Q: What do you suggest bloggers do when given free stuff as compensation?
A: Great question. Here’s a few things to keep in mind if you’re receiving “free stuff” as compensation.
As an accountant that works with small businesses, this question comes up quite a bit. And although this statement seems fairly simplistic, the first thing you need to remember when you’re given free stuff as compensation is that you’re really getting paid in product.
Reviewing product is a fairly common practice among bloggers. Many companies provide free services or products for you to review and share your opinions with your readers and friends. It’s not cash, so it seems like a freebie, but a good rule of thumb is to think about what you might be providing them in return for that “free stuff”. If there’s anything you may be providing, then it’s easy to see that the “free stuff” is really just payment in kind instead.
You can still accept the items, but remember that the dollar value of those items will need to be recorded as income and reported when tax time rolls around.
You might even receive product from someone with “no strings attached”. They don’t require you to write a review or return their product. This may not happen as often, but are you required to report it on your tax return if they don’t expect you to review it?
Best practice would suggest that you do. If a company is sending out product, odds are they’re hoping for a kickback (you can read more about this here) whether they require it of you or not. Odds are, they’re expensing the cost of the product from their taxes – so they consider it to have a monetary value, even if it isn’t cash. If you can answer yes to the question – “do you think they’re deducting this “free stuff” come tax time?” with a yes – then odds are you should be reporting it as compensation.
We understand that situations like these get tricky. If you have additional questions or want some advice about a certain situation, drop us a line. We love to talk taxes and deductions with bloggers.
Check out our other Tax & Accounting FAQs for bloggers here:
Ben Sutton is the founder of Mazuma USA, an accounting firm providing tax, bookkeeping and payroll services to small businesses. Since founding Mazuma, Ben has established himself as an expert in the small business world. He’s still driven by that same desire to provide accounting help to all small businesses – from photographers, bloggers and creatives to lawyers, doctors, and dentists, everyone needs affordable accounting help. Ben is a Certified Public Accountant, and a member of the American Institute of Certified Public Accountants. But Ben considers his greatest achievement and credential to be his happy wife and four children.