Business Accounting - Vyde

4 Accounting Mistakes That Put Your Small Business At Risk

Accounting is one of those tasks that grow with your business. The bigger your business grows, the larger and more complicated accounting tasks become. Which means accounting mistakes are more prone to happen. You shouldn’t take managing a company’s finances lightly.

Many small business owners choose to tackle their own accounting and small business bookkeeping tasks and while some are able to pull it off, many are making costly accounting mistakes they don’t even know they are making.

Here are four common accounting mistakes to avoid in your small business:

Mixing business and personal finances

While your business is still in its infant stage, it’s easy to use your personal bank account. Most new business owners use the same bank account and record keeping methods you’ve always used, without separating the two. However, this can be a costly mistake to small business owners. One of the first steps when starting a new business should be to open a new bank account. If you pay for business expenses out of pocket, keep your records for tax deductions and reimburse yourself. It’s the same idea as turning in receipts to your employer for a business expense. Try to keep your personal and business accounts as separate as possible.

Forgetting to record small transactions

Many small business owners don’t keep track of small expenses simply because they seem insignificant. Mailing a package, or purchasing file folders don’t seem like expenses you need to keep track of. However, it is essential that you track even the smallest of transactions, no matter how insignificant. Those small business-related purchases add up and after a while, you’ll rack up a decent amount of tax-deductible business expenses. If the IRS ever audits you, you’ll want to have records or each and every business expense. Not to mention, staying on top of the small transactions makes managing the larger business expenses that much easier.

Not setting a clear budget for each project

Failing to effectively budget even the smallest projects within your company can be a costly mistake. A project that isn’t properly budgeted can end up costing a company way more money than it should have. Simply because there is no clear plan going in. Set a budget for each project, convey that number to employees working on the project, and stick to it. Setting budgets for all projects keeps a business’ finances on track and cuts spending significantly.

Trying to manage all accounting in-house

When a business is first starting out, they have limited expenses which makes it easy to manage your own accounting. However, as your company grows, managing your own accounting could actually be costing your business money. While hiring an accountant will cost you more money each month, you’ll actually save money long-term. An accountant can help you free up your time and focus, find tax deductions you didn’t know about, and find errors that only an expert can spot. In fact, the IRS reported over $3 Billion in penalties and fees charged to business owners for mistakes in taxes and payroll in 2013.

To speak with an accountant about saving your small business time and money, and avoiding these costly mistakes, contact Vyde today.

FAQs about Accounting Mistakes:

Why is mixing business and personal finances a mistake?
Combining finances can lead to confusion, hinder tax deductions, and complicate financial tracking. Separate accounts streamline record-keeping.
Why should small transactions be recorded?
Small expenses accumulate and impact financial records. Proper documentation ensures accurate tax reporting and facilitates financial management.
Why is setting a clear budget for each project important?
Clear project budgets prevent overspending, enhance cost control, and promote financial discipline. They ensure efficient resource allocation and project management.
Is managing all accounting in-house advisable for growing businesses?
While manageable initially, in-house accounting may lead to costly errors as businesses expand. Professional accountants offer expertise, uncover deductions, and mitigate IRS penalties.
How can an accountant benefit small businesses?
Accountants provide financial expertise, uncover tax-saving opportunities, and identify errors that could result in IRS penalties. Contact Vyde for professional assistance and long-term financial stability.

6 Accounting Tips For Really Small Business

Before you read on, take a quick guess at how many small business start-ups fail within the first five years. No reading ahead!

According to the Small Business Administration, about half of all businesses fail within the first five years. 50% of businesses make it, and 50% don’t. Are you shocked? Maybe feeling a little unsettled about your new business venture?

If you’ve found a way to make money and suddenly it feels more like a business than a hobby or side-job, you’ve got a business on your hands. Congrats! Here are a few quick accounting tips for making sure you’re business is among the 50% that are still around five years from now.

Keep it simple. Get organized, get legal, and get to work. The simplest entity you can form for now is a called a sole proprietorship. This means your business is owned and run by person and there is no legal distinction between the owner and the business. No employees, no payroll, no fuss.
Obtain proper licenses and tax information. Since you’re going to be the owner/entity of your sole proprietorship, you’ve got a few other tasks to take care of. You need to acquire an occupational license (if mandated in your area) and you must remit all state or city tax collections on retail or sales your business collects.
Concentrate fiercely on your business, but don’t be irresponsible. Now is the time to buckle down and build your business—find ways to market to your customers and clients, improve your products and services, and build your brand. As a sole proprietor, the IRS won’t even know you exist until after you file your first personal income tax return. You’ll file your personal taxes (like usual) and also a Schedule C form where profits and losses of your business are reported. If you don’t quite have a streamlined process of doing business yet, not to worry. For a sole proprietorship, a separate bank account is not mandated as it is for an LLLC or Corporation. If your business claims a loss during the first few years, those losses can offset your day job’s income and provide a possible tax refund.
Develop an organized way to pay yourself. Another advantage of a sole proprietorship is that there are no payroll taxes taken out, and no set way you have to pay yourself. You can set up a certain percentage of profits you plan to pay yourself, or you can simply keep what’s left over after paying all business expenses. Often times, S corps don’t have to pay quarterly estimated taxes either. Click here to learn about specific scenarios when they do.
Keep track of expenses and income. You don’t really have to do much with your receipts until tax season comes along, but definitely keep them in a safe place. Perhaps an easier method of tracking expenses and profits is to use a simple two-page Excel spreadsheet, one with incoming money, and the other with outgoing. You can use your business expenses as write offs at the end of the year which deduct from the amount of money owed on taxes.
Plan to succeed, but be prepared for the worst. Remember that statistic from the beginning? If your business fails, no special forms are required to be reported to the IRS, you just simply stop doing business. All you have to do is file one final Schedule C and you’re done.

After your business experiences significant growth or you hit the five year mark, talk to a CPA about changing your entity type to one that could save you more money and be more efficient for your business. Vyde offers free accounting and small business bookkeeping advice all year long. Contact us with your sole proprietorship questions and we can offer some accounting tips and point you in the right direction.

FAQs:

What is the simplest business structure for a small startup?

A sole proprietorship is the simplest entity, where the business is owned and run by one person without legal distinction between the owner and the business.

What licenses and tax information are required for a sole proprietorship?

Owners need to acquire an occupational license (if mandated) and must remit state or city tax collections on retail or sales their business collects.

How does taxation work for a sole proprietorship?

Profits and losses of the business are reported on a Schedule C form along with personal income tax returns. Losses can offset other income, possibly leading to a tax refund.

How should a sole proprietor pay themselves?

Sole proprietors have flexibility in paying themselves, either by setting a percentage of profits or taking what’s left after business expenses. No payroll taxes are deducted.

What’s the best way to track expenses and income for a sole proprietorship?

Keep receipts safely stored for tax season. Utilize a simple Excel spreadsheet to track incoming money and outgoing expenses. Business expenses can be written off at year-end to reduce tax liability.

10 Ways to Make Your Employees Feel Valued at Work When You Can’t Offer a Raise

If you have looked at your small business bookkeeping and you’re not in a place to offer every employee a salary of $70,000 a year–or even a small raise–you can still make your employees feel valued and happy in their jobs.

For many employees, feeling valued and appreciated at work is just as important as the amount of money they make anyway. In fact, only 21% of employees feel strongly valued at their work. That leaves a whopping 79% of employees who feel only marginally valued or not valued at all in their contributions to a company, according to Engagement Report.

How can a manager improve overall morale and employee satisfaction at work?

Help your employee see their worth by making them feel valued in the workplace.

Listen to them. You—the manager. Not your secretary or your right hand man, but you. Take the time to listen to their ideas and concerns as an authority who can make changes within the company. Remove all distractions and set aside time for each employee individually.
Recognize their contributions. Your company wouldn’t be where it is today without a lot of hard work from a lot of hard working people. But these people also have lives outside of work—disappointments, financial woes, and personal problems. Take a moment to recognize when an employee makes a big sale or acquires a new client. A simple email or text message, or even a pat on the back and a thank you, is often all it takes to boost an employee’s confidence and increase their concern for the welfare of the company.
Write a hand written note. In the sometimes overwhelming technological world we live in, quick “thank you” emails and text messages often get lost in the shuffle of workplace and personal demands. However, a handwritten note speaks volumes for an employee. Set aside five minutes each week and write a note or card to one of your employees. Thank them for their contribution and let them know of your personal gratitude for their work. Your employee will be surprised and appreciative that you took the (extra!) time to recognize them.
Be flexible about work schedules. This is a perk almost all employees value and it offers the most gain with the least pain for an employer. As long as an employee is deserving and doesn’t abuse the privilege, they’ll appreciate the flexibility their job offers, even if their salary isn’t quite where they would like it to be.
Make work fun. Create opportunities for employees to socialize with their superiors by offering occasional contests during lunch, donuts in the break room, or just a quick bit of trivia before a staff meeting. Having fun at work is proven to increase productivity among employees.
Offer a clear path to advancement. While this task can be challenging for a small business because of limited opportunities to offer promotions, a healthy dose of honesty can be good for everyone. At least once each year, sit down with each employee for a career assessment. Find out what their goals are within your company and ask them how you can support their goals. This may mean providing training, tuition programs, or helping employees find opportunities for advancements—even if it means leaving your company for another one. Employees are always thinking about their futures and knowing what their potential opportunities are helps them feel secure in their path.
Remember the two secret words. While the phrase often gets lost in the hustle and bustle of everyday life, a simple “thank you” rarely goes unnoticed or unappreciated. Make an effort to thank at least one employee each day for something they’ve done to better the company.
Take the team to lunch. While a team lunch might not even be in the current budget, making it happen can have a surprising effect on company morale. Taking your team to lunch on the company helps them feel valued in the workplace and provides a much-needed break from the sometimes mundane tasks of everyday work.
Show them that others need them, too. While employees love hearing it from the top dog, feeling like an integral part of the company can help an employee feel like the work they’re doing is important. Feedback from others can sometimes pack more of a punch than positive feedback from the boss. Pay attention when a client sends you an email about an amazing experience they had with one of your employees and pass it along to them every time.
Challenge Them. Most jobs come with less-than-glamorous day-to-day responsibilities. Balance the grunt work with a challenge every once in a while and let your actions speak louder than words. Recognizing an employee for something they did is great, but believing they can do something bigger is even better. When you put trust in an employee to do a difficult task, you’re sending the message, “I know you’re capable of this and I can trust you to do a great job.”

While most of these things may be in the back of your mind, your employee will never know what you’re feeling unless you tell or show them. You might be surprised how easy it is to implement a few key tasks that will help your employee recognize their worth in the company, even if that doesn’t come in the form of a raise.

FAQs for Employee Appreciation and Valuation in the Workplace

1. How can a manager improve overall morale and employee satisfaction? Managers can boost morale by valuing employees’ contributions, listening attentively, recognizing achievements, offering flexibility, fostering a fun work environment, and supporting career advancement.

2. Why is recognition important in employee valuation? Acknowledging an employee’s efforts enhances their confidence, commitment, and attachment to the company, reinforcing their sense of worth and significance.

3. How can managers make employees feel valued without substantial financial incentives? Managers can show appreciation through handwritten notes, providing flexibility in work schedules, organizing occasional team activities, and recognizing employees’ importance through feedback from clients or peers.

4. What’s the significance of providing a clear path to advancement? Offering employees a vision of advancement and discussing career goals demonstrates an employer’s commitment to their growth and development within the company.

5. How can managers empower employees beyond verbal recognition? Managers can challenge employees by entrusting them with more significant tasks, showcasing belief in their capabilities, which often has a substantial impact on employees’ confidence and motivation.

I’m a Blogger. Can I Deduct Hosting, Web, and Design fees?

Do hosting, web, and design fees count as deductions? Yes, as long as they’re specific to the running of your site or blog, they count.

Here’s the quick list if you’re running short on time:

Design fees – a new logo or look for your site, even business cards.
Hosting fees – unless you’ve got blogspot.com or wordpress.com in your site address you’re paying for your own little piece of the internet.
Web Management & SEO

Read on for the fine print on deducting these fees and expenses.

There are a lot of hidden expenses for bloggers. Design fees, hosting, web management, SEO. The list goes on and it can get terribly expensive – but with a little knowledge about what is or is not a valid deduction, you’ll end up saving yourself a dime or two come tax time.

Whether you write a fashion blog, a foodie blog, or a blog about web design you’re probably paying for domain names, and site hosting. Seeing that you’re already paying the bill, why not save the receipt and have it be a write off at tax time?

It doesn’t matter if your blog isn’t about tech stuff, the behind the scenes stuff of running your blog are still related, so they count.

Don’t forget the fees you pay to a graphic designer for your logo and business cards. It may only make your site appealing, but it’s an element meant to build your blog and network so it’s a valid deduction as well.

We find that trying to come up with ideas for deductions as you’re trying to file makes things harder. Take just a few minutes right now and start listing off recent expenses that are blog related. If you’ve got a few more minutes to spare, start tracking down receipts for specific dollar amounts and update your small business bookkeeping with what you find. And from here on out, print off or save all receipts – that way you’re that much closer to finishing your taxes when April 15 comes rolling around again.

To learn more about accounting for bloggers, visit these posts:

Accounting 101 for Bloggers

Taxes for Bloggers

Top 20 Items Bloggers can Deduct on their Taxes

Is My Blog a Business or a Hobby?

How Do I Legally Operate a Contest or Giveaway on My Blog?

3 Tips to Increase Blog Profits

How Do I Pay My Blog Employees?

Can I Pay My Family For Their Help?

Can I Deduct Conference Registration Fees, Travel, and Meals?

I’m a Blogger. Can I Deduct Conference Registration Fees, Travel and Meals?

Do conference registration fees, travel and meals count as deductions? Yes, as long as they’re blog-related, they count.

If you’re here reading about taxes you’re probably aware that you can deduct expenses to help lower the amount you owe in taxes. The real question is how much and what can you deduct legally? And what do you need to do to track or keep record of these deductions.

The simplistic way of looking at potential deductions is that if it relates to or promotes your blog you can deduct it.

Conference Registration Fees

Conference registration fees for a blog conference where you network and learn to improve your blog can be deducted.

Licensing Fees

Licensing fees, as long as they pertain to your blog topic, can be deducted as well. (i.e. You blog about hairstyles and you pay a licensing fee to maintain your stylist license)

Training

In addition, any additional training you receive, as long as it pertains to your blog or the topic you blog about is considered a valid deduction as well. So the cost of that online class you’re enrolled in about SEO, or the crash course you’re taking in graphic design so you can start that design blog you’ve always dreamed about – well, those are deductions as well.

Print and file receipts, or if you’re really organized, start a simple spreadsheet with date, purchase amount, who you paid, and what it was for. Still stash your receipts so you have them as proof if by chance you’re audited.

Travel & Meals

Travel and meals are also deductions if they’re related to your blog or business. Keep receipts for bus passes, plane tickets and taxi cabs. Even keep a mileage book of your travels if you are often driving to consult with clients, picking up product from a vendor, or making trips to the post office to ship product to clients.

Coffee & Drinks

Coffee dates and drinks for business meetings or to meet with potential clients, are also deductions – again, a receipt stash and a simple spreadsheet will make your life that much easier come tax time.

Check out our more extensive list of deductions for bloggers or contact us if you have specific questions regarding your taxes.

To learn more about accounting for bloggers, visit these posts:

Accounting 101 for Bloggers

Taxes for Bloggers

Top 20 Items Bloggers can Deduct on their Taxes

Is My Blog a Business or a Hobby?

How Do I Legally Operate a Contest or Giveaway on My Blog?

3 Tips to Increase Blog Profits

How Do I Pay My Blog Employees?

Can I Pay My Family For Their Help?

Can I Deduct Hosting, Web, and Design Fees?

I’m a Blogger. Can I Pay my Family for Their Help?

So can you hire family? Absolutely.

In fact, hiring family members is pretty common amongst sole proprietors and bloggers. Whether it causes strained relationships is entirely up to you, but here’s what you need to know in regards to taxes and paying family members. The Internal Revenue Services outlines the following regarding family help.

Employing Your Child

Wages of a child are subject to income tax withholding, Social Security, Medicare, and Federal Unemployment Tax Act (FUTA) tax if he or she works for:
- A corporation, even if it is controlled by the child’s parent,
- A partnership, even if the child’s parent is a partner, unless each partner is a parent of said child, or
- An estate, even if it is the state of a deceased parent.
Wages are subject to income tax withholding, regardless of age.
Children under 18, are not subject to Social Security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child.
Children under 21, are not subject to FUTA tax.

Employing Your Spouse

Wages of a spouse are subject to income tax withholding as well as Social Security, Medicare and FUTA taxes if he or she works for:
- A corporation, even if it is controlled by the individual’s spouse, or
- A partnership, even if the individual’s spouse is a partner.
Payment to a spouse are subject to income tax withholding and Social Security and Medicare taxes, but NOT to FUTA tax.

Employing Your Parent

Payment for services of a parent employed by their child in a trade or business are subject to income tax withholding, Social Security and Medicare taxes.
Wages are not subject to FUTA tax, regardless of the type of services provided.
If your parent works for you, the wages you pay to them are subject to income tax withholding, Social Security and Medicare taxes. Social Security and Medicare taxes do not apply to wages paid to your parent for services not performed in your business, but they do apply to domestic services if both the following conditions are met:
- Said parent cares for your child who lives with you and is under 18 or requires adult supervision for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition.
- You are widowed, divorced, or married to a person who, because of a physical or mental condition, cannot care for your child during that period.

Employing Other Family Members

So you’re not hiring your child, spouse, or parent. Can you still hire other family members, like aunts, uncles, cousins, or nieces or nephews? Yep. But there aren’t any special rules provided by the IRS for those family members. Their wages should be treated like any other employee’s.

If you have additional questions regarding hiring family members, feel free to drop us a line. We’d love to hear from you.

To learn more about accounting for bloggers, visit these posts:

Accounting 101 for Bloggers

Taxes for Bloggers

Top 20 Items Bloggers can Deduct on their Taxes

Is My Blog a Business or a Hobby?

How Do I Legally Operate a Contest or Giveaway on My Blog?

3 Tips to Increase Blog Profits

How Do I Pay My Blog Employees?

Can I Deduct Conference Registration Fees, Travel, and Meals?

Can I Deduct Hosting, Web, and Design Fees?

I’m a Blogger. How Do I Pay my Employees?

You’re busy. Your business is growing. You’re thinking it’s time to hire someone to take care of a few things you’d like to have off your plate. But how do you pay employees and does it effect taxes?

Paying employees may seem like an easy task, but you want to make sure you’re spending your money wisely and staying within legal guidelines for small businesses. Here are a few tips to keep you on track:

Know the market. Set an upper limit of what you’ll pay based on what a particular job is worth to you and set the lower limit based on what the market standard currently is.
Consider trading services or intangibles. Lets say you’re looking to find someone to work on your website or put together a new logo and business cards for you. You might want to see if the person you’re hiring would like to swap services instead. As a blogger, you’re more than likely a good writer, and you never know – they may really be needing some new marketing copy or even some ad space to promote their business.
Keep taxes and employee status in mind. Once you hire an employee, you’re generally required to withhold money from their pay for income tax purposes regardless of if they are paid hourly or on a salary basis. That may still be the way to go, but you may want to consider using them as an independent contractor instead. Independent contractors are self-employed individuals who sell their services to clients. They aren’t considered an employee, but a business owner themselves so they’re responsible for taking care of their own taxes.
Offload payroll responsibilities to an expert. Keeping track of paychecks, employee hours, and withholding employee taxes can take up a lot of extra time. Stay focused on your blog and leave the accounting to payroll to an expert.

Keeping these 4 easy tips in mind will make hiring and paying employees that much easier – now back to the blogging.

To learn more about accounting for bloggers, visit these posts:

Accounting 101 for Bloggers

Taxes for Bloggers

Top 20 Items Bloggers can Deduct on their Taxes

Is My Blog a Business or a Hobby?

How Do I Legally Operate a Contest or Giveaway on My Blog?

3 Tips to Increase Blog Profits

Can I Pay My Family For Their Help?

Can I Deduct Conference Registration Fees, Travel, and Meals?

Can I Deduct Hosting, Web, and Design Fees?

3 Blogger Accounting Tips to Increase Blog Profits

You’ve put a lot of effort into your blog to make it profitable and your hard work is paying off. Did you know that you might be able to increase your income just by handling your money a little differently? Here are 3 tried and true ways to keep you financially healthy and possibly increase your overall profits.

1. Track Expenses. Even if financial stuff isn’t your thing, tracking expenses is one of the best and easiest things you can do to increase your blog profits. A running total of money coming in versus money going out, will help you know if you’re being profitable or even if you’re overspending.

What’s the best way to track your expenses? To start, a simple spreadsheet will do. Make sure to include the date, amount, to whom, and what for. Then stash your receipts in a folder or envelope so you’ll have them come tax time (and in case you get audited).

2. Set Aside Money to Run the Business. It seems simple enough, but setting aside money to run the business is one way to ensure you’ll stay in the green.

Make a list of expenditures that you’ll know you’ll have throughout the year – hosting fees, domain name and registration fees, shipping fees if you run a shop that sells physical product, and so on. You know you’ll have these expenditures, so set aside a small amount each month so that you’re not breaking the bank when it comes time to renew.

You don’t have to know your expenses down to the exact dollar and cent, even saving a percentage, say 10-15% from your monthly income should take care of it. No matter how you decide to save, your bottom line will thank you.

3. Hire An Expert. It’s not mandatory, but it sure can put your mind at ease. Accountants know the ins and outs of small business bookkeeping and taxes. They’re happy to help you keep track of expenses and help get your taxes done. Accountants can also help with a myriad of other financial issues. Plus they know how to list your deductions and exemptions so you’ll get the biggest return when it comes tax time. You’ll sleep easy at night knowing you’ve got an expert in your corner and you’ll have more time to focus on your blog.

Following these 3 simple tips will help you keep your blog fiscally fit as well as increase your overall blog profits.

To learn more about accounting for bloggers, visit these posts:

Accounting 101 for Bloggers

Can I Deduct Conference Registration Fees, Travel, and Meals?

Taxes for Bloggers

Top 20 Items Bloggers can Deduct on their Taxes

Is My Blog a Business or a Hobby?

How Do I Legally Operate a Contest or Giveaway on My Blog?

Can I Pay My Family For Their Help?

How Do I Pay My Blog Employees?

Can I Deduct Hosting, Web, and Design Fees?

I’m a Blogger. Does the IRS Consider my Blog a Business or a Hobby?

We get a lot of different questions regarding tax code, but one of the most frequently asked from bloggers and creatives is if the IRS considers their blog a business or a hobby. If you have a blog and it’s providing you with even a small income, read on.

According to the Internal Revenue Code, all income is taxable unless it is specifically exempted. Translation – even if you’re not breaking even, any money you receive from your blog is definitely includible when it comes tax time.

That said, one of the main concerns, for established and novice bloggers alike, is how their blog is viewed by the IRS. It may not seem like a big deal now, but it might end up being one when you get ready to file.

There are two ways to classify blogging income – earnings are either reported as coming from a hobby or a business. So, when it comes to taxes, where does your blog fall? Answer the following questions to find out:

Does the time and effort you put into your blog indicate an intent to make a profit?
If there are losses, are they due to circumstances beyond your control or did they occurring the “start up phase”?
Do you depend on income from the activity?
Have you changed methods of operation to improve your profits?
Do you or people advising you, have the knowledge needed to carry on the activity as a successful business?
Have you made a profit in similar activities in the past?
Does the activity make a profit in some years?
Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
If you’ve made a profit during at least 3 of the last 5 years, including the current year, the IRS assumes your blog is a business.

If you’re answering yes to most of these questions, your blog is a business. So what to do if you’ve got a mixed bag of answers – error on the safe side and consider your blog a business or consult with a tax expert or accountant.

To learn more about accounting for bloggers, visit these posts:

Accounting 101 for Bloggers

Taxes for Bloggers

Can I Pay My Family For Their Help?

Top 20 Items Bloggers can Deduct on their Taxes

How Do I Legally Operate a Contest or Giveaway on My Blog?

3 Tips to Increase Blog Profits

How Do I Pay MyBlog Employees?

Can I Deduct Conference Registration Fees, Travel, and Meals?

Can I Deduct Hosting, Web, and Design Fees?

Interested in Learning More?

Schedule a free consultation with our team!

I’m a Blogger. How Do I Legally Operate a Giveaway or Contest on my Blog?

It’s common knowledge that running giveaways or contests on your blog will help drive traffic and attract new readers. It’s also a great way to network with other bloggers and cross promote. But if you currently run giveaways or contests on your blog, or are planning to - listen up.

You may or may not be aware, that regardless the size of your blog or giveaway, there are laws and requirements to running a fair and above board giveaway or contest; and that’s something that’s extremely important when it appears on your tax filing.

You might be wondering why this shows up on your tax filing at all. But many bloggers expense giveaways or contests and write them off come tax time. If a sponsor gifts you the prize that you’re going to pass on to your lucky winner, you can’t expense it. But if you’re paying for the prize yourself you can, along with the cost to ship it to the winner. (There’s more on deductions and expenses, but that’s for another blog post you can read here).

Here are a few guidelines for running your giveaway or contest*:

You cannot charge an entry fee to enter your promotion.
You absolutely must choose your winner at random.
You must accept all valid entries.
You must award a prize even if your prize sponsors backs out.
Any giveaway with a prize valuing $600 or more must be reported to the Internal Revenue Service. Bloggers should not only make entrants aware of the value of the prize but the fact that they will need to complete a prize validation as well as be responsible from any taxes that will result from winning.
Bloggers based in the United States cannot run a promotion involving any of the following industries: tobacco, alcohol, gasoline, dairy, insurance, and financial institutes. There are special requirements for these industries and the cost to meet the requirements usually won’t justify the time you spend on it.
You cannot extend an entry deadline in order to get more or any entries for the giveaway or contest.

To be sure you’re 100% in compliance with local laws, we recommend consulting with a legal expert. Good luck with the upcoming contest or giveaway – we’re sure it will be a smashing success!