• Tax Time

    March 2, 2011

    I promised you guys a few more posts about navigating my finances and business as a full-time blogger (aka being self-employed). I’m not going to say that I have it all figured out (because I don’t), but I am slowly getting there, and, hopefully, what I share on CNC will be helpful to you– or at least point you in the right direction!

    First up: TAXES! They’re not fun, but I know they are a necessary evil and make the world go round, so I have to play along.

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    Every three months, I pay quarterly federal and state taxes on my income because I am paid by companies that don’t take these taxes out for me. It’s my responsibility to make sure that the government gets their chunk of change. My accountant figured out how much I should pay based off an estimate of my income from last year.

    Paying this amount every few months was actually a big adjustment for me. I’ve only ever received taxed income in the form of a paycheck from my employer, so giving my money away took some getting used to. Even now, it’s sort of weird looking at my bank account and knowing that the number isn’t really what’s mine. To keep myself on track with what I owe to the government, I save a little over a third of my total income to pay every 90 days.

    For me, hiring an accountant is completely necessary. I had 17 different sources of income last year, so I need my accountant to figure things out and answers all of my questions. I am definitely NOT an expert in this area, so if you have a lot of questions about your blog income and taxes, I definitely recommend hiring one. It’s a lot easier having an expert help you than blindly trying to navigate a new business.

    With that said, here are a few tidbits that I learned from my meeting with our accountant last week:

    • Record income and expenses. Being your own boss, means you need to keep good records (in case the government decides to audit you). I use Google Documents to keep track of my income and expenses. I have two Excel spreadsheets: one for income; one for expenses. Each time I receive a payment, I record it in the spreadsheet. At the end of each month, I record all of my expenses. I keep my receipts in an accordion file organized by month and label all of my electronic receipts ‘2011 TAXES’ in Gmail. I also categorize the expenses, which makes things easier for my accountant at the end of the year. I used this site as a guide for those categories.
    • As a food blogger, you cannot write-off your groceries. When it comes to expenses for the self-employed, you can only write off what is “ordinary and necessary” to your business. With regard to groceries, my accountant basically explained that I need to eat, so I would have to buy the groceries anyway. They’re not really ‘necessary’ to my business. However, if I bought special ingredients to test a recipe that I featured on my blog, I could write those off. But, regular ol’ I-need-to-eat-to-live groceries do not count.
    • It’s better to save your income than use it for expenses. When CNC started making money, I went out and bought a new camera. I didn’t really need it, but I figured I could just write it off as a business expense. Well, as my accountant explained it, I can write it off, but it’s not like I just get that money back in my pocket. It’s a balancing act between income and expenses, which determines what you owe the government at the end of the year. He said I am better off only spending my income on what I really need for my business than just spending it to spend it.

    Snack

    I’m super sore from yoga yesterday, so I nixed Body Pump this morning. (Sorry, Julie!) I’m heading to the gym in a little bit for an easy cardio workout, so I snacked on some leftover sweet potato fries from last night’s dinner. I need a little something in my tank before I exercise.

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    Disclaimer: I am not a trained financial professional. Please consult an accountant or finance specialist before making any financial decisions.

    P.S. Check out who’s featured on the Teddie homepage!

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    { 57 comments… read them below or add one }

    Kristen March 2, 2011 at 8:59 pm

    I had sweet potato fries today too! I even have cravings for them now haha

    Reply

    lynn @ the actor's diet March 2, 2011 at 9:30 pm

    ah, tax time…luckily i CAN write off my groceries b/c it’s under “special diet” for acting!

    Reply

    Sheila March 2, 2011 at 10:24 pm

    I love sweet potato fries:)

    Reply

    Honey @ Honey, What's Cooking March 3, 2011 at 1:55 am

    wow you have 17 sources of income… that’s crazy and awesome at the same time. you are POPULAR! :-)

    Reply

    Franziska (justalittlechocolate.com) March 3, 2011 at 7:05 pm

    taxes taxes – I do not make income off of my blog yet but I do have a private nutrition practice and my husband is a marriage and family therapist with a private practice – both new this year so we found ourselves an accountant and kept good records – I do like your process of seperate excel sheets for income and expenses – thanks!

    Reply

    Debbie March 30, 2011 at 7:30 am

    I’m not good when it comes to budgeting and all that.. thanks for sharing some useful tips…
    I enjoy reading all your post,..

    Reply

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