Welcome to my second segment of Real Talk! I received a lot of great comments and questions after my first post last week on how I make money blogging. One reader asked me to share how I file my taxes. This is an excellent topic to discuss especially with taxes due in just two weeks!
Many of you have probably already filed your taxes. Congratulations. I wish I was in your shoes. Perhaps these tips can help you for your 2017 taxes. But for those of you like me and likely to file an extension because you procrastinated, welcome to my world. I filed an extension last year and still barely made the October extension deadline. I know- I just really don’t like filing taxes.
Now I am not a tax expert by any means, so I won’t be telling you what to do. That’s what CPA’s (Certified Public Accountants) are for. However, I will share how I file my own taxes and a few tips on how to stay organized.
DBA vs. LLC
When I first started my blog 5 years ago, taxes were super simple. Laura Lily was a DBA (Doing Business As.) This basically means that I was doing business as myself, a sole proprietor, it allowed me to accept payments from brands as “Laura Lily” or Laura Yazdi. (Fun fact: Lily is my dog’s name NOT my middle name.) I barely had any expenses at that time and the ones I did probably filled up less than 100 lines on an excel spread sheet. Fast forward to today and that is definitely not the case. Let me explain…
Up until August of last year, Laura Lily was a DBA. Now it’s an LLC (Limited Liability Corporation.) My main reason for starting the LLC was to separate and protect my assets (mainly my condo) in case of any lawsuits. Hey it could happen. Is an LLC necessary as a blogger? There are mixed opinions on this. A few bloggers whose businesses practices I appreciate have LLCs (Sazan, Margo and Me, Gal Meets Glam, to name a few.) Will I keep an LLC? I’m on the fence at this point. It’s extra paperwork with lots of deadlines and it’s not cheap in the state of CA ($800+ per year.)
Hire a CPA
Back to taxes… Last year I tried filing my own taxes with Turbo-Tax. FAIL. I was going to owe the IRS even though my net profit was negative! (Net profit is the amount of money you’ve made after you deduct expenses from your total income.) Add on being a homeowner with a W2 tax form and it became too confusing to do it on my own. So long story short – I hired a CPA. Best decision I made. Yes, it cost me $450 to hire someone else to do my taxes, but it was WELL WORTH IT. It saved me time, money, and the hassle. Plus, I got money back AND I was able to ask a lot of questions that can save me more money in the future!
I recommend finding a CPA by asking your friends and colleagues for recommendations on who they use. That is how I found mine. Find one that is not totally confused by your line of work as a blogger. If you’re a homeowner, find one that is either a home owner themselves or very familiar with the write offs for owning a home.
Create Your Own Expense Tracking System
Worth noting- last year I organized and sent my CPA an itemized excel spreadsheet. This A) allowed me to see my actual expenses and B) understand where most of my money was being spent. Plus, I saved money by not having the CPA organize all my receipts. This year I started using Quickbooks to keep track of all my expenses. The program (about $5-10 per month) allows you to download transactions from different credit cards and bank accounts and organize them by categories (personal vs. business and travel, office expenses, marketing, etc.)
Hard truth: last year I did not keep very good track of my expenses. Now I am paying for it by spending a lot of my time trying to organize all of 2016. I won’t make that mistake again! I am already caught up for 2017 and will continue to dedicate one day a week to just making sure I am organized can caught up with expense tracking!
Tricks For Keeping Receipts Organized
I organized my receipts in two ways. One) I use an AMEX receipt app that uploads a photo of my receipt to each transaction. Two) I also keep the hard copy receipts for each year organized in a file folder like the ones pictured above. I bought these file folders at Target and Amazon. Within each one the receipts are organized by category: travel expenses, office supplies, meals/entertainment, operational expenses and income (usually checks I’ve cashed.)
Another way to stay organized: use one bank account and credit card for all of business related expenses. This will make your life so much easier come tax time. Plus, it’s really the only way to keep your personal and business expenses separate.
Deductions You Can Expense
There are so many deductions you can take as a blogger. Some may even surprise you. Here is a basic list of the kinds of things I write off on my taxes:
- Instagram editing apps
- phone bill
- education (Photoshop + social media courses)
- travel expenses (flights, hotels, taxis)
- home office
- camera equipment
- laptop + equipment (mouse, cords, etc.)
- fashion magazines
- office supplies
- Facebook ads
- meals/coffee with brands/bloggers
- parking fees
- props for photoshoots
- Microsoft Office programs
- CPA or TurboTax fees
Just to name a few of probably a hundred. A big question is, Can you deduct clothes? I don’t think so. I read an article last year that stated unless the clothes you buy are specific “uniform” (ie: nurse, police officer, etc.) that you need to do your job, you can’t expense it. However, if you find a CPA that says you can please let me know!
Hope you all found this article helpful! Looking forward to sharing more Real Talk topics with you. If you have any questions or suggestions please let me know in the comments below! You can also email me: Laura@LauraLily.com. Remember: No question is a dumb question. Trust me, I ask MILLIONS of questions and I love hearing from you all.