Blogging for profit might get you in trouble!

Does writing a blog constitute work? That appears to be the position of the New York State Department of Labor, which recently declared a laid-off attorney ineligible for unemployment benefits because she was bringing in $1.30 a day from blog ads.

Earlier this year Karin--a 2008 graduate from the University of Virginia School of Law who asked that her last name not be published--was laid off by a New York City law firm six months into her job.

Karin applied for state unemployment benefits and began receiving $405 a week. Unable to afford her rent in New York, she moved to St. Louis, Mo., and began searching for paralegal jobs while preparing to take the Missouri bar exam (it is common, and legal, for the unemployed to receive jobless benefits from the state where they last worked, even after moving elsewhere.)

In April, Karin started a blog, called STL Meal Deals, where she wrote about local restaurant promotions. Since she received no payments from the businesses she mentioned, Karin decided to try generating some income by signing up for Google AdSense, a service run by the Web search giant that pays bloggers to host ads on their sites. Google sends bloggers checks when their earnings hit $100--a level that took Karin three months to achieve.

When the check came in, Karin realized she had a legal obligation to disclose the income to New York State, even though doing so might reduce the weekly unemployment benefits she received. According to state regulations, anyone receiving unemployment benefits, who works one day and earns less than $405, will have his check for the week reduced by 25%. Someone who earns more than $405 in a single week becomes ineligible for any payments for that week.

It was after Karin notified the Department of Labor of her AdSense income that the confusion started. New York cut her weekly benefits to $300 and sent her a form to fill out and send to her employer. Unsure whether Google was considered her employer, Karin called the DOL to get an answer. She says a state official told her she shouldn't have claimed the AdSense payment as income because it was "residual," meaning a payment made for services previously rendered. New York does not regard residual income as employment pay that could make someone ineligible for unemployment benefits.

The call prompted Karin to file another claim with the state and to attach a letter stating she was running a blog and that the Google AdSense revenue it generated was her only source of income. A few days later, she received a letter from the DOL informing her that it had launched an investigation of her "business" to determine whether she remained eligible for benefits.

Karin called the DOL again and says this time she was told that the state considered her self-employed, which would require her to claim earnings each time she received an AdSense check. She called back to get another opinion, and Karin says this time she was informed by yet another state official that she needed to declare that she was working every time that she updated her blog.

Meanwhile, New York State has informed Karin that she is ineligible for unemployment benefits while its investigation is ongoing.

Several phone calls by Forbes to the Department of Labor failed to yield a clear response as to whether New York State regards Google AdSense payments as residual or self-employment income. Such payments are "uncharted territory" and questions of eligibility are "very case specific," according to a DOL spokesman.

Karin, meanwhile, has pulled AdSense from her Web site. "It's frustrating that nobody seems to have a straightforward answer," she says. "It's even more frustrating that trying to work and generate additional income, while being straightforward and honest about that income, is treated with suspicion and punished."

Her total AdSense income: $238.75!

Google, for its part, seems to want to stay out of it. In a statement, the company said, “Google AdSense revenue supports many publishers and bloggers with a revenue stream from online advertising. We're not able to comment on how various states choose to classify this revenue for purposes of unemployment benefit eligibility."

The company does send 1099 statements to anyone who earns $600 or more in AdSense income within a calendar year. The recipient, in turn, is supposed to declare this as miscellaneous income when filing his federal tax returns. Google does not report to the IRS, or issue 1099s, for AdSense income of less than $600 per person.

So is blogging work only if you make a certain amount of money? New York, at least, doesn’t see it that way. “You are considered employed on any day when you perform any services - even an hour or less - regardless of whether you get paid for that day,” said a spokesman from the Department of Labor.

Sources and Additional Information:

http://www.forbes.com/2009/10/07/blogger-google-unemployment-personal-finance-google-adsense.html

http://blogs.forbes.com/moneybuilder/2009/10/08/blogger-loses-unemployment-benefits-after-making-1-a-day-in-adsense-pay/