You pay taxes on all earnings...sorry, but income is income and all is reportable. However because you are now using personal items - internet access, hosting, part of your home (or rent if you don't own), cell phone, domain names, etc you have quite a few deductions to offset these gains, and a creative tax guy will flesh them all out - pardon the pun.
To keep it simple I formed a corporation years ago and would recommend you do it as well (that is if you are making more than beer money
Then all checks should be paid to the corp and you shift all the expenses of the company to your newly founded corp. Get an corp AMEX or something too to rack up the points for free schwag.
It also helps protect you against lawsuits or other legal actions to shied your personal assets from the assests of corp if the worst comes to the worst and someone comes at you hard.
Good luck and take all I said with a grain of salt - I have a tax guy to handle all this for me but this was his advice when I hired him quite a while ago and I have been quite happy with the direction he pointed me.