David Risley: How a Problogger Handles Taxes
A few days ago, I got an email in from a reader with the following:
All the talk (you and others) focus on how to get all this money in a short amount of time- but nothing discussed about paying taxes on all this income.
So, I thought I would address this for everybody.
Yes, just like any other business, we pay taxes. I maintain my accounting records for the business in Quickbooks, and I have an accountant who does my taxes for me every year. I could do my own taxes if I were so inclined, but it is worth it to have a CPA do it. I am not a tax expert. I don’t follow all the different rules regarding deductions. And at the end of the day, I just hate accounting. 
The taxes which would need to be addressed are:
- Sales taxes (if applicable). If I sell a physical product to somebody within the state of Florida, I collect sales taxes. I have to pay that to the state once per quarter.
- Employment taxes. I have to deduct income taxes, social security and Medicare and pay that to the tax man once per quarter.
- Income taxes. I have an S-corporation, so my income carries over to my personal taxes and that’s where I pay it.
As for any tax breaks or tax loopholes, I only apply the same basic stuff anybody else does. To my knowledge, there are no loopholes. But, I do deduct things like:
- Hosting expenses
- Cost of goods sold.
- Labor/Service costs.
- Travel expenses when I travel for business.
- Any educational/service subscriptions I pay for.
- Internet service, business phones, etc.
- Etc…
Essentially, if it is a legit business expense, I deduct it. On top of this, my wife and I have other deductions on a personal basis which helps gets the tax bill down at the end of the year as well.
Generally, I do not pay estimated taxes. Perhaps I should, however it doesn’t appear to have ever been an issue. I just pay the whole bill at the end of the year.
I personally do not set money aside for taxes. With all the deductions and everything, my tax bill has never been unmanageable for me. Plus, I try to get my taxes back from my accountant as early in the year as possible so that I have some time to prep for the tax bill (if necessary).
In general, it gets to a point where you can begin to ballpark your tax damage. I know how my income compares to the year prior, and I also know what my expenses and deductions are.
Blogging for a living is no different than any other business when it comes to dealing with the tax man.
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