*This guide does not constitute financial or legal advice. For specific questions, we recommend seeking the advice of a local tax professional specializing in content creator taxes.
What’s the biggest piece of advice that Founder of the CPA Dude, Tony Hoong has to give about content creator taxes?
“Make sure to tax plan during the year—do not wait until the year is over. Taxes are just like Cinderella at midnight on December 31st. The chariot turns back into the pumpkin and you really can't do much for your taxes after that.”
But how do you make sure you’re prepared? If you have questions, you’re not alone.
The number of people needing to pay taxes on income earned from self-employment related to content creation has been sharply rising over the past few years. In December of 2022, there was a 207% increase in taxpayers claiming creator, streamer, influencer or related terms as their occupation, from tax year 2018. The hashtag #taxtok has been used on TikTok over half a billion times.
Taxes are on everyone’s minds, and for good reason. According to Hoong, “taxes are a creator’s biggest expense.” And many creators are unsure of how much they need to pay in taxes, or how much they can write off as business expenses.
"Taxes are just like Cinderella at midnight on December 31st. The chariot turns back into the pumpkin and you really can't do much for your taxes after that."
But with planning and the right resources, creators can get the maximum tax savings on the money they’ve worked hard to earn! (As an added bonus, you can also save yourself the massive headache of starting from scratch every time you do your taxes).
Here’s where to start. This guide will cover:
- What income creators need to pay taxes on
- When creators need to pay taxes
- How creators report their taxes
- How creators can leverage business expenses for tax savings
- The best tax resources available to creators
What income do creators need to pay taxes on?
You’ve been making money as a creator—congrats! Now you might be wondering, how the heck do I figure out what I owe in taxes?
What kind of income are you receiving?
There are several types of income that you can be receiving as a creator, because there are so many ways to make money as a creator.
You’ll want to account for all of these when reporting your income:
- Revenue from the sale of digital products, services, courses, consulting, and/or subscriptions
- Income from contractor work, reported on 1099s, such as brand deal partnerships or affiliate partnerships
- Direct income from tips and donations
- Ad revenue from monetized content, such as YouTube ad revenue
- Platform creator funds, such as the TikTok Creator Fund
- Income from UGC
- Non-cash payment in the form of gifts or goods
What is your creator business entity?
The next thing to consider is your creator business entity. There are a few main options that most content creators fall under:
- Sole proprietorship: A self-employed person who owns and operates 100% of their business, who files for taxes using their personal income tax return and social security numbers or EIN (employee identification number).
- Independent contractor: A subcategory of sole proprietors who work for other individuals or companies on a contract basis. Independent contractors are considered self-employed and are subject to a self-employment tax. They track income made through contract work and taxes owed on that income through forms called 1099s.
- Limited Liability Corporation (LLC): A formal business entity that registers with the state, that files taxes separately as a business and is subject to different tax regulations. LLCs should seek the advice of tax experts knowledgeable in LLC taxation.
- S Corporation: Another formal business entity that passes pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders report income and losses on their personal tax returns. In this way, S Corps can avoid double taxation on their corporate income. There are other tax responsibilities for S Corps and certain requirements on how to qualify. Some creators report that registering as an S Corp helps them save money on taxes—Collective has great resources on this.
- C Corporation: Similar to S Corporations, C Corporations are also a business entity in which the owners, or shareholders, are taxed separately from the business entity. C Corps are also subject to corporate income taxation, and differ from S Corps because they are taxes at corporate and owner/shareholder levels, creating double taxation.
Some other things to keep in mind:
- Content creators and freelancers are considered self-employed in the eyes of the IRS.
- Many content creators and freelancers either file taxes as sole proprietors or as an LLCs filing as a sole proprietors.
Some creators talk openly and even create content about their own tax process to help other creators—like Michel Janse, who has found in her business that she receives the most tax benefits by forming an LLC that can file as an S Corp. According to Janse, this has allowed her to make herself a W-2 employee of her own business, which has its own benefits.
Janse recommends reaching out to a tax professional if you want to learn more about this!
At what creator income threshold do you owe taxes?
The IRS considers gross income to mean “all income from whatever source derived”, which can include the money you make through your work as a creator.
If you are self-employed as a creator and you make over $400 in net income, you need to pay self-employment taxes as part of your Federal taxes, according to TurboTax.
A good rule of thumb is that no matter how much you’re earning from content creation, you need to report all income to the IRS in any form, including gifts and tips. Which brings us to…
Do creators need to pay taxes on gifts?
Many creators are gifted products or other non-cash items, which may or may not be given in exchange for their work with brands.
If a creator is expected to do work in exchange for the gifted item, it may be taxable. These are best considered on a case-by-case basis and would be something to speak with a tax expert about.
According to creator Laura Collazo, creators should be aware of income they receive in any form and be prepared to report it as taxable income. “When aspiring influencers or creators get into the industry—which is as easy as a gifted collaboration—you could be on the radar of the IRS.”
“When aspiring influencers or creators get into the industry—which is as easy as a gifted collaboration—you could be on the radar of the IRS.”
The best practice is to keep track of the gifts you receive in exchange for work and report these as income. Staying organized and on top of this throughout the year will save you a ton of time when it comes to do your taxes and make sure nothing falls through the cracks!
Do creators pay Medicare and Social Security taxes?
When you have your own business, as many creators do, you pay both the “employer” and “employee” portions of the Social Security and Medicare taxes, which combined is called the self-employment tax.
This is separate and in addition to your income tax and must be paid on the profits from your creator business, even if you don’t owe federal income tax.
Still have questions about how to calculate your taxes?
We get it—there’s a lot to digest. We strongly recommend contacting a local tax professional with any questions you have. They are the best person to advise on what is considered income from your creator business!
When do creators need to pay taxes?
The best timeline to pay taxes as a creator is quarterly in January, April, June, and September.
Some creators do file their taxes annually—but if you only pay once a year, you are subject to penalty fees (interest to the IRS). By filing quarterly you save yourself money and a lot of stress throughout the year.
Your taxes due each quarter are only a percentage of what you owe through the year, so your payments are spread out. Many states require quarterly payments of 25% of what you owe for the year, though some states differ, such as California. (In California, quarterly payments follow a 30%, 40%, 0%, 30% schedule).
If your estimations of what you owe are a little off, you can make adjustments throughout the year, rather than stressing all year that your one payment will be incorrect.
It is always better to slightly overestimate than underestimate your tax payments, but there are safe harbor rules for tax payments where the IRS will not charge you an underpayment penalty if you meet the following requirements:
- You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or
- You owe less than $1,000 in tax after subtracting withholdings and credits
As always, you should double check the payment schedule requirements and safe harbor rules for your local area.
Janse anecdotally shared that paying taxes quarterly helped save her money by not paying those penalty fees!
The best practice is to track your creator income across all of your income streams (e.g. brand deals, sale of digital products, tips and donations, etc.) consistently throughout the year.
You can use a tool like Beacons Income Dashboard to do this—just connect your income sources once, and automatically track and categorize your income throughout the year.
You can even get custom breakdowns and monitor your income flow. If you have trouble keeping up with a spreadsheet, this is a great solution to automate this process and take the tedious admin work of tracking income off your plate.
When it comes time to calculate the taxes you owe each quarter, you’ll estimate the taxes you owe for the year and divide by four.
Best practice is to set aside money regularly (each week or month) to cover your estimated taxes. Some creators recommend doing this in a separate bank account.
How do you report content creator taxes?
Creators report the income from their content creation activities on Schedule C of their income tax form, Profit or Loss from Business.
Schedule C is a profit/loss form in which you input how much money you make as a content creator and deduct how much money you spent on your business according to various categories of expenses.
If you work with other entities as a contractor, you’ll receive a Form 1099-NEC from each partner that pays you $600 or more.
Even if you don’t receive a 1099-NEC or 1099-K you should still claim any income earned from your creator business on your taxes, even if it is less than $600.
Best practice is to send a W-9 form with every professional invoice you send for your creator work so you don’t need to go back and chase down any individuals or companies later.
You can do this with Beacons Invoicing and W-9 Generator, which lets you attach a W-9 form to every invoice you send. A W-9 form helps you provide information to the business that you’re doing work for, and the business later uses the 1099 form to report your earnings as a contractor.
Sending a W-9 form with each invoice helps expedite both your payment and tax processes.
How can creators leverage business expenses for tax savings?
Most, if not all creators will have spent money on items and activities related to their creator work. Some of these purchases may be written off as legitimate business expenses.
How do business expenses help you save on taxes? Business expenses are deducted from your income, which lowers the total net income you owe taxes on. For example, if you earn $10,000 from your creator work and spent $2,000 in expenses related to your work, you will be taxed on $8,000 of net income.
Again, the best practice is to keep track of your expenses related to your creator business throughout each week/month of the year.
- Commissions and Fees
- Depreciation expense
- Legal and professional services
- Office expenses
- Travel and meals
- Home office
However, you may have expenses that you don’t even realize are business expenses. It’s worth going through your expenses with a fine tooth comb—you may be able to save yourself money by deducting these costs from your taxable income.
Specifically, consider the “ordinary and necessary” expenses. These are expenses that the IRS classifies as ordinary (meaning they are “common and accepted” expenses in your industry) or necessary (meaning they are “helpful and appropriate” but not indispensable).
One last consideration: If you are reporting a loss on your business (negative net income), the IRS may classify your creator work as a hobby rather than a business. While this is perfectly fine, if you do report a loss, the IRS may not acknowledge the expenses related to your creator income as legitimate business expenses. According to TurboTax, the best way to show you are running a legitimate business is to report a profit.
If you’re unsure if something counts as a business expense, we strongly advise you to contact a local tax professional to confirm.
What tax resources are available to creators?
Even though the process of doing your content creator taxes can be daunting, there is a wealth of resources available to creators to make sure you get the answers and support you need. Here are some of our favorites: