Tips to Making Money Online…Without Breaking the Law

If you’re a writer, you know that money doesn’t always come easy. While you work on that next New York Times Best Seller, you have to do something to make a living. In other words, the idea that you can actually make a decent living through blogging online is exciting. You get to write about topics that interest you, interact with people about your articles, and watch the money roll in. However, it’s important that you make sure you stay legal while you do all of this great writing.

Now don’t let the title fool you: It is completely legal to make money online through blogging. However, many bloggers find themselves having to take out a small business loan come tax time because they were blinded by the excitement of all those dollar signs. When you make money through blogging, taxes are generally not taken out of the money you are sent. This can sometimes make the job very confusing, so consider the three things you should be keeping in mind as you make your money from blogging:

How to Make Money Online and Stay Legal

1. Income Tax – A traditional paycheck usually already has income taxes taken out of the total, so people sometimes forget that this isn’t the case when you’re making money online. With direct deposit, many people do not even look at their pay stubs to see how many taxes were taken out. This makes it extremely easy to forget the importance of the tax (at least when it comes to dealing with the IRS). When you are making money on your own, it is important to keep track of how much you are making and then set aside some money for taxes. If you want to know exactly how much money you will owe, consider visiting the IRS self-employed tax center or H&R Block tax calculator. Fill in your information, and they will take care of the math for you. 

2. Self-Employment Tax – If you’re making money online through blogging, it means you are self-employed, or an independent contractor. Therefore, this means that you must pay this additional tax on top of your income taxes. You pay these taxes by filling out a 1099 form and filling out the appropriate boxes. Self-employment tax is generally calculated as 15.3% of your net earnings. This tax usually only applies if you make more than $400 or more per year. For more information on the tax, visit Oblivious Investor.

Although this is probably not the best news you’ve ever heard, independent contractors do have a few perks when tax time rolls around. These perks come when you claim all of your expenses.

3. Claiming Expenses –   Anything that you use when blogging online is tax-deductible. For example, if you had to buy a new laptop in order to blog or you needed to meet a potential editor for lunch; you can write both of those off come tax time. All you have to do is make sure you keep all of your receipts and you should get a tax break with no questions asked!

Worrying about your own taxes is sometimes tough for someone who makes their money by blogging online. At the end of the year, the amount of money you owe is going to seem like a lot, but the truth is you would be paying the exact same amount if you were working for an employer. In the end, it is important to remember that you love your job. If you didn’t have to pay taxes like everyone else, you would have a lot more competition.

Photo Credit: scragged.com

Dean Saliba

Dean Saliba is a freelance writer, professional blogger, media enthusiast, dirty football player and huge professional wrestling fan who covers a wide range of subjects and niches including, making money online, traffic generating, pro wrestling, blog reviews, football, how-to guides, music, internet marketing and more.

18 Comments

  • Hi Amanda,

    Although the specifics of this post mostly applies to Americans, in my opinion, this post does serve as an important reminder that we all have to pay income taxes.

    You’re playing with fire if you choose not to pay.

    Making sure you’re “legal” tax-wise shouldn’t be too difficult no matter what country bloggers happen to live in… Governments love our money.

    Good post!

    • Amanda DiSilvestro

      (January 19, 2012 - 11:54 pm)

      Ahh I apologize for focusing on America. I admit I have only left the country once, but I should have been paying attention to where I am writing! Nonetheless you’re right–avoiding taxes is certainly playing with fire.

      Thank you so much for reading!

  • Interesting to know that bloggers too go through so many types of taxes. Certainly there are not much reimbursements involved I guess and there are just too many hidden taxes but when we’re passionate about our work we also have to work free from legal issues.

    • And if you believe what is being reported in the media then bloggers who make money are going to get a VERY rough ride in the future as governments try and make us pay through the nose for what we love to do.

  • Interesting stuff. I’ve been blogging for a few months now but I haven’t started monetizing yet. It’s good to know how to get your taxes in order for a writer. Great share.

    • It is actually something a lot of bloggers overlook, they must think because it is online they don’t have to pay taxes on their income. The yare very wrong and the governments are clamping down on it.

  • Thanks for warning bloggers about self employment taxes. That extra 15+% tax always comes as a shock to those used to an employer paying half.

    • Amanda DiSilvestro

      (January 19, 2012 - 11:56 pm)

      Definitely. I know a few writers who were unaware of the self employment tax and it was, as you say, a big shock. These just aren’t things that are told to new writers. In an office setting you have a boss to give you a nudge, but writers are on their own. Glad you found it helpful 🙂

  • I was earning money online but there isn’t any single cent charged to me as tax. Is the country where I live play a role to that? I’ve heard that US citizens pay taxes for whatever they earn online. Like for example from Google Adsense.

    • Amanda DiSilvestro

      (January 19, 2012 - 11:59 pm)

      This is something that I will have to look into for you (as I have never lived anywhere but America). However, I can almost guarantee that there is some sort of something that you’re going to have to pay. You’re right when you say it won’t come out of your “paycheck” though. That’s how it works in America as well. Independent contractors don’t get any taxes taken out of the money they make, but they still have to pay.

      I will look into this, but does anyone else have any advice for this topic in other countries?

  • Hey,
    This is something great you’ve brought to the notice of the public, but in my own country, I don’t think there is someone there to enforce task on you (that is even if they know you earn money online)

    • Oh I’m sure there is, countries are slowly but surely setting the wheels in motion to try and get their share of what bloggers and internet marketers are making. I’d check u on it if I were you because I wouldn’t put it past some governments to back date any claims on your online income.

  • I believe a relatively easy way to make money online is eBay – I know we have all heard the stories before and seen the ads but they hold some truth – its a business model very similar to a traditional business model – buy cheaper and sell for a little bit more – a very valid point about taxes though people no matter of country should always keep this in mind.

    Paul Johnson
    Manager
    http://Xboxpcpro.co.uk

    • Very good point Paul, although I’ve found Ebay to be absolutely saturated in certain niches and people are having to sell incredibly low to stand out among the others.

  • Interesting to know that bloggers too go through so many types of taxes.

  • It is important to stay legal. Do not miss those taxes if your making money online. Great list here Amanda.

    – Robert

    • It is very important. There are some people who believe you don’t have to pay if you make money online, I guess that is one reason why governments are really putting the squeeze on online marketers and entrepreneurs.

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