So, it’s tax time again, and I had my annual update conversation with our tax guy this morning. Because I am a professional freelance blogger, I took his advice years ago and applied for a city tax license which is required by the city of Los Angeles for self-employed people. It only costs a percentage of your net profits, which for me is $0, so yay me! I get a free business license. It looks so legit.
This year my big question to him was this: how do we know when bloggers must report free stuff as income on the income tax return?
For me, the answer is not very cut and dried. I have several outlets – some paid, some unpaid. This here blog you are reading now does not generate income in cash, but I did receive some pretty cool free products and a trip to Hawaii. At first blush, Tax Guy said that those things would indeed count as income. However, because the trip to Hawaii was a research trip, about which I wrote several articles that were published in many outlets, that doesn’t count. Nor do my expenses count as deductions, because I received a per diem while I was there.
As for the free products, it’s not like I’m getting cars or houses or Cartier jewelry. The most expensive things I was given were Britax car seats and a Nintendo Wii gaming console. The items would count as income, said Tax Guy, if I asked for them. If I solicited them. As in, “I’ll write a post in return for free product.”
There’s nothing wrong with that approach – I have used it many times with varying levels of success. I should have been keeping track of the products I obtained that way, though, because now it is hard for me to go back and remember which products or services or admission prices I received for free because I asked for them vs. the ones that I accepted after they were pitched.
For example, I went to a Tupperware party hosted by Brooke Shields. The gift bag was a lovely canvas tote filled with about $50-$75 of Tupperware products. I was invited to the party, and I did not ask for the products. I’m not going to sit down and calculate the retail value of the plastic cups and put that on my tax return. For a more expensive item, take the Britax car seat – approximately $300 retail value. I did NOT ask for that – I received a press release in my email in box that said “if you’d like a sample, let me know.”
Let me know? This was back before the famous “What is Twitter?” post, so I didn’t have as much visibility as I do now. It took me less than 10 seconds to reply to that pitch and say “yes, please.” But because they offered the car seat as a promotional gift in the hopes that I would write about it here, that doesn’t count as income for me.
In the opposite example, the product that I solicited myself that I can remember off the top of my head was the G-Fit Stretch Mat. I saw a sidebar ad on some other site for this product, thought it was cool, and contacted the PR company that represented it. I offered to review the product and host a giveaway, and I suggested that after the success of this project we might discuss having them send me to BlogHer ’09 as their blogger eyes and ears. While the second part of my offer did not come to pass, the review and giveaway were quite successful. I actually did a lot of work on that review and giveaway.
One might think being paid with an exercise mat is selling myself too cheaply – but I did a cross promotion with an exercise blog and the whole thing increased my visibility, brought in more readers, taught me a lot about working with a brand, and helped me get a little bit more limber. Six months later my price is higher, but I’m worth it. Ask anyone.
But I digress. At the end of the day, the tangible payment for that post series was a pair of exercise mats, I believe a value of $90. That is something I would need to report. Like I said above, I wasn’t very good at keeping track of those things last year, but going forward, I certainly will. Luckily, my days of requesting products and services are few and far between, because I end up getting more and more unsolicited products now. Most of them are lovely and useful, but sometimes that pile overflows and I wind up doing things like The Great Free Crap Giveaway of 2009. I mailed the stuff to the “winners” on my own dime, and you can bet I’m counting that postal fee as a deduction.
So that was my experience discussing the concept of the free stuff as income for bloggers. I’m sure many other bloggers have gone before me and dealt with this, and I am curious – if you have heard otherwise, please share. I’d love to hear your story, or your story about someone else’s story!
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