Am I Expected To Pay Taxes On My Google Adsense Earnings?

The fast and easy answer to this question is, yes. As an American citizen, you are expected to pay taxes on all of your earnings, worldwide. Because these earnings are attached to a blog or website that you run on the Internet, it does not exempt them from being part of your taxable income.

Contrary to some opinions, the Internet is not a tax-free zone where you do not have to relinquish income to the taxman because it is generated over the web. Every dollar you earn from your Internet endeavors is taxable, period.

Google Ad-sense will collect tax information from those participating in their program. If you have a business, you will need to provide an EIN. If you are participating as an individual, you will need to provide them your Social Security Number. They will allow you to participate in their advertising program without, first, providing them this information. They will, however, withhold any payment to you until they have your tax information. If you earn more than $600 annually with Google Ad-sense, they will supply you with a form 1099 for filing with your income taxes.

Some people wonder if they should report these earnings as part of a business, or if they might be better off reporting their activities as a hobby.

First of all, it might be difficult to convince the IRS that someone would place income generating advertising on a website or blog that is solely used as a hobby. Secondly, you are severely limiting your opportunity for tax deductions if you report your blog or website as a hobby. It would be better if you reported these endeavors as a sole proprietorship and filed for business deductions on your income tax return.

Some of the business deductions you might qualify to claim are costs for domain names, web-hosting costs, costs to advertise and promote your site, computer costs, hardware costs, software costs, digital camera costs, scanner/printer costs, office equipment and supplies costs, utilities costs, internet service provider costs, rent or mortgage costs, business cards, business travel/mileage, trade journals, magazines, books, and all costs related to running a business. If you run your business from home, you can even deduct some of your everyday living costs, as well.

If you earn more than $600 in a tax year, Google Adsense will report your earnings to the Internal Revenue Service and issue you a 1099. Even if you do not earn more than $600 in a tax year, you are still required by law to report your earnings to the IRS