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You did it! Your blog is starting to make some money!!!
Go you!!
As exciting as that is, it means there is just one more thing to add to your ever-growing list of “to-do’s.” You need to track it all.
That means keeping tabs on every penny earned – and spent.
You might look at accounting and think that you can’t do this! You sucked at math in school, and the idea of income, expense, profit, and losses is enough to make your head spin.
I get it.
If you are completely overwhelmed with the process, you can hire a professional bookkeeper (for bloggers) to do this for you. But, keep in mind that you still have to be involved, even if you hand over the tracking to them.
If you aren’t making much right now, it may not make sense to outsource something simpler than you think. Yeah. It can be easy.
The idea is to write down everything you earn–and spend–so that you are ready when it is time to do your taxes at the end of the year.
I have the perfect tool that will show you exactly how to do this. You don’t need to have some fancy accounting degree or even excel at math. If you can type – you can do it.
Disclosure: I am not a tax professional. Nope. I am not a CPA, bookkeeper, accountant, or lawyer. What I share here is my advice based on what I have done since 2009 on my blogs. You must consult with a professional if you have specific questions or issues that may arise for your location.
Related:
How do you make your first $1,000 blogging?
Why you will never see a blog income report from me
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Why you need to track blog income and expenses
There are a few reasons why every blogger needs to keep accurate accounting records.
Make tax prep simpler
Whether your blog makes money or not, you will need to claim this on your taxes. Yep – even if it is a loss!
The way that you report, including any licensing or tax forms, will vary based upon where you reside. For example, in the United States, you may need to attach only a Schedule C to your personal taxes.
You will save yourself hours trying to track down those recipes or recall that random $100 check you received 10 months ago with proper accounting.
Pay the right amount
No one wants to pay too much in taxes, right? And, you certainly do not want to underpay and find yourself in the middle of an IRS audit either.
Therefore, you need to track every single penny you make to accurately report that as income and pay the proper tax you owe. However, you also need to keep track of those expenses.
Your blog expenses will reduce your profits. And, since taxes are based on profits, you need to make sure you report the right amount. That can reduce the amount of tax you owe to Uncle Sam and keep more money in your pocket.
To make sure you pay yourself
As a business owner, you know you need to cover your expenses. And then, if there is anything left, you pay yourself. With accurate records, you can make sure you do this regularly.
There is an awesome book called Profit First. It helps business owners rethink how they track their income and expenses to ensure they always pay themselves.
To keep track of every possible deduction
We all know that we need to pay taxes. But, we also want to make sure we also don’t pay a penny more than necessary. It is simple enough to know you can deduct your operating expenses (such as hosting and domains), but there might also be others.
For example, you might be able to deduct mileage if you travel related to your blog. You may be able to claim that license that you need to operate in your state or even the cost of the goods for you to make that new product you sell.
With proper accounting, you won’t overlook these items and will be prepared come tax time.
What to avoid doing when tracking expenses and income
Like there are things you need to do, there are common mistakes bloggers make when tracking their blog income and expenses.
Don’t rely on your memory
You have a lot to recall when it comes to your blog. And, adding your earnings into the mix is extremely difficult.
You will forget about that check you received in February or the new camera you need to buy in July.
Even if you think you won’t forget, trust me, you will.
Your statements aren’t enough
You may use a credit card, bank, or Paypal for sending and receiving money. While the statement has the transaction listed, it does not contain nearly enough details that are needed to ensure you properly prepare and file your taxes.
You should keep your statements and review them at the end of the year for overlooked deductions, but they aren’t the only source of information you should use.
Guessing at deductions
Let’s face reality here. You are not an accountant. You are a blogger.
The truth is you aren’t sure what you can deduct or even what you can’t.
Do you qualify to deduct your office space from your taxes? What about that 100 miles you had to drive for a sponsorship? You need to write everything down and keep excellent records so your tax professional can make these decisions for you.
Forget to include referrals
One big thing that you may not realize is that all those referrals you received for recommending a product are deemed income. Yep! That means you have to claim it as such on your taxes. Make sure you keep track of every penny earned and accurately report it.
You only declare income from tax forms
If you live in the United States, you may receive a 1099 at the end of the year, sharing how much income you earned from a partner. But, if you make less than $600 — or if they pay you via PayPal, you may not receive anything.
Even if you do not get a form sharing your total earnings, you still need to report every penny earned as income.
Trying to figure it all out yourself
Tax preparation is already tough enough. When you have to file returns for your business, it is something entirely different. If you aren’t sure what to do or complete the necessary forms, hire it out.
That few hundred dollars you spend to pay a professional to handle it will be money well spent to help you avoid a potential audit.
How to track income and expenses
You know you need to track your business expenses and income, but what method should you use? There are many options available. One is not better than the other. It is about finding the one that works best for your situation.
Let’s talk about the ways to keep track of your income and expenses.
Paper and Pencil
You could start with the good old method of paper and pencil. You will want to make sure you include different forms, such as one for your income, another for your expenses, and then calculate your profit and loss (the net result of the two forms).
You can find these forms available inside of the Blogging Business Planner.
Blog Income Tracker and Expenses Spreadsheets
One of the simplest ways to track your blog accounting is through a money tracker spreadsheet. The reason is that you can have it do your calculations automatically for you. You enter a number, and it will return the total income, expenses, or even profits earned.
What is great about the spreadsheet option is that you don’t need to purchase expensive software, like Excel. You can use Google Sheets — for free!
You will want to make sure you set up different sheets to track every aspect of your business. They should include your budget, income, expenses, and profit/loss statement.
If you do some research, you can find the formulas to add to your sheet to get it to all work together. There’s also an awesome Profit Tracker that you can get for around $20 — and it’s all done for you! Download and then add your data, and it does all the work for you.
Online Apps
There is an app for just about anything you need these days, and blog bookkeeping is no exception. Some of these apps also offer a computer application so you can view your accounting directly on your computer or your phone. Some you may want to consider include:
- Quickbooks
- Freshbooks
- Xero
As great as apps can be, there is one drawback. What if they fail? Do they have any way you can recover the data? Make sure you consider that before you sign up.
What should you include in your blog accounting?
Anything and everything associated with your blog! If you earn it – track it. If you pay for it – include it. This list will get you started:
Blog Income Categories
- Advertising
- Affiliate income (learn more about affiliate marketing)
- Product sales
- Sponsored posts
Blog Expense Categories
Keep in mind that these are a few of the times you may need to include in your bookkeeping. If unsure, consult with your CPA or accountant.
- Domain Name (i.e. HostArmada)
- Email Service Provider (i.e., ConvertKit)
- Plugins (i.e., Updraft Plus, Grow by MediaVine, WordFence)
- Advertising (i.e., on Facebook or Pinterest)
- Themes (e.g., Kadence, Restored 316)
- Social Media Scheduling (i.e., Hootsuite)
- P.O. Box
- Blogging Courses
- Books on blogging
- Travel expenses (i.e., conferences, meals, or meetings)
- Meals
- Computer equipment or printer
- Stock Photos (i.e., DepositPhotos or IvoryMix)
- Virtual Assitant
- Internet or Cell Phone Fees
- Supplies
- Legal or professional services (i.e., CPA or IT Professional)
- Postage
Again, these are some of the expenses you need to include in your tracking system.
How do you calculate your profit?
Ahhhh…yes…. profit. Of course, you need to know how much money you make blogging, don’t you?
When you look at most blog income reports, they show you what they earned. But, what they may not explain is if the total is profit or simply income.
If you made $10,000 one month but had to spend $7,890.00, you really only had profits of a little more than $2,000. That sounds MUCH different than making $10,000, doesn’t it?
When you look at your blog’s income, you need to consider the profits as the only figure that matters.
To get your total profit, it is a simple calculation: Total Income – Total Expenses = Profits.
How much should bloggers set back for taxes?
The final question you might have about all this accounting is the taxes. And, not how to pay but rather how much should I save?
The reality is that the amount of taxes you need to pay varies too greatly to give anyone an estimate. One person may find they pay a lower amount than another due to their tax situation.
However, a good rule of thumb is 30 – 35%.
If you are more conservative, you might want to increase your savings to 40% of your profits. And, you might want to set this money aside and put it into a savings account, so you are not tempted to touch it.
Then, each quarter, you may need to make a payment to the IRS based on your estimated income. I say “may” as every tax situation is different, so you will want to consult with your CPA.
Tracking your blogging income and expenses is not difficult, but it is too important to overlook. The sooner you start, the more organized you will be and the simpler it will be when it is time to file your taxes.
