CPA and blogger Angela Williams brings us another instalment in her series on accounting for food bloggers. Tracking income and expenses, knowing what to expense and when, doing your taxes … they can all send shivers down the spine of even the most experienced cook or restaurant reviewer. But Angela breaks it down and shows us that bookkeeping for your food blog doesn’t have to be hard at all! Today she explores what counts as blog income and what doesn’t.
Let’s be real, income is great! As a blogger or freelancer, it’s what keeps your business afloat; however, when it comes to taxes, it might cause a bit of a bill to be paid to the tax man at the end of the year. That part? Maybe not so fun.
What Counts as Blog Income?
Per the Canada Revenue Agency (CRA) pretty much any payment you receive as a result of your blog or business needs to be included in income. Yes, this means a payment as small as a dollar from a company should be included in income. (Note that there are some exceptions to this, which I’ll cover a bit later on in this post).
A good rule when determining if you should include amounts in income is considering the purpose of the payment. If you have provided a service and are getting paid as a result of that service, then you should include any payments (and product) received in income.
Payments received from hosting ads on your blog should be included in your income as they’re received. We discussed this somewhat when we talked about accruals in Tracking Income & Expenses. By hosting ads on your site, you’re providing a hosting service to the ad agency and thus must include those amounts in your income.
Product as Income
Many bloggers aren’t aware that per the CRA (IT-490 Barter Transactions), physical items received do count as income. If you’re sent product for review, you do need to record the value of the product received as part of your income. The value of the product does not necessarily equate to the retail value of the product received.
The markup on products can vary, but what should generally be included as the amount in income is the cost to the provider (the amount they would expense) or the value of the service you provide (what you would invoice if goods weren’t received). In the case where both goods and cash are received, both of these amounts should be included in income.
Similarly, if you receive a credit from a company (not won as part of a giveaway), the full value of the credit should be included in your income. An example of this would be a grocer providing a credit for you to purchase groceries for use in food posts — the full amount of this should be included in your income.
Discounts & Referral Codes as Income
It’s not uncommon for a company to provide a discount to a blogger as part of being an ambassador, or representative of the company. Things such as discounts are not required to be included in income, as you’re not receiving any product for free. While you may receive an attractive discount, at the end of the day, you’re required to provide payment to these companies in order to receive your goods.
Referral codes are also quite popular; you know, where you give someone a discount and you also receive a discount off your order. Good news: like receiving a discount for being an ambassador, you don’t need to include any referral discounts in your income, since you need to spend money in order to take advantage.
To simplify things a bit, if you have to spend your (after tax) money in order to take advantage of a discount or a credit, it’s not considered income so you don’t need to worry about it for the purposes of taxes. The Ebates program is also similar to a discount in that you receive a payment after spending your (after tax) money on a purchase; as such, you wouldn’t need to include those amounts in your income.
Commissions & Affiliate Income
Finally, we have affiliate income. Most commonly, you’ll see this coming from Amazon whereby you link to a product on your site and if someone clicks on the link and purchases something from Amazon, you receive a payment. This payment is easiest considered to be a commission, so yes, income earned as an Amazon affiliate (or through other affiliate networks) would need to be included as income on your tax return.
Recording US Dollar Income
The majority of ad networks that partner with bloggers are either US-based, or make payments in US dollar (USD) amounts. This can sound tricky when determining what, and how, to record these amounts. The good news is it’s not as difficult as it may seem.
Any amounts received in US funds (or any non-Canadian currency) are reported on your taxes in Canadian dollars. Use the Bank of Canada exchange rate in effect on the date you receive payment, or, you can use the average annual rate for payments paid multiple times per year.
While all of that might sound confusing, there are some easier ways to go about recording those amounts. If your revenue is calculated in USD but deposited into your account in Canadian funds, no translation is necessary; you would record the amount deposited into your account as your income. If you receive deposit via PayPal in US funds and deposit into a Canadian bank account, again, you’d record the amount deposited into your Canadian account as the revenue amount.
What You Don’t Need to Include in Income
In Canada, we aren’t required to include items that are considered to be gifts in income; this is why lottery winnings aren’t taxable in Canada.
This means there are certain situations where you won’t be required to include amounts in income. The most common items likely be considered a gift include items won as part of a giveaway (including cash) and swag bags received from companies for promotional purposes.
- There’s no threshold you have to meet before including income on your taxes
- Product received should be included in income
- What the heck is CCA and what do I do with it?
- What you need to know about filing taxes
In the meantime, what are your burning tax and accounting questions? My goal is to make taxes and accounting less scary for you, so you can help me by telling me what you’re struggling with. Leave a comment below and let us know!
- Accounting for Food Bloggers: When & What You Should Expense
- Accounting for Food Bloggers: Tracking Income & Expenses
- Audit-Proof Your Food Blog – Part 1
- Audit-Proof Your Food Blog – Part 2
- Audit-Proof Your Food Blog – Part 3
Accounting for Food Bloggers is written by Angela Williams, a CPA CA registered in the province of Alberta. During the day, Angela works for an oil and gas company in Calgary and in the evenings you can find her running the river pathways or relaxing with her two cats, Merlin and Charlie. Angela also writes and manages two blogs, Cowgirl Runs and Accounting for Bloggers. You can find her on social media as well, at Instagram, Twitter here and here, and Facebook here and here.