legal (and sane) is hiring a tax professional.

People have strong emotions about tax season. Either you get excited about a refund or dread having to pay. For me, I just hate the entire ordeal of crunching numbers. Or maybe it is just post traumatic stress lingering from an audit we experienced.

Talking about stress… wow!

But having survived an audit has definitely changed my approach to taxes and armed me with information other bloggers might not understand.

Whether you are a new blogger or have recently shifted your mindset from hobby to pro, these blogger tax tips will make you hate me… but I do it because I care about your success.

Hire an accountant.

Might seem like a dumb suggestion but hiring someone who knows what all the legal tax jargon means can be a huge relief. Plus, if you ever face an audit, you already have an ally.

As you choose an accountant, be sure they he or she understands internet business or is at least willing to do the research and be fully prepared to represent you as a blogger.

But I know… accountants cost a small fortune. If you are determined to do your taxes yourself, even though accounting fees may be a tax deduction, just use the same software consistently. Changing from one brand of software means the formatting is different and even the phrasing can vary. If you accidentally place something is a different category than you have in previous years, this can trigger a red flag with the IRS.

I personally use H&R Block software, not because I love it but because it is what I started with and I do not want to make any sudden changes. I know… makes me sound like I am walking through a minefield and avoiding any misstep that might can an explosion. Actually, that is pretty close to the way I feel.

Use an income/expense spreadsheet.

If you are a free member of the Inspired Bloggers University, you have access to the income/expense spreadsheet I use. This XLSX file is easily opened in Excel but if you do not have access to the Excel program, just upload it to your Google Drive. The file should open easily.

The Blogger’s Simple Guide to Taxes: A Guide to Saving Time and Money

Of course, having the spreadsheet still requires that you complete the income and expense categories each month. Procrastinating will just make it harder. Dedicate time at the beginning of the month to completing the entries. If necessary, grab a few bloggers and create a mastermind group where you can share you report each month.

Count all of your income.

Do not skip over this and think, “Well, that’s a no-brainer.” What you consider income and what the IRS considers income might be completely different.

Sara F Hawkins has a very comprehensive list of taxable income items for bloggers that might surprise you. For instance, the books and t-shirts you are given while browsing the exhibits during a blog conference?

That is income.

Prizes you were awarded for being the most profitable affiliate?

That will cost you.

The ebook you graciously accepted from a friend to offer a complimentary review on your blog?

Ouch. Yes, that digital document has taxable value.

Even the giveaway prizes a company sent to your address and asked you to forward to the winner… Surprise. It is all income and the IRS wants to know if you are including it when you file your taxes.

“But, but, but…” I hear you stammering to plead your case.

I did not receive a 1099 form.
The value is under $600.
Blogging is just a hobby.

Doesn’t matter. So what. Your point is?

If you received it, the IRS considers it income and you are responsible for reporting your income accurately.

Keep it organized.

If you must file taxes then do yourself a favor and keep everything organized.

When you attend a conference, keep a copy of the agenda and your name badge. Even a photograph or digital scan will suffice. Then, collect your receipts for meals, accommodations, and cab fare and keep it together.

Your Blogging Business: Tax Talk & Tips from a Bookkeeper Turned Blogger

Expensify is a fabulous app – available for desktop, iOS, and Android – that will help organize your travel receipts and can even track your mileage if you choose to drive.

Another organizing idea, create a folder in your inbox just for receipts and conversations with brands regarding giveaways and reviews. If you prefer Evernote, you can create a notebook and email them to your Evernote file with a Premium account.

>>Get a free month of Evernote Premium.<<

Remember your deductions.

Even the best accountants need a little help. You must be educated about what you can safely use as a qualified deduction. Wise Bread has a long (although uncategorized) list of blogger tax deductions you should browse. Another list of tax deductions for bloggers is available by Free from Broke.

Some deductions you might have missed include:

Ingredients for a test recipe
Premium plugins
Licensing for images, fonts, and music
Your blog planner
Postage for mailing giveaway prizes
Ink and paper for printables
Stock photography subscriptions
E-courses and ebooks that further your education

Tax time can feel daunting but you can master this with an organized method for tracking your income and expenses.

Don’t forget to download the blogging income/expense report on your Inspired Bloggers University profile page.

Recently, there has been a lot of buzz in the blogosphere about VAT, or the European Union’s Value Added Tax. Many bloggers in the United States are confused, so I want to explain exactly what VAT means for US bloggers and how it will change the way you sell digital goods and services online.

Although VAT was enacted in 2003, the changes effective January 1, 2015 have brought attention to the impact on all non-European residents who sell digital goods and services to consumers within the European Union. So, if you have an online store on your blog and have customers in Europe, this means you… regardless of where you live. [SOURCE: GOV.UK]

As of January 1, 2015, there will be significant changes to the European VAT rules on sales of digital goods and services to retail consumers in Europe. These changes increase the VAT compliance burdens on all sellers, wherever those sellers are located.

– Rick Minor, Forbes

Please note that the Value Added Tax is not based on the seller’s location but the rate is designated by the consumer’s country of residence and may vary greatly from country to country, reaching as much as 27% of the product’s value.

Being VAT Compliant

If you sell digital goods and services to consumers in Europe, you must follow the instructions for submitting the Value Added Tax.

You must register as a non-resident seller for VAT prior to any sales to European customers.
Even if the tax equates to only $0.01 USD, you must still submit payment.
The VAT rate must be included in your retail price and not listed separately as a US state sales tax would be.
Payments are submitted quarterly. To avoid having to pay each country individually, you can choose a simpler system for reporting with VAT MOSS. [SOURCE: VAT Mini One Stop Shop, UK.GOV]
Information regarding the transaction must be kept on file for 10 years.

Many eCommerce plugins and websites are updating to include VAT compliance.

Woothemes has announced a Woocommerce VAT extension that will collect and validate the consumer’s IP address and their country of residence.
Shopify will be supplying you with the customer’s billing address and IP address for you to pursue VAT compliance. [SOURCE: Shopify]
Easy Digital Downloads offers an extension to make VAT compliance possible.
Ejunkie is trying to explain how to be VAT compliant while using their services.

How the tax is enforced upon US businesses

Several bloggers have touted that the European Union has no basis to command United States business owners to pay VAT. They have said that VAT will be impossible to enforce. Perhaps, but many analysts anticipate that other countries will enact a Value Added Tax as Europe’s model is receiving high praise.

Canadian legislature is consider its own VAT. [SOURCE: The Globe and Mail]
India plans to solidify changes to their VAT in April 2016. [SOURCE: Indian Express]
Senate Finance Committee member, Benjamin L. Cardin, plans to introduce legislation for a United States VAT. [SOURCE: Lexis Nexis]

Sellers of digital goods need to settle into the idea and stop claiming ignorance as the European Union plans to tighten the enforcement of VAT using web bots to find eMerchants in violation. [SOURCE: Taxamo] The United States has already pledged to cooperate in several treaties and documents including the Economic and Technical Cooperation agreement between the US and Bulgaria in 1998.

What we [HMRC] and other EU tax authorities are doing is if we found that one of these businesses is non-compliant then through treaties arrangements that we have with the jurisdictions, through information exchange or debt recovery, we would then approach the authorities in those other states to take action to help us to get the debt paid.

Those arrangements are going to be reinforced, and strengthened, effectively in the coming months and years to make sure that there aren’t jurisdictions out there where someone could effectively hide and make those supplies without properly declaring.

– Andrew Webb, Taxamo

Limitations to Europe’s VAT

What is included under the VAT changes? View a comprehensive listing of digital services and goods by Taxamo.

But what is NOT included?

A video is embedded above.

Here are a few important notes recorded by My News Desk during a Twitter Q&A with HM Revenue and Customs that was mentioned in the video above:

A2 What constitutes an e-service? #VATMOSS

An e-service is one that is fully automated and involves no or minimal human intervention. #VATMOSS

A4 Does #VATMOSS apply to web hosting, SAAS, cloud storage, analytics, online accounting, remote maintenance and web advertising? #VATMOSS

Yes if those services are automated and involve no, or minimal, intervention. #VATMOSS

A5 Does this mean I need to be VAT registered to sell ebooks? #VATMOSS

If you sell ebooks to consumers in other member states through own fully automated website this will be an e-service, so yes. #VATMOSS

A6 If I run a paid live webinar (human interaction) and have a free pdf download with it, is that liable under #VATMOSS?

No, the live webinar is not an e-service and the pdf download, provided it is genuinely free, will not be affected by new rules. #VATMOSS

A7 Is delivering part live, part downloadable content to customers around the EU exempt from #VATMOSS?

Live content not an e-service, downloadable content is. Depends on which part of transaction was principal element for customer. #VATMOSS

A8 If I have paid membership for my website and people can then get free online courses, is that a digital services under #VATMOSS?

If course is fully automated it’s an e service. If there is “human intervention” eg online tutors, live Q&As etc, it’s not. #VATMOSS

A9 What about virtual classrooms combining live webinars, videos, pdfs & human intervention? #VATMOSS

A virtual classroom combining all these elements would not be an e-service because of the amount of human intervention involved. #VATMOSS

A10 What if an e-course contains recorded videos & PDFs but is opened at specific times only + has live interaction? #VATMOSS

The inclusion of live interaction means that this is not an e-service. #VATMOSS

A11 If I offer coaching (human intervention) with an online course, how do I handle that to comply with #VATMOSS?

The inclusion of live coaching means that this is not an e service. #VATMOSS

You should read the complete Twitter Q&A transcript as it includes details on the VAT implications for Paypal, Etsy, Kickstarter, and more.

Follow VAT MOSS on Twitter for updates.

How to avoid paying VAT

graphic published with permission of Dave Walker. SOURCE

If you have an online store and want to avoid paying VAT completely, you have one option: Block sales to consumers living in Europe. Most eCommerce plugins have a way to limit the countries allowed to purchase through your store.

You can block countries under the settings of Woocommerce.
Tips and Tricks has an add-on to assist you in blocking countries in WP eStore.

You can also use a 3rd party eMarketplace such as Amazon, Etsy, etc. who assume responsibility for being VAT compliant for you.

Breathe.

Wow. I feel like I need to take a deep breath because this is quite a lot of important information, and I probably should have divided it into multiple posts. However, I remain determined to educate you for your protection and thought one thorough piece would keep you from plundering around Google looking for help in decoding this complex piece of legislation that will impact so many of us.

I truly hope you are ending with a clear understanding of VAT and what it means to US bloggers. Now, go make sure your blog is VAT compliant.

Tag: Taxes

5 Tax Tips for Bloggers

What Does VAT Mean for US Bloggers?