Author Topic: Are Paypal donations for blogs taxable income?  (Read 8568 times)

limeandpepper

  • Magnum Stache
  • ******
  • Posts: 4459
  • Location: Australasia
Are Paypal donations for blogs taxable income?
« on: June 14, 2014, 11:31:42 PM »
I've been reading some blogs where they accept Paypal donations from readers who appreciate their content.

Now, they may call it a "donation", but it's not really a donation in the sense that it's not going to charity. I guess it's more like a tip, in a way.

My question, thus, is: would this be considered taxable income for the blogger? I'm curious to know, as I may start a blog soon, and I'm thinking about things like this.

Also, in Australia, income from hobbies is not taxable, but at some point where your hobby becomes more like a business, then the income becomes taxable as well. This is still a bit confusing for me in terms of what it means for blogging income, but anyway, just thought I'd throw this issue out there and get some insights.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27539
  • Age: -999
  • Location: Traveling the World
Re: Are Paypal donations for blogs taxable income?
« Reply #1 on: June 14, 2014, 11:51:00 PM »
I'm sure it would depend on your municipality.

You basically answered it:
Also, in Australia, income from hobbies is not taxable, but at some point where your hobby becomes more like a business, then the income becomes taxable as well.

Now just research into when does a hobby become business activity.  The IRS has rules around this, I'm sure your taxing authority does as well.

What does your accountant say?
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

limeandpepper

  • Magnum Stache
  • ******
  • Posts: 4459
  • Location: Australasia
Re: Are Paypal donations for blogs taxable income?
« Reply #2 on: June 15, 2014, 12:20:39 AM »
You basically answered it:

Now just research into when does a hobby become business activity.  The IRS has rules around this, I'm sure your taxing authority does as well.

What does your accountant say?

Ha, I guess I did. I don't have an accountant, thus far I've always done my taxes myself. I've read the information on it before -

https://www.ato.gov.au/Media-centre/Articles/Is-it-a-business-or-a-hobby-/

But I guess I still feel like I may be in a gray area based on those definitions. I imagine that I may make some effort into monetizing, but it will be quite casual and easygoing, because I don't think I want blogging to feel like work. So probably it will be firmly in hobby territory to begin with, and may stay that way, but if at any point it starts to shift (and determining this is the tricky part, which is my issue, but I guess it could become quite obvious when it happens?) then I'll declare it as taxable income.

agent_clone

  • Bristles
  • ***
  • Posts: 252
  • Location: Australia
Re: Are Paypal donations for blogs taxable income?
« Reply #3 on: June 15, 2014, 01:02:54 AM »
You could call the ATO and ask.  Also in the off chance that you end up earning 75k a year from it you will need to register for GST (below this you do not need to).

robotclown

  • Stubble
  • **
  • Posts: 152
Re: Are Paypal donations for blogs taxable income?
« Reply #4 on: June 15, 2014, 01:17:42 AM »
The IRS definitely considers it taxable income.  Whether it actually gets reported to them is another question.

TomTX

  • Magnum Stache
  • ******
  • Posts: 3332
  • Location: Texas
Re: Are Paypal donations for blogs taxable income?
« Reply #5 on: June 15, 2014, 06:45:40 AM »
The IRS definitely considers it taxable income.  Whether it actually gets reported to them is another question.

So, what about the gift exclusion?

"If you like the blog and would like to make a monetary gift [link]"

CarDude

  • Pencil Stache
  • ****
  • Posts: 611
  • Location: Chicago, IL
  • Beep Beep!
    • The CCD
Re: Are Paypal donations for blogs taxable income?
« Reply #6 on: June 15, 2014, 08:05:46 AM »
In the US, yes. I have no idea about Australia...

limeandpepper

  • Magnum Stache
  • ******
  • Posts: 4459
  • Location: Australasia
Re: Are Paypal donations for blogs taxable income?
« Reply #7 on: June 15, 2014, 08:12:21 AM »
The IRS definitely considers it taxable income.  Whether it actually gets reported to them is another question.

So, what about the gift exclusion?

"If you like the blog and would like to make a monetary gift [link]"

Hmm, that's an interesting point. I've seen people who go with taglines such as "buy me a beer".

phred

  • Pencil Stache
  • ****
  • Posts: 506
Re: Are Paypal donations for blogs taxable income?
« Reply #8 on: June 15, 2014, 10:46:32 AM »


So, what about the gift exclusion?

"If you like the blog and would like to make a monetary gift [link]"
Does not apply since you received your money's worth in return by reading the blog.  So, is definitely income per IRS website

Nords

  • Magnum Stache
  • ******
  • Posts: 3166
  • Age: 58
  • Location: Oahu
    • Military Retirement & Financial Independence blog
Re: Are Paypal donations for blogs taxable income?
« Reply #9 on: June 15, 2014, 12:30:12 PM »
I've been reading some blogs where they accept Paypal donations from readers who appreciate their content.

Now, they may call it a "donation", but it's not really a donation in the sense that it's not going to charity. I guess it's more like a tip, in a way.

My question, thus, is: would this be considered taxable income for the blogger? I'm curious to know, as I may start a blog soon, and I'm thinking about things like this.
Yes, it's considered taxable income.  It's the same as the tips you'd get for serving customers in a restaurant, or the bucks that someone would throw into your cello case while you're performing on a street corner.

Here's another way to frame the issue:  are you willing to deal with the risk of not paying taxes on it, only to have a tax authority determine (perhaps months or years down the road) that it's actually taxable income after all?

marty998

  • Walrus Stache
  • *******
  • Posts: 6183
  • Location: Sydney, Oz
Re: Are Paypal donations for blogs taxable income?
« Reply #10 on: June 15, 2014, 04:10:54 PM »
If it was taxable then you could claim as a deduction your home office, internet, depreciation on computer/laptop, software etc...

So it's not all bad news...

HappierAtHome

  • Walrus Stache
  • *******
  • Posts: 8586
  • Location: Australia
Re: Are Paypal donations for blogs taxable income?
« Reply #11 on: June 15, 2014, 07:35:16 PM »
I think if you're already thinking about monetisation, taxes etc then you're firmly in 'business' territory rather than 'hobby'...

limeandpepper

  • Magnum Stache
  • ******
  • Posts: 4459
  • Location: Australasia
Re: Are Paypal donations for blogs taxable income?
« Reply #12 on: June 15, 2014, 08:23:54 PM »
I think if you're already thinking about monetisation, taxes etc then you're firmly in 'business' territory rather than 'hobby'...

I don't know... to me it's like the difference between an eBay or Etsy seller who sells 2 things a month as opposed to 200 things a month. Just because a blog may earn a few dollars a month doesn't mean it's firmly in business territory, does it?

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 27539
  • Age: -999
  • Location: Traveling the World
Re: Are Paypal donations for blogs taxable income?
« Reply #13 on: June 15, 2014, 08:50:22 PM »
If the amount is that low, why are you worried about paying taxes on it?  Just pay your taxes, it'll be an insignificant amount.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

limeandpepper

  • Magnum Stache
  • ******
  • Posts: 4459
  • Location: Australasia
Re: Are Paypal donations for blogs taxable income?
« Reply #14 on: June 15, 2014, 08:57:09 PM »
I'm just wondering what the clear line is between hobby and business, since some people do make a bit of money from their hobbies. I'm not worried - actually, I just realized that in my case, I won't have to pay taxes on it even if I declare it as a business, unless I make more than the tax-free threshold - and if I did make that much then there would probably be no question that it's firmly in business territory. :)
« Last Edit: June 16, 2014, 04:19:03 AM by limeandpepper »

twbird18

  • Stubble
  • **
  • Posts: 126
Re: Are Paypal donations for blogs taxable income?
« Reply #15 on: June 16, 2014, 03:52:15 AM »
Paypal reports income if you receive more than 200 payments or $20k per years, that is the line if you really don't want to report for some reason, it is unlikely the IRS will find out below this mark.


Sent from my iPad using Tapatalk

marty998

  • Walrus Stache
  • *******
  • Posts: 6183
  • Location: Sydney, Oz
Re: Are Paypal donations for blogs taxable income?
« Reply #16 on: June 16, 2014, 04:50:38 AM »
I'm just wondering what the clear line is between hobby and business,

I think I ended up getting an ABN mostly to give a more professional impression to the newspapers and magazines I was trying to get published in.

An Australian BUSINESS Number is a pretty clear indication that you've got a business and not a hobby? :)

limeandpepper

  • Magnum Stache
  • ******
  • Posts: 4459
  • Location: Australasia
Re: Are Paypal donations for blogs taxable income?
« Reply #17 on: June 16, 2014, 04:55:21 AM »
Anyway, good luck. Hopefully the ATO guidelines are a bit clearer than they used to be. Regardless what you decide to do, I reckon it wouldn't hurt to document your decision and why you made it, and file it with your papers in case you are ever audited.

Thanks, Astatine, so glad that I'm not the only one who finds it a bit vague and would like clearer guidelines. I don't know what it was like back then, but I think they can still be improved at the moment.

This is what's on the website at the moment.

Quote
Does your activity have a significant commercial character? It's important to consider whether your activity is carried on for commercial reasons and in a commercially viable manner.
Is there more than just an intention to engage in business? You need to have made a decision to commence business and have done something about it. If you are still setting up or preparing to go into business, you might not yet have commenced business.
Do you have the purpose of profit as well as the prospect of profit? Do you intend to make a profit or genuinely believe that you will make a profit, even if you are unlikely to do so in the short term?
Is there repetition and regularity to your activity? Businesses usually repeat similar types of activities, although one-off transactions can constitute a business in some cases.
Is your business similar to other businesses in your industry? Is the way you operate consistent with industry norms or other businesses in your industry?
What is the size, scale or permanency of your activity? Is the size or scale of your activity consistent with other businesses in your industry? Is it sufficient to allow you to make a sustainable profit?
Is your activity planned, organised and carried on in a business-like manner? This can be indicated by business records and books of account, a separate business bank account, business premises, licences or qualifications, and a registered business name.

My answers to the above questions, in regards to how I intend to run my blog, would probably be a confusing mixture of Yes, No, and Maybe / Sort Of.

deborah

  • Walrus Stache
  • *******
  • Posts: 8240
  • Location: Australia or another awesome place
Re: Are Paypal donations for blogs taxable income?
« Reply #18 on: June 16, 2014, 05:07:51 AM »
I'm just wondering what the clear line is between hobby and business,

I last looked at the ATO rules around hobby vs business 12 years ago when I was getting into freelance writing in meatspace, not online blogging. As far as I could tell, there was NO clear line and it was very frustrating at the time. The examples bore no resemblance to what I wanted to do (if I recall correctly, the examples from ATO were growing fruit, wine making and making wooden toys). I rang the call centre I don't know how many times. In essence, it came down to you have to self-assess, but you have to self-assess correctly.

I think I ended up getting an ABN mostly to give a more professional impression to the newspapers and magazines I was trying to get published in.

Anyway, good luck. Hopefully the ATO guidelines are a bit clearer than they used to be. Regardless what you decide to do, I reckon it wouldn't hurt to document your decision and why you made it, and file it with your papers in case you are ever audited.
Yes, they are a bit confusing - there is a self assessment questionnaire on the ATO website, which does a fair job.

You can always ask for a ruling from the ATO - I would do this rather than make a decision and document it. The ATO also run several small business seminars (depending on what you want to bone up on) and they are very good. At the seminars they go through what you can claim, and what you need to pay tax on. I think this was where I first learnt about asking for a ruling.