Tax Girl

Why not give a little and get a deduction? It’s near the end of the year and it’s the holiday season. If you think you’ll be itemizing for 2005 then it might be nice to give to a local charity or do some cleaning around the house and donate to goodwill to get a little extra deduction on your Schedule A. If you donate money, it’s good to use a check so that you have a record of your donation. If you donate clothes and stuff to goodwill, they usually give you a receipt that estimates the fair market value, which you would use as your deduction. If you donate more than $250 you will need a statement from the organization detailing the amount you donated and whether you received anything in return.

The end of the year is coming up and I’m going to see if I’m withholding enough or too much from my paycheck. The IRS puts out a really good publication, Publication 919, that basically goes through the why, when, how’s of adjusting your withholding. Basically you don’t want to withhold too little or you’ll pay fines and penalties, but you don’t want to withhold too much because that money could be saved at a nice 4% savings rate. The publication also has these helpful worksheets that guide you through how to project your 2005 taxable income. Then you figure your tax liability and compare it to how much you will have withheld for the entire year.
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So I recently took a trip to Las Vegas. I LOVE that place. I’m in my early twenties and I’ve already been there 5 times. Twice this year. I’ve done pretty well…I think I’m up in the long run. I don’t really go all out though. My games are craps and blackjack and I keep my bankroll to about a couple hundred dollars. And I stick to it. No more, no less. It’s all about moderation baby.

On this recent trip I made a few hundred bucks. Not bad. But as always, I was thinking, do I have to report this income? My answer is no. I think you can fly under the radar if you just go to Vegas and play a little for fun. Now if you’re a high roller and you win the big bucks(like in the thousands) or you hit the jackpot, then the lovely casinos will probably track your winnings. I’m not sure if they automatically send you a letter detailing your winnings or not, so it might be up to you to request one.

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So as I embark on this wonderful journey into the world of blogging I thought to myself…so what exactly are the ways that I can earn a little bit of cash? And, of course, the next logical question from a tax accountant perspective is, would I have to report this income on my tax return?

After talking to some blogging friends, I guess the most common way to make money off a blog is through advertising, such as Google AdSense. Now I hear that Google won’t send you a 1099-MISC if you don’t make $600 in a year, but my guess is that if you make $599 off advertising, the IRS would like you to report it nonetheless. So I would keep track of your earnings. Hmmm…I will have to look into this thing they call advertising then.

So then I was thinking, is blogging just a hobby or is it a business? Income from a hobby or a business is considered taxable. For a hobby, deductions are allowed to offset income but never create a loss. But with a business, ordinary and necessary expenses are allowable deductions and can be deducted fully even if they create a loss. This loss can then be used to offset other income earned or be carried-foward or carried-back, depending on the situation.

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