Your Questions Answered by Our Advisors - Taxes & Financial Activities To Do With Your Kids!
The following two questions were submitted to Cape Cod Mommies Advisor: Gary DellaPosta,
Gary, I have a few questions regarding Bloggers and taxes:
What is the difference between business/hobby for blogging? How does one determine that? How does a blogger claim review items that were received in exchange for a post? I know that it is bartering, but what are the official rules? Should quarterly taxes be filed? Should I register as a DBA at my local town hall? Also, how can a blogger claim the dependent care deduction if s/he doesn't receive a 1099? ~Emily
The business versus hobby rules can be complex. However, if the business shows a profit in 3 of 5 years, it cannot be classified as a hobby. If the IRS classifies a business as a hobby, then any losses cannot be deducted.
The items you receive in exchange for blogging are considered bartering. The fair market value
of the item is the amount of income you must claim. If the item sells for $19.95 online or in a store, then $19.95 is the amount of income you have to report.
Filing quarterly taxes would depend upon your overall tax situation. You are only required to register as a DBA if you are doing business under a fictitious name (ie.: The Green Grocer).
If you have net income (after all expenses) from your business, you will be qualified to claim the dependent care credit.
Gary, How can I teach my kids good financial skills? ~ Leslie
Once they reach school age, children should start learning rudimentary financial skills.
You might start to teach your kids in the following areas:
Their Allowance. Give your kids control over their own money (their allowance and whatever monies you give them that are not earmarked for some particular purpose). You can make suggestions to them about what they should do with it, but allow them the final say on what happens to the money. Let them see the consequences of both wise and foolish behavior with regard to money. A child who spends all of his money on the first day of the week is more likely to learn budgeting if he is not provided with extras to tide him over.
Savings And Investment. Beyond the basics of budgeting and saving, you'll want to get your child involved in saving and investing. The easiest way to do this is to have the child open his or her own passbook savings account. If you want your child to get familiar with investing, there are various child-friendly mutual funds and individual stocks available.
Taxes And Credit. Kids can start using credit cards at an early age with parental counsel and involvement. They can learn the concepts of incurring and paying off debts both from credit card use and from small loans that parents make them. If children have to file tax returns-as they would with an IRA--allow them to participate in the process; this will get them used to the idea of yearly tax payments.
For more information please contact our office 508-540-3683 or email us at firstname.lastname@example.org
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