Paying Taxes on Reviews?

[strawberryred]

I know we talked about this a while ago, and I thought we all decided that we didn't need to pay taxes on items we received to review because they were gifts from the company, unless they were some huge amount.  But then I remember Trisha said something in a FNL about this.

Do we need to claim them as income?  Or just if they are over a certain amount?  I was told before that if you kept the review item you had to claim the wholesale price.  How do you find out the wholesale price and not just the retail price if that is the case?

[Stefanie aka bloggymommy3]

Well I certainly hope not! It wouldn't really make sense if we did. B/c unless we're charging we're not makin anything off of it.

[trisha]

yes, actually you DO have to claim it as income. Why do u think id ont take that many.

[strawberryred]

yes, actually you DO have to claim it as income. Why do u think id ont take that many.

So what do you have to claim, the retail or wholesale price?

[Kim]

I asked a friend who works for an accountant and while they didn't have a direct answer, they look at it as promotional material.  If you go to some sort of convention and they are handing out pens, coupons for free items, and other stuff that has NO COMMERCIAL VALUE because of the intent of it.  It is a promotional item.  You do not have to pay taxes.  My husband has some samples, some $75 value and higher that he gives to contractors to try products.  It is not a gift, it is a promotional item for their consideration.  They do not have to report it.  In my husband's case, it is to get them to buy some additional product from him, in a blogger's case it is to get them to write a glowing review.

I am NOT giving you advice to NOT pay taxes but I think some research should be done before you assume either way.  Because I think you will find valid arguments on both sides.

Frigidaire has to report the items because of the value, but they are actually cutting us a check to pay the taxes. 

The IRS has a $600 maximum before they REQUIRE a company to get a w-9 (or whatever that tax form is) from you so you can be taxed. 

[strawberryred]

That makes a lot of sense Kim.  That is basically what I was thinking before anyways.  It's not income- it's just promotional product.

[trisha]

I really think its a fine line though.

Unlike a one time convention, you are soliciting or accepting products as a "payment" in exchange for advertising a company on your website. Very easily the IRS could show up wanting to know where the taxes are on the products. The thing is all the companies that send you products are writing down where they go. If your website name pops up 150 times but you are not claiming anything, surely the IRS wont look at that as a one time convention situation, but rather a full time business.

If you are accepting dishwashers, video cameras, and $500 strollers, I would be claiming it.

[Miss Blondie]

what about all the little stuff Trisha?  would you claim that too or just the high ticketed items?

[trisha]

you know, im not an expert but i would think if you are making a significant value it has to be claimed. I dont know what that value is. To be on the safe side, im claiming anything over $100 and I am donating all the rest of my stuff to charity/bloggers give after im done testing it. I am not claiming food/perishable items or small things. HOnestly, i dont get that many small things as it is anyway cause i dont want to mess with it.

I am claming my video camera, regular camera, dishwasher, ipod, etc.

I actually am donating the TOro stroller so i wont be claiming that this year.

[Kim]

I really wish I knew a tax attorney. 

As an Architect, we got thousands of dollars in gifts and promotional items each year throughout the year.  From Bears tickets (super 'spensive) to food.  I am pretty sure they did not keep track of that stuff.  I could be wrong though.

In any case, our reps sent us that stuff because they want us to remember them when it comes time to spec or recommend a product.

I just wish we knew the answer because why pay taxes on something you didn't need to?

In any case my "friend" is asking her boss his opinion.  He's an accountant and pretty knowledgeable.  I'll let you know.

[strawberryred]

Yes, Kim, please let us know what they say! 

I know I have to pay on my washer/dryer, but that was something I won, it wasn't for a review.

[Pat]

This is great to know even for us little bloggereviewers wannabes

Thanks for putting this out there ladies

[Bridgette]

What about trips?  Like the Hallmark trip, Hershey's trip or General Mills trip?  Do we have to pay taxes on that?

[Alyson]

Has anyone besides me noticed that something we may have started out doing because we liked it and it was fun is getting more difficult every day???

[trisha]

What about trips?  Like the Hallmark trip, Hershey's trip or General Mills trip?  Do we have to pay taxes on that?

technically, yes. I know that for sure.

[Kori@hair4myprincess]

Has anyone besides me noticed that something we may have started out doing because we liked it and it was fun is getting more difficult every day???

I was just thinking the same thing. 

[Bridgette]

What about trips?  Like the Hallmark trip, Hershey's trip or General Mills trip?  Do we have to pay taxes on that?

technically, yes. I know that for sure.

crap....may have to rethink the general mills thing, then.  how much are taxes?

[strawberryred]

What about trips?  Like the Hallmark trip, Hershey's trip or General Mills trip?  Do we have to pay taxes on that?

technically, yes. I know that for sure.

what would we pay taxes on?  The cost of the trip?  I consider that a gift.  I don't see how we could be help responsible to pay taxes.

But I really don't know much about it, so I am probably completely wrong.

[Kim]

You will need to ask them about these trips.  They may already know how you are supposed to deal with this.  It's not a prize or a gift.....I know I keep using real world examples but that's all I have to go on right now, but my husband was flown out of state to visit production plant for a product.  They fed him and put him in a hotel.  He paid for nothing but we didn't have to claim it.

This is a valuable discussion if we can find answers.

[trisha]

Yes, you DO have to pay taxes for trips that are all expenses paid.

Here is what yall have to remember. You are thinking about it as like this is a hobby, etc. but because you are EXCHANGING property for advertising, its a business transaction. Its a business trip.

Its not just a hobby anymore in the eyes of the government. You are getting these things as a result of something you are giving back. Its a transaction.

When i was on the hersheys trip i specifically remember allison worthington of blissfully domestic talking about the taxes she had to pay for the trip.

Im not telling you to not jsut let it slide. By all means, chances are they WONT come after you. But the bigger you get, the more the FTC puts its nose in it, the more your name gets in the limelight of social media, etc. the more likely it is that you will be noticed as recieving these things w/o taxes paid on it.

I personally dont want that kind of risk so i just pay on mine and pass the majority of our reviews off to the review team so its not me having to worry about it.

But also, someone did a BTR show on it a bit back. It was an attorney. She talked about the taxes you have to pay on reviews. I wish now i could remember who it was. I listened to the whole thing.

[trisha]

THe good news is like the trip to blogher is a write off~

[trisha]

http://www.problogger.net/archives/2007/06/13/7-things-that-every-blogger-should-know-about-tax/

[trisha]

is someone brave enough to ask on twitter?

[trisha]

someone said:



I’ve been researching this a lot lately as I’ve just fired up two blogs as spinoffs from my personal multi-category blog. These blogs are specifically designed to make money.

Here is my current understanding of hobby vs. business as the IRS sees it. If you give the appearance of intending to profit (marketing, etc.) you can deduct to your heart’s content. The IRS generally expects you to make profit in three out of five years, though, but taking awhile to get in the black is understood. IF, however, this intention to profit is not clear then you do indeed get stuck with the label of ‘hobbyist’ and can’t deduct more than you make.

So get serious, make some money and deduct away. I know I am.

I also found some very interesting articles regarding product reviews. If you can show that reviewing products is part of your business then you can deduct a lot of purchases. If you then sell the product you subtract the income received, if you keep it you might need to subtract the ‘fair market value’ although some think this is optional.

[trisha]

someone said:

As an attorney and former tax preparer, the tax implications of blogging are pretty interesting to me. I have recently been pondering whether products sent to me by PR agencies are income. I decided that in the absence of any agreements for a review, that they are not and that they are gifts instead. I also have been wondering whether purchases of products for review are deductions even if I use them up personally after I review them. I lean toward yes, as long as I purchased with the intent to review the product and actually did a review. But my confidence there is not quite as high and I have not formally researched the issue yet. (note, the same disclaimer given in the post applies with me as well, I am not giving anyone formal legal advice with my opinions here!)