I get asked this question regularly, how to prepare your taxes as a content creator? Social media content creators such as YouTubers, Bloggers, and UGC creators, while not relatively new, have become an exciting profession for most people. Consequentially, these individuals may now qualify for certain deductions and credits because they are categorized as self-employed by the IRS.
What's All The Buzz With Content Creation?
There’s never been a better time to be a content creator. As your social media presence and influence grows, the possibilities for additional revenue streams become endless. Needless to say that with this inflow of income comes the dreaded question, “Do I have to pay taxes?”. To understand the tax implication of your new revenue streams, let’s first determine whether you’re self-employed.
- You carry on a trade or business as a sole proprietor or an independent contractor.
- Per the IRS, you are self-employed if any of the following apply to you.
- You are a member of a partnership that carries on a trade or business.
- You are otherwise in business for yourself (including a part-time business or a gig worker).
Responsibilities of a self-employed individual.
Contrary to what you may have been told, influencers and content creators do not need a registered business or an LLC to be self-employed. The caveat is that being self-employed comes with additional responsibilities, which include the following:
- Track Your Earnings – while employees receive W-2 from their employers, self-employed individuals do not. Therefore, it’s advisable to maintain accurate records of the income earned throughout the year.
- Make Quarterly Payments – making quarterly payments for Social Security, Medicare, and Income taxes is required because you do not have an employer withholding it on your behalf.
- Consider Gift Taxes – there are two sides to the tax code. Often if one party deducts the expense, the other party records the income and pays the taxes. Generally, if you receive a gift (company merch, brand-sponsored trips, etc.) as compensation for your services (i.e., posting a review or a blog), you may be subject to the gift tax. *There are exceptions and each situation should be evaluated independently.
Filing Your Taxes - Forms to Keep in mind.
As a content creator, you must file an annual tax return like other self-employed individuals. You should file Form 1040 and report all your activities on Schedule C. You will also be subject to the self-employment tax if your net earnings exceed $400. Therefore, you should utilize Schedule SE to determine the tax due.
- Self-employed individuals typically receive a 1099-NEC from all payments over $600 during the year. However, as a self-employed individual, you must still report all payments, including those under $600.
By being categorized as self-employed, content creators also receive the added benefits of claiming certain deductions that otherwise would not have been deductible. The following are some deductions specific to the content creation niche.
- Office Furniture
- Home Office Deduction
- Courses
- Supplies
- Electronics
- Advertising
- Cell Phone & Internet
- Travel
- Creative Assistance
- Subscriptions & Software Licensing
- Meals
- Professional Photos
Content creators often have a saying that goes, “everything is content.” While this may be true for content, unfortunately, it doesn’t translate quite literally for the IRS. Everything is NOT deductible. To be deductible, the expense must be ordinary and necessary to carry out the activity. You should also be aware of comingling your personal and creator-related expenses. For example, purchasing a camera for use exclusively to record vlogs for your YouTube channel would qualify as a deductible electronic expense. Whereas purchasing a laptop to use partly for your online college courses and editing YouTube videos would require you to allocate only a portion of the cost as a deduction
Remember, while being a content creator can be fun and exciting, you must familiarize yourself with your tax obligations and the additional responsibilities that come with being self-employed.
