What If 'Citizen Journalists' Are Tax Dodgers?

If it seems like there's something wrong about the idea of giant media conglomerates making money off the unpaid contributions of anonymous nobodies, you might be onto something.

A media-ethics website called Stinky Journalism has identified an issue that probably won't but very possibly could trip up companies that make heavy use of so-called citizen journalism, particularly the Huffington Post.

The problem lies in the tax code, which requires individuals who make non-reciprocated gifts of more than $12,000 a year to report and pay taxes on that money (assuming it's not given to a tax-exempt non-profit). Time and labor count, so, if you're contributing the equivalent of more than $12,000 a year to, say, CNN's iReport or MSNBC's First Person, you -- and not the beneficiary of your efforts -- could be incurring unforeseen tax liabilities.

This is unlikely to be an issue for the vast majority of citizen journalists, both because their contributions aren't worth all that much and because there's a lifetime allowance of $1 million (I'm a little fuzzy on the details -- ask your accountant). But for those whose scribblings are arguably worth real money -- the big-name Hollywood actors who blog for Huffpo, say -- it's easy to see how they could pass the $12,000 annual limit.

Say the authors,

Ask yourself: How can a web site like Huffington Post be worth millions to investors and at the same time all of its donated content be worth zero on an individual basis? An accounting game that seems to be afoot here gives asset value to the citizen journalists' content only after the media owns and controls it and can even earn income licensing it to other media outlets.

Of course, it's not as if Huffpo contributors get nothing in the bargain. Plenty of writers use their Huffpo blogs to flog their books or other writings. And bandwidth's not free. Still, Stinky Journalism raises an issue that, at a minimum, may need to be clarified by the IRS before too many more media edifices get erected on the willing backs of unpaid volunteers.