Monday, March 16, 2009

Blogging and Taxes

I’ll start with an apology to the greatest readers a guy could have. This isn’t going to be about baseball, and it isn’t going to be applicable to most of my regular readers. This is for the other bloggers out there. We’ll get back to our irregularly scheduled baseball coverage in our next entry…..

Bloggers, I really wish someone had told me seven years ago what I’m about to tell you.

Last Saturday, at the Twins bloggers gathering, the question was raised about whether or not bloggers can deduct certain costs from their taxes. The answer is ‘yes’, and the further answer is that this can be worth hundreds of dollars. But first, let’s get the disclaimer out of the way….

I am not a tax advisor. You should not mistake what I’m saying for advice from a tax advisor. This is general information only, and for specifics about everything I am about to tell you, you’re going to want to talk to an actual tax advisor. In fact, most of what you’re going to hear here can be gleaned from spending about 45 minutes with a tax advisor. So you might want to do that if you have any questions.

The Strategy
You can deduct expenses related to your business, and if your business is blogging, then you can deduct those expenses. You can do this even if you aren’t actually making any money from blogging, provided it’s a “business”. This deduction applies to both your federal and state taxes.

For example, let’s say you find $2500 of expenses related to your business. (We’ll get to where you are finding those expenses in a second). And say you pay 28% federal tax and 6% state tax which means your paying about 34% in taxes. And say you also make all of $100 in income from ads on your blog and the occasional freelance writing gig.

Your business has lost $2400 this year. You can write that amount off, so you have $2400 less taxable income. Which means you don’t need to pay a 34% tax on that $2400, meaning you pay $816 less in taxes. And, since most of us have taxes already withheld from our paychecks, you’ll get back an extra $816 back in your tax refund. That’s how you make several hundred dollars from blogging.

By the way, the specifics of the above example might not be dead-on accurate. That’s because I’m not a tax advisor. I constructed it as a general example of how reducing the amount of taxes you need to pay can end up getting you extra money. You’ll want to talk to a tax advisor for specifics.

Making Blogging your Business
Blogging is your business if you are in it for a long-term profit. Otherwise, it’s a hobby. If it’s a hobby, you can still deduct some expenses, but you can’t deduct any expenses beyond the income you make. So in the example above, you would only be able to deduct $100 (because that was the only income you had), and you would only make back $34. You want your writing/blogging to be a business.

And, if you’ve been doing this for any length of time, it probably is, even if you haven’t been recognizing that. So it’s time to treat blogging, and the expenses associated with it, like you would if it was a business. So:

  • Record your business expenses in a timely manner – This is THE MOST IMPORTANT part, so we’ll cover it more below.

  • Have a plan to make a profit long-term. For instance, write up a plan that states how you’re going to build an audience on your blog, how you are going to try and use google ads to raise revenue, use your blog and audience as a marketing tool to draw freelance writing gigs, etc.

  • You may want to register your business with your state. If it’s located in the state of MN, you can do so by filling out a form on this web site and paying $35. Name it whatever you like, such as Lastname Publishing or Lastname Media.

  • Document instances where you tried to market your business, like times you tried to get paying jobs as a writer, or attempts to get ads on your site. You need to be able to show that you are actually trying to make money.

Again, it’s not important that you end up turning a profit, though if you end up doing so, you’re really in good shape. If you make money two out of seven years, the IRS can’t say you’re a hobby. But even if you lose money for twenty straight years, if you run your business like a business, you can be safe.

How safe? I don’t know. You might want to ask a tax advisor. Which I am not. I’m just trying to pass along some general information here.

Identifying Expenses
A lot of things can be counted as business expenses for your publishing company. The important part is the documentation (which I’ll get to in a minute). For example, as a baseball blogger you could deduct:

  • Tickets to a game. And food at the game, for that matter.

  • A portion of your cable TV bill. - If you can claim that you wouldn’t have cable TV at all without your blog, then you can write it all off. Or, if you estimate that 50% of your viewing on cable is sports for your baseball blog, you can write off 50% of your monthly cable bill.

  • A portion of your hi-speed internet connection bill. - Again, if you can claim that you wouldn’t have hi-speed connection without your blog, then you can write it all off. Or, if you estimate that 75% of your internet use is because of your blog, you can write off 75% of your internet bill.

  • Computer/laptop – Are you getting it for your business? If so, it’s mostly deductible.

  • Baseball publications – The books you read about baseball.

  • Baseball subscriptions – The ESPN Insider or Baseball Prospectus subscription you have.

  • Cell phone – Maybe. You could conceivably deduct the portion of it that is related to your blogging. Or, if you also have a land line and you use the cell phone as your business phone, you could do the whole thing.

  • Mileage – Going to the game? In 2009, you can deduct $0.55 per mile for the trip you make. In 2008, I think it was $0.505 per mile.

  • Parking – For the game

  • Entertainment – If you attended the blogger get-together, you can deduct that. Watching a game at a bar with friends and writing about it, or using it for research? You can deduct that, too.

  • Web site costs, URL registration costs, etc. - That $35 cost you paid to register your domain name and the other $35 you paid to register your business is tax deductible.

There is one thing you probably don’t want to try and deduct. On Saturday, someone asked if space in your home that is used for the business is deductible. The answer I got is that you probably don’t want to do that. The IRS is pretty sensitive about it, and has really tightened their interpretation of it. For instance, the space must be solely and exclusively used for the business, like a separate room. And even then, there are some factors when you sell your house that you need to consider.

Again, like everything in this story, you’ll want to consult a registered tax advisor for the full story. Because – and I don’t know if I’ve mentioned this - I’m not one. And this is meant as general information.

How Do You Do It?
You need to treat these expenses like true business expenses, and that means you need to track them “cotemporaneously.” That means that you need to document the expense at or about the time it happens. An easy way to do this if you have a daily planner is to reserve a section for documenting these expenses.

For instance, if you dropped $20 at last Saturday’s BW3 gathering, you would turn to 3/14 in your planner and write:“$20.00, BW3 in Roseville, Blogger gathering to discuss future plans and watch USA/Canada.” And if the trip was five miles from your house you might then scribble: $5.50, 10 miles round trip to BW3”. I think you could also instead update a spreadsheet or something with that info (including the date), so you can add up the expenses later. Just remember that it has to happen at or about the time the expense happens.

It doesn’t hurt to have receipts, but the only time you need receipts is when it is an entertainment charge that is $75 or more. So even if you walked away from the BW3 without a receipt, but you know you dropped $20, you can claim it.

How much can you deduct? As much as is legitimate. But you’re likely to receive some extra attention from the IRS if it exceeds a couple of thousand dollars per year.

Finally, when you do your taxes, you’ll want to fill out a Schedule C. You can download/see that form here. Again, if you have any questions, to be safe you should probably contact a tax advisor for assistance. Because I’m still not one. And this is just meant for general information.

Let’s try boiling down this whole thing into a hundred words or so as a summary:

  1. If you treat your writing as a business, you can subtract expenses related to that business from your personal income, which lowers your taxes and could get you a bigger refund.

  2. To treat your writing as a business, at the very least you need to document those business expenses at or about the time they happen. If the entertainment expense is more than $75, you’ll need a receipt.

  3. You can deduct a lot of stuff, including some utilities, entertainment, mileage, research and office equipment. You’ll deduct these on Schedule C, using the supporting documentation you have from #2.

  4. I’m not a tax advisor. For specifics, you should talk to one. This is for general information.

The internet has changed writing considerably, and I think it’s generally been for the better. But it still isn’t clear how we’re all going to make a living from it. So many of us are just plugging along, building eyeballs, exercising our writing muscles, and hoping that business model emerges that makes sense. In the meantime, let’s make sure that we’re getting what we can monetarily from it. Hopefully this entry will help with that a little.

Even if it is just general information from a guy who is not a tax advisor.

Sunday, March 15, 2009

Respecting the Game

Nuke: How come you don't like me?
Crash: Because you don't respect yourself, which is your problem. But you don't respect the game, and that's my problem.

- Bull Durham

On April 12th, 2002, on the original site, I raved about a new independent program/scorecard that I had just found:
The Little Things

A progressive rock radio station I can listen to while driving to work. A sauna in my health club that is truly hot. Hometown beers that I really like. A body of water within walking distance. I've come to the conclusion that a lot of the things I value the most are little, but are big enough that I can't really control. They're the icing on the cake.

I found a new one yesterday at the Twins game - Gameday, a $1 independent program and scorecard which is being sold across the street from the Metrodome prior to each game. If you like this website, you will LOVE this magazine.

It's exactly the program I want to have at a Twins game and I'll not only be buying one at every game, I wouldn't be surprised if I end up going to a couple of extra games this year because of it.

That year, while I was getting – at most – twenty to thirty hits per day on this site, I wrote to GameDay and volunteered to write for various issues, and I did so on and off again over the next year or two.

Four years later, I received an email from Tom Genrich, one of GameDay’s founders. He asked me if I had any interest in becoming the editor and a partial owner, and we met over a beer at Dan Kelly’s to discuss it. I suspected it would go well. We were both fans of each other’s work.

But as I sat across from Tom, it seemed like the enormous mirror behind the bar was playing tricks. I was staring at myself in that booth. We had both been doing the same thing, starting at the same time, but in different products.

We both had scars we were reluctant to show. We had both had dedicated way too much time to our passion. And we both admitted that the passion was fueled as much by anger and disgust as by love. We were driven by coverage that didn't respect the game.

That's a term that's used in relation to ballplayers, but it's applicable to baseball writers, announcers and promoters, too. Tom and his brothers were fed up with the overpriced, glossy, vapid programs that dominated most ballparks in the 80s and 90s. So were a lot of baseball fans. Independent programs and scorecards had been popping up in all kinds of major league cities at that time.

I remember once paying $5 to get an official magazine because it had a scorecard in the middle. Fully 2/3 of the scorecard area was advertising, meaning I was essentially trying to keep score on an index card. And the kicker was that it was glossy paper, so the pencil that came with the scorecard couldn't write on it. You had to buy a $4 pen. For a baseball fan, it was not unlike an inner circle of hell.

I had been fighting the same beast only with daily coverage. The corporate dailies were determined, or at least satisfied, to cater to the lowest common denominator. I didn't start because I wanted to write this stuff. I started it because I wanted to read this stuff. And now I can, both in the blogosphere, but also in local newspapers, whose coverage is roughly 523% better than it was earlier this decade.

And MLB teams have embraced this movement with their content too. It's no longer solely promotional or blindly positive. When you lead fans out of the shallow end of the pool, they can find all kinds of facets to appreciate. Those are fans who stick with a team when they aren't divisional favorites. And I think that's what led to an agreement between GameDay and the Twins.

Today Tom and I signed a contract with the Minnesota Twins to be the exclusive content provider for their official scorecard. The heart and soul of GameDay - the Dugout Splinters insert - will now be the heart and soul of the Twins Scorecard and updated for each and every home series. And it will be sold for just $1.

I could not be more excited about this, and that excitement is largely based on how impressive the Twins have been while working out details. Twins President Dave St. Peter has shown a real commitment to providing this kind of content, and a high level of patience in dealing with a couple of baseball geeks. I think the three of us - GameDay, the local baseball blogging and writing community, and the Twins - are going to make a great team.

My favorite St. Peter moment was when he was delicately suggesting that maybe we didn't need to pack words into every square quarter-inch of the page. "We could, maybe, add a graphic someplace to break up the text?" Blasphemer. Blasphemer!!!

The change is not without some mixed emotions. While the Dugout Splinters will live on, the GameDay Program will not, or at least not this year, and I'm really going to miss some of those more in-depth stories. It also means we won't be working with some of our partners - our vendors, printers and advertisers. THANKS so much to everyone for the support you've provided GameDay over the last seven years.

But this is just too good an opportunity to pass up. Pairing the Twins organization with the talented local baseball writing community is something we've sought for years, and I hope this is nothing more than just the first step. Because there are a lot of things we can do together. And because the game is worthy of respect.