Updated: Mar 15, 2021
I hosted a clubhouse a few weeks ago with an amazing accountant Nicole Couloute where she answered all your burning questions about taxes.
I know everyone doesn’t have the app yet and I’m not a tax expert, so I found one to help!
I decided to ask my followers for their top questions about blogging and taxes, and then I handed those questions over to Marisol from ThursdayMorningThoughts (who graciously volunteered to help with all of your common questions!)
Marisol specializes in entrepreneur and small business financial success. Her passion is to help women and people of color reach their financial business goals. Her services include but not limited to:
Understanding the best way to account for your business income and expenses
Setting up process including technology to support managing your income and expenses
Business Financial Management Coaching
Developing tools to help you achieve your success like invoice templates, accounting templates, quarterly tax estimates template
Preparing a business budget or forecast
How should business structure be determined? When should I form an LLC? When should I switch to SCorp?
The first thing to understand with entities is that an LLC offers you no tax benefits. In fact, an LLC isn’t even recognized by the IRS, it’s treated the same as if you were a sole proprietor. The only thing an LLC does is potentially offer you legal protection, which you will want to discuss with an attorney. I do advised forming an LLC by the time your income is stable.
For tax benefits, the entity you would be looking at is an S Corp, which could potentially save you big money on self-employment taxes. As a general rule, you should start considering an S Corp at around $50k a year in net income, but every business is different and there are some requirements that come with an S Corp, so be sure to talk to your CPA before making that move.
When should a person start paying quarterly taxes? How do you do quarterly taxes?
The IRS says that if you will owe at least $1,000 in taxes at year end, they expect you to pay quarterly estimated taxes to avoid penalties on underpayment.
Another thing to consider is that estimates are always based on what you owed the previous year. So if you didn’t have any year end tax liability in 2020, the IRS won’t penalize you for not paying estimates in 2021, even if you end up owing.
If you do need to pay estimates, it can either be done through vouchers mailed in with a check, or online at the IRS direct pay website.
How do I know if it’s a hobby or a business?
It really comes down to whether or not it makes money. IRS standards say a business has to make money three out of every five years, meaning income has to be higher than expenses. If you don’t meet that standard, you could be in danger of the IRS calling it a hobby and losing the ability to deduct the losses against other income.
What are the best tax savings tips for influencers and bloggers?
A great thing to do here is to start turning personal expenses into deductible business expenses. So items like cell phone, internet, a room in your house, vacations, etc that you would be using anyway for personal reasons can now potentially be business deductions for you.
What are typical tax deductions for influencers and bloggers?
With any business, anything you are spending money on to improve the business is almost certainly a tax deduction. For a blog, home internet, computers and anything you need to run the blog are easy deductions.
For example, if you are a skincare influencer and your review products/services, items that you buy and review could potentially be deductions as well.
Should you hire a tax person as an influencer or is it possible to do it alone?
It is definitely possible to prepare your own taxes. There are so many options to do your own taxes by using TaxAct.com, HR & Block Online, or even filing directly
How do you determine how much you owe in taxes? Does it include affiliate income too?
As a general rule, you should include all the income you receive no matter how you receive the funds. If you have prepared your tax return before then you may have access to your effective tax rate. If not, you estimate your quarterly income and check the IRS tax brackets to determine your tax rate. Use your tax rate and multiply it by your estimated income to pay in your taxes.
How much should you put aside for taxes whenever you get paid from partnerships? The amount of taxes you put aside depends on your effective tax rate or your tax bracket. The best way to find your effective tax rate is the supplemental forms that are used to prepare your tax return but are actually not reported to the IRS. Your tax bracket can be found here: https://www.irs.gov/pub/irs-pdf/i1040tt.pdf
Does it have to be a certain amount for us to file?
You can file a tax return regardless of how much you make. However, it is only enforced when you reach the minimum bracket. FOR 2020 (this can change annually): If you are single, you have to file a tax return if your total income reaches $9,875 or $19,750 if you are married.
What programs do you recommend influencers to use for tax? Is quickbooks good?
For taxes specifically, you can use TaxAct.com, H&R Block
For accounting and taxes, Quickbooks is normally what I recommend. FYI I am Quickbooks certified.
Can you recommend any great tax accountants and/or lawyers that are of color?
Chinwe Ohanele Biz Lawyer has a great Legal Lunch hour that I love listening to.
Financial Advisor: Paul Morgan: http://paulmorgan.nm.com/ email: email@example.com
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