Real-life pretend. *snort*
This post is in reaction to my earlier post.
I have gotten quite a few confused emails, especially from hobby bloggers who do product reviews. I will try to clarify to the best of my understanding, using a real-life pretend example.
The part that’s tricky, in my opinion, is the product reviews and testimonials. If you are getting paid for ad space, you are essentially selling real estate and have a dollar amount to declare as income. That’s pretty cut and dry. You get paid, say $100, you declare the $100 on your income taxes. Viola. Done.
Now consider this.
You talk about a certain software program a lot on your blog. Let’s just say that program is Ashobe Photosmop. Ya’ know, for winks. Now, knowing that you use Ashobe Photosmop a lot and you clearly support it, let’s say that Ashobe’s competition wants you and your readers to know that they make a comparable product. For kicks, lets call that company NotAshobe.
Since you have an established readership that knows you like Ashobe, NotAshobe wants to send you their version of a product for you to try. They’d like to know about your experience with the NotAshobe product. They will even give your readers a chance to win some NotAshobe product.
Turns out the NotAshobe product is good, too. It is comparable. It’s actually a very good program. You like it.
Now the FTC steps in and says, “Hey Blogger, you have to pay taxes on that NotAshobe product. It’s considered income. Furthermore you need to tell everyone who may read your review (testimony) that you didn’t pay for the item and your experience may not be typical.”
Now is where it gets tricky. You already bought and paid for Ashobe Photosmop. It was expensive. Now, NotAshobe sent you their program to try and… well, it’s expensive, too.
But even though NotAshobe is a great product and you like it, and you’re willing to tell people it’s a good program, you would never have purchased it, because you already own the expensive competition’s brand. Very few people shop laterally.
So, NotAshobe’s software has a retail value of $500.
The training DVD they sent you so you could learn the program has a retail value of $100.
You now have $600 in declarable income on stuff you wouldn’t buy. Again, not because it isn’t good, but because you already own something like it. So, you don’t really use both programs, you stick with the one you know.
And you have made NO income, gave away $200 in merchandise and have $600 worth of stuff sitting in your house for which you now owe taxes. And, you now have to make a messy disclaimer statement saying, NotAshobe sent me this free product to try so I can tell you about it, I didn’t pay for this program, my opinion is my own experience and my testimony may or may not be the results you get.
And that is just ONE relationship. For one post. On one day. That’s just the tip of the iceberg. Now multiply that for every yogurt coupon, software program, book or product that you’re reviewing. It’s no longer just a way to support the little guy you want to see succeed. If you get a product, regardless if you want it / would have bought it/ like it / hate it / couldn’t care less….
it’s now a line item income.
Even if you have NO cash income to show for it.
See what I mean about messy? For a little hobby blogger like me, it’s not worth the paperwork, tax filings, and record keeping necessary to avoid causing trouble. What does this mean for you or your blog? For some of you, the work will be worth it. Your income is worthwhile. The products are ones you would have purchased anyway.
DISCLAIMER: Dude, get a tax attorney for real advice. I’m just a mom. I can’t even balance a check book, much less run a blogging business. This post is not advice it’s for my own entertainment. It’s probably not even good. It’s my own experience. Your experience may be different. 4 out of 5 CPAs think I am full of hot air. The other 1 of 5 got his degree from an online degree mill, and is just agreeing with me because I’m hawt. Fo’ reals.
DISCLAIMER: This story was fictitious. NotAshobe is not a real company. I do not have a real relationship with a company called NotAshobe. Any likeness to a real company like NotAshobe is purely coincidental. Ashobe and NotAshobe are not liable for my long-winded, irrational rambling.
DISCLAIMER: No CPAs or tax attorneys were injured in the making of this post.
{ 24 comments… read them below or add one }
fantastic post! It is all so clear now…
love this. thanks for clearing it up.
lol You crack me up! So I’m thinking no accepting products to review. Advertising seems easy enough as it’s just like any other income. Just gotta keep track of it.
I’m confused about giveaways though? Do those matter? Ok well of course they do, but I mean does the silly, money stealing government care about them?
I don’t care a whittle about the FTC or what their rules are since I STILL haven’t joined the blogging world. I ‘m still training for Olympic lurking, I come out of hiding twice on Green Cheese Moons.
BUT… you are so stinking funny that I”m reading the post again and still laughing. thanks I needed that! HUUUUGGGEE smiles coming your way.
my blogging group and I have been following this FTC law and we all think it really suck and you put it into words I just love. thanks
I am LOVING all of your disclaimers!
I’ll have to look more into this. This is rather frightening, but I appreciated your humerous approach to it – - -especially your final disclaimers. I’m thinking it may be more worth Uncle Sam’s time to investigate the major corporations aka Enron types and not worry about the free give aways that bloggers may receive.
My extended family and I were talking about all this garbage at dinner tonight. Here’s my take: fine, if I get $600 worth of stuff, I’ll declare it and, since I’m doing blog reviews for a certain homeschool magazine and am considered an independent contractor, I’m guessing they’ll be needing to send me a 1099 (or whatever it is) for any product values totaling over $600 that I review for them.
Oh, but wait! I’m a small business now, as far as the FTC is concerned, so they’ll be needing to let me claim my laptop as a business expense, since that’s where my business is done. And, oh, yeah, I have a desk chair sitting at my dining room table now that was bought because I sit here and do all my blogging — you know, my small business. And, let’s not forget that the only reason I have cable Internet is so I can blog, so I’ll need to write that off, too. Oh, and the light that hangs over my head so that I can see to write said reviews…
It’s ridiculous! I don’t see how this is ever going to fly or how it’s going to be enforced.
Girl, you are funny! I certainly see why it isn’t worth the bother. Thanks for explaining (in English).
I really liked that you added some funny/witty stuff in there. It helps balance out the meltdown I had about it over at my blog. haha! Seriously though, this FTC stuf IS killing me!
Hannah
You ARE hawt! Fo’ shizzle. Your anniversary picture is proof.
And NotAshobe and Ashobephotosmop are fightin’ over you because of it. You know that’s the real reason. Don’t be shy about it.
I wish Nokin and Nonac would fight over me.
Well done Darcy. I’d buy NotAshobe based on this post alone.
~smile~
Darcy you are always too funny! Thanks for the explanation!! I like what Kris had to say, and agree!
Didn’t they try and do this with celebs and their swag they get at award shows and such? what ever came of that?
Kris — You are actually correct though. You can write off a certain percentage of things like Internet service, laptop, etc if you are filling out your taxes with your blog as a business. They are all perfectly legitimate expenses. I’m big into what are really legitimate expenses and whatnot (especially after giving someone I am very close with a very hard time the other day when finding out the things she writes off that she so totally should not). Anyway, I am sure you can balance your “income made” with some of the expenses. For instance, the amount you would have paid Darcy for your header would be a deductible expense.
My head suddenly hurts. Seriously. This is beyond me. Now I get to go back and re-evaluate my blog and changes I was going to make to it. Ugh.
“DISCLAIMER: No CPAs or tax attorneys were injured in the making of this post.”
….maybe they should have been!
Thank goodness I just follow you for your family updates…and your quirky sense of humor!!
Actually, I think you probably did a downright good job of explaining it. I think the concept of the new rule is good, but it sure is causing a stir.
this is just so depressing…
all i am doing is reading all possible articles on it now…
i was wondering about doctors who get free vacations in name of conferences and all those cool goodies….wow!this is crazy…
you crack me up! and this just makes me wonder about anything I say on my blog… so weird and not right!!!
Such a great explanation, Darcy. Something about this FTC foolishness doesn’t feel right. Why suppress (sp?) moms who blog? I don’t think anyone is raking in the millions over this stuff…
Why are they making it so complicated? I wonder if anyone is trying to fight this or have it repealed? Geez. What a buzz-kill! lol
Wow. Very interesting : ) Too bad notashobe or any other companies are banging down my door to tote their products : )! Thanks for the lesson!
oh great, one more thing to jumble my all ready full brain with….thanks for the clarification!
Luckily Nyquil and Coca-Cola want nothing to do with me and haven’t given me anything. I wouldn’t take it either, because if you CVS correctly, which I learned from a blog, you don’t have to spend actual cash money obtaining said items.
loved it. Now I’m off to mow my neighbor’s yard for free, must I declare that as income I would have made had I not been nice?