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:
- Blogging Income and Expenses
- Business Use of Home Expenses
- 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:
Get your FREE tax guide at www.shoeboxbegone.com/sccto : Find out what DOES and DOESN’T count as a business expense!
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.
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.
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:)
Founder, Ottawa Mommy Club