As you start to earn money from your blog, you need to keep adequate records to make sure you report all your income on your annual tax return. Below are some possible sources of revenue - some obvious, some not - that you need to track:
Any money you receive from advertising campaigns should be included in your total income for the year. It doesn't matter if you call it “sponsorship” or “advertising,” if people pay you to put their ad, logo, or image on your site, it’s revenue. It must be considered when determining annual income.
The same rule applies for any amount you receive from advertising networks. If you receive money for writing about, or hosting information about a product or service on your site, it’s revenue.
Advertising “In Kind”
Occasionally bloggers will receive a product or service in exchange for featuring that item on their site. This could be a skirt given to a fashion blogger or a gallon of paint given to an interior design blogger. However big or small, products or services given should be considered revenue.
Bottom line: did you receive something in exchange for blogging about it? It’s revenue. You are required to report the fair market value of the item received (i.e., what it would cost an average person to buy the item at retail) as revenue.
Sponsored Posts and Freelance Gigs
In both cases, you are paid to write. In both cases, these payments are income.
There are many affiliate programs out there that allow you to showcase a product or service and get some form of payment if your readers make a purchase. All money from affiliate links and networks should be included in your annual income.
If you are getting money to appear or speak at an event, it’s income.
Remember, everyone’s situation is different. Consult your tax adviser if you have questions (or bring them with you to Ask an Accountant on November 26).