March 21, 2023
Creator's Guide to Taxes
Filing taxes as a creator can be one of the most difficult parts of your job. Lucky for you, we’ve tried to make the task a little easier with our Creator Tax Guide! Take a look.
Step 1: Business v. Hobby
The first step to filing your taxes as a creator is to understand whether your content creation is categorized by the IRS as a business or a hobby. The short answer: if you’ve made a profit for three out of the past five years you’ve been creating content, you have a business. Remember if you file taxes as a business, you benefit from being able to claim expenses as deductibles.
Step 2: Track Your Finances
The easiest way to eliminate stress come tax season is to consistently track your business finances throughout the year. You can do this by keeping a simple Google Sheet or Excel Spreadsheet up to date or using a software like Quickbooks. Find a system that works best for you and allows you to store and track your invoices, while also documenting your expenses.
Step 3: Forms
You’ll most likely need at least two different forms this tax season. The first is called a W9 which gives you a Taxpayer Identification Number if you make more than $500 in a calendar year with your business. The second is a 1099-K, and is issued to you by any company that paid you more than $600 within a calendar year. As a part-time or full-time creator, you will probably have multiple 1099-K forms you will need to file. Don’t forget: even if you made less than $600 through a partnership, you still have to report that income yourself.
Step 4: Deductibles
Tax deductibles are one of the most misunderstood part of filing taxes for creators. By definition, a deductible is a business expense that you subtract from your total revenue so that the total amount of taxes you pay goes down (less revenue = less taxes). The IRS describes a deductible as anything that is “ordinary and necessary” for your business. That could include: camera, sound equipment, video editing software, and more.You can also deduct a percentage of your home costs if you work from home, travel costs if you need to travel for your business, and more. Business deductions are highly scrutinized so make sure you’re only claiming expenses that are absolutely necessary.Additionally, just like you can subtract business expenses from your total revenue, creators must account for gifting partnerships they’ve done by adding the monetary value of those gifts to their total revenue.
Step 5: Understanding What You Pay
On top of your regular income tax, self-employed creators are also required to pay self-employment taxes. This tax consists of 2.9% for Medicare and 12.4% for Social Security, coming out to a 15.3% tax. Most individuals who work for a corporation have this tax already taken out of their paychecks, while creators will have to save this money to pay the tax themselves. We recommend saving at least 20% of your income each month to devote to taxes, so that the self-employment tax doesn’t break the bank.
Step 6: Pay Quarterly
You may not have realized this but self-employed individuals are supposed to pay quarterly taxes. Employed individuals don’t have to worry about quarterly taxes because they are subtracted from their paychecks. However, creators have to pay that tax themselves in the form of estimated taxes paid quarterly (April 15, June 15, September 15, and January 15th roughly each year).If you under-estimate or over-estimate your payments, you can balance them out at the end of the year. FYI: failing to pay quarterly taxes can result in a fine from the IRS. Paying quarterly can also help alleviate stress come tax season, so that your entire tax balance isn’t all due at one time.
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Disclaimer; nothing in the site constitutes professional and/or financial advice.