The Swag and Tax Question: An IRS Auditor Reveals the FactsCecily Kellogg
This is a follow up to this post.
Bad news, folks. I have the information straight from the IRS auditor’s mouth: swag IS, indeed, taxable.
And you might want to sit down for this part.
Are you sitting down? Okay.
ANYTHING you receive with a value of $25 or higher needs to be reported.
You read that right. $25 or higher.
Not $600. $25.
Are you okay? Do you need a minute?
Here is the exact quote I received from the auditor (who has asked to remain anonymous for this article). Emphasis is mine.
Anything received as compensation is reportable as income, no matter the value of it. What is confusing people is the fact that companies paying individuals (be it with cash or products) don’t have to provide that person with a 1099-misc until the payment (cash or product) is valued at greater than $600. Just because they don’t provide you with a 1099-misc, does not mean it isn’t income to you. You provided a service and got paid for it, therefore it is income.
This is critical information for review bloggers. I know the majority of products I’ve received to review have certainly had a value greater than $25; for a blogger that does a couple of reviews a week, this income could add up very quickly. I’m so sorry to be the one to tell you this.
So what about blogging trips? You know, a company flies you out to visit them, puts you up in a hotel, and then you blog about it? Yep. Totally taxable. The auditor states (again, emphasis mine):
In regards to people getting trips to attend information seminars in exchange for writing about that product… This is income too. The same rules stated above apply here. Anything that is paid for for you to give that company advertising is income to you. Now, why you’re not receiving a 1099-misc for this is perplexing. I’m assuming the value of these trips are more than $25, right?
Luckily, there is one positive light the auditor was willing to share. Food bloggers, you may get a bit of a break on your supplies for recipes you blog about. This is the advice she’s given to a food blogger with a family of six.
[She should be] able to deduct 1/6 (her family has 6 people in it) of the cost to create that meal. As with anything though, I’ve advised her to keep any receipt for the recipes created. I’ve also advised her to print out a copy of the blog post that the food was used for and attach the receipt directly to it. This is a business, as is blogging for a lot of people, so she should treat it as one. So, if you know of anyone who purchases things to use in their blog, it would be advisable for them to use a similar ideology.
Not the news you’d hoped to hear, is it? Will this change how you do things?