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Blogging as a Hobby or Business? Claiming Blog Income

| February 18, 2013 | 11 Comments

 

 

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One of the seminar that I was looking forward to the most at the ShesConnected Conference was Claiming Blog Income: Blogger Compensation.  An acquaintance, Angèle Lafond from Shoebox-be-gone, was presenting it, so I was really interested to see what she had to say on tax credits, business expenses and claiming revenues.  This seminar was definitely an eye opener for me and most attendees!

First of all, if a company mails you a prize or gift certificate to be drawn to your readers, it counts as a revenue.  However, you are giving it away so it also counts as an expense.  It’s in and out and automatically annuls itself, but you still have to include it.  If the company mails the prize directly to the winner than you don’t have to claim it on your income tax.

Secondly, I liked the fact that 100% of my cell phone bill and basic internet fees are deductible.  You can’t be a blogger without using any of them so it makes sense!

She also handed out a blogging monthly income and expenses sheet that is really useful for tracking revenues and expenses on each blog post.  What a wonderful idea, now I won’t wait until the end of the year to start preparing my income tax, and yes, forget to include expenses!  I purchased the packaged called the Ultimate Shoebox- Blogging Edition for only $4.99 + tax (an exclusivity price to #SCCTO attendees until November 3rd)  www.shoeboxbegone.com/sccto. It includes 3 templates:

  1. Blogging Income and Expenses
  2. Business Use of Home Expenses
  3. Business Use Vehicle Expenses

When we started talking about revenue on product reviews, did it ever create a major discussion.  I didn’t want to make a mistake on what I was about to write on this topic so I emailed Angèle, and asked her to share her knowledge with you. This is what she had so say:

“As the CRA link http://www.cra-arc.gc.ca/E/pub/tg/rc4070/rc4070-08-e.html#P720_67363 *DOES* state that barter transactions as well as gifts / vacations etc are income.

The first thing people need to look at is ‘is my blog a hobby or a business’.  If you are showing ‘business activities’ – advertising your blog, using Adwords, etc, those are business activities and therefore your blog is a business.  The T2125 is the form you need to fill out.

Once you’ve determined if your blog is hobby (non-consequential) or a business, then you need to look at the following if it is in fact a business:

Free mini-hot dogs at Costco and the such are not income.  Same for swag received at a conference or ‘sample’ sized products (where the product is clearly labelled ‘not for resale’)

A product received for review becomes income WHEN THERE IS A REASONABLE EXPECTATION OF A PRODUCT FOR SERVICE CONTRACT.  What that means is that if you have agreed to write about a product in return for receiving it, then you are offering a service in exchange for the product, hence a barter agreement.

If you receive unsolicited product pitches (with actual product) and you CHOOSE to write about it – the product becomes income.

Going forward, when accepting product for review, ask the brand / PR agency for a form letter which indicates the Suggested Retail Value of said item received.  Keep this with your tax documents to protect yourself.

If you accept a product to write about and you give it away (whether to family and / or friends and / or giveaway) then you claim the suggested retail value as income (as discussed) as well as expense (under supplies).

If buy a pair of shoes and choose to blog about it, then the cost of the shoes becomes a supply.  If you receive a pair of shoes from a brand and blog about it, the shoe is income but there is no expense if you keep the shoes.

Items received for review only become an expense when you give it away, either formally or informally.

If you make an educated choice to not claim income (I don’t suggest you do this, but know that some will) and you get audited down the road, you will have the face the consequences of those actions, 1st of them being a 10% penalty on the total income that was never claimed, whether or not you actually owe money on that income.  Furthermore – if you do owe taxes you will be charged a penalty plus interest, based on the amount of taxes owed.

When claiming blog income, the ‘income’ amount is the total of all moneys received, gift certificates, and value of products / services received.  The supplies you claim are the direct supplies in writing ANY blog post (so expenses related to non-sponsored posts are valid – however it must be actual money spent).  You can also claim all the normal business expenses such as advertising, bank fees, office expenses, and business-use-of-home amongst others.  Anyone is welcome to check out the www.shoeboxbegone.com/sccto link to download the copy of the tax guide which details what expenses are valid for any business, and how to calculated them (i.e. business use of home – what counts, what doesn’t, etc).

Note that 100% of your cell phone bill and your home internet bill is allowable – most people that resonates to about $130 / month, or $1500 / year.  If you receive less than that in income you have an automatic business loss that can either be used to increase your tax refund or carried forward to the following year.”

At the bottom of the sheet Angèle gave us, this information was provided:

Ressources

Get your FREE tax guide at www.shoeboxbegone.com/sccto : Find out what DOES and DOESN’T count as a business expense!

CRA Information

Excerpt from http://www.cra-arc.gc.ca/E/pub/tg/rc4070/rc4070-08-e.html#P720_67363

Types of income

During the year, you may receive income from your business and from sources other than your actual sales. If they relate to your business, you have to include them in your business income.

What is business income

Business income includes money you earn from a profession, a trade, a manufacture or undertaking of any kind, an adventure or concern in the nature of trade, or any other activity you carry on for profit and

there is evidence to support that intention. For example, income from a service business is business income. However, business income does not include employment income,such as wages or salaries received from an employer.

Note

You have to report all amounts of income that are required for calculating income for tax purposes. If you fail to report all your income, you may be subject to a penalty of 10 % of the amount of income that

Vacation trips and awards

If you received vacation trips or other awards of any kind (such as jewelery or furniture) as a result of your business activities, you must include the value of these awards in your business income.

Barter transactions

A barter transaction takes place when any two persons agree to an exchange of goods or services, and carry out that exchange without using money.

If you are involved in a barter transaction, the goods or services you receive could be considered proceeds from a business operation. If you are in a business or profession that provides goods or services, and you offer these goods or services in a barter transaction in exchange for other goods or services, you have to include the value of the goods or services you provided in your income.

©Shoebox-Be-Gone Bookkeeping Solutions, 2012 Claiming Blog Income -SCCTO

Thank you Angèle for sharing your expertise with us!  It is greatly appreciated:)

Lyne

Founder, Ottawa Mommy Club

Tags: , ,

Category: Blogs, Business, Living, Mom-Preneur

About the Author ()

Lyne is happily married and has two teenagers: a 16 year old son and a 20 year old daughter. She is a Certified Infant Massage Instructor (CIMI), Certified Professional Wedding Consultant, and an Event Planner. It has always been her dream to create a website dedicated just for Moms since her children were young. Thus, after 10 years, she finally accomplished it, and the Ottawa Mommy Club was born in May 2011. She is also the Queen B of the BConnected Conference, Canada's Digital Influencer and social media Conference in Ottawa. She coordinated the Annual Infant Information Day/Early Years Expo for the City of Ottawa for 8 years. She was also the co-chair of the Navan for Kraft Hockeyville 2009-2011 committee that organized five community events within 6 months, and helped Navan reach the top 10 finalists in Canada. In April 2011, she received the Mayor's City Builder Award. Author's website.

Comments (11)

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  1. This post helped a lot! I wasn’t aware I could claim things I had bought and then decided to review and had just classified those as hobby blogging. I’ve done quite a few of those. I also didn’t know I could claim 100% for my phone and internet. I’m almost certain mine will be claimed as a loss for this year since I only did a few reviews and had no ads — or would I not be able to claim those expenses for the months I wasn’t blogging?

  2. Hi Missy! Those are great questions 🙂

    The months you didn’t blog – were you actively promoting your blog, researching content, networking etc? If yes, than you can claim those months as well. If not, it would probably be disallowed during an audit.

    If your blog is monetized then you can claim all expenses related to said blog, providing you can prove that you are actively pursing this a an income generator – whether or not it actually made any income this year. It’s like the shoe maker who spent thousands of dollars on machinery, leather, staff, and made all those shoes, but didn’t sell a single one until the following year – his expenses still count because there is a reasonable expectation that he will eventually make money. And review items received are considered money 🙂

    If you have other questions you can download the guide at http://www.shoeboxbegone.com/sccto 🙂

  3. That’s good to know, thank you. My brother in law tried to explain it to me regarding the expectation of income but he didn’t point out that I would have had to be actively promoting etc. Researching and SEO yes, but I was really only promoting when I posted something and not really sure how I could prove I was researching.

    It sounds like I will not be claiming my phone for the inactive months, but I will plan on doing it this year. My phone and call display are registered under my blog name, but even with that I’ve thought of my blog as a hobby more than anything.

  4. Steve says:

    Thank you so much for this info!! I really appreciate you putting this together.

    I have one question regarding products, we as bloggers, receive. You say that products we give to people ‘formally or informally’ becomes as expense. I know the CRA likes records and documents, but the products I hand off to a friend of family member do not provide any paperwork. I have given a lot of the stuff I receive to other people.

    Do you know how we are to handle these situations?

  5. DebH says:

    Interesting article! I definitely learned a few things!

  6. Karen E. Hill says:

    I am glad I read this. Gave me food for thought

  7. Robyn B. says:

    Great article. This post really helped a lot. I wasn’t aware that you could claim things that you had bought and then decided to review.

  8. Karen E. Hill says:

    Very informative thanks for writing this.

  9. jan says:

    there are so many bloggers that I am sure they do not all know what they can claim, how many things really work, etc. Great info for them and it was an interesting read for a non blogger too.

  10. Cassey C says:

    Great information, I have always wondered about some of the things you described here.

  11. gianna borden says:

    i’ve always wondered how this works because i have thought about many times becoming a blogger. good to know, thanks!

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