You’re living your dream – you create content you’re passionate about as a career. You’ve mastered your craft and are showing up on the FYP. But while your gilded YouTube Play Button looks great on your wall, April 18th is still looming.
That’s right, it’s tax season. [cue score from ‘The Shining’]
No matter your job, this can be a stressful time of year. But being self-employed can add another layer of complexity – making that dream (temporarily) feel like a bit of a nightmare.
It’s time to rest easy. Here are six tips that can help you manage your creator taxes:
Note: You’re about to read high-level tax tips that can help you navigate this challenging aspect of being an entrepreneur. At the same time, we’re not licensed or certified tax professionals, which means that we can only provide suggestions. This advice is based on US tax information so refer to official resources from the IRS or talk to a professional if you have specific questions.
1. Build a system to capture ALL of your income
This is a simple one to start with: Claim everything you make. Yes, everything.
As a creator, you likely have a variety of revenue streams. Keeping everything organized and well-documented is paramount to set you up for an easy breezy tax season.
Create a system that allows you to store and track invoices, receipts ,and the value of any other items or experiences you’ve received. A process for organizing this information and your key documents drastically simplifies the process of calculating your total income when the time comes. Of course you can set something up in Google Sheets or Excel. But you may want to consider using software like Quickbooks, Wave or Expensify which all have receipt functionality too.
2. Get informed on the documents you need
Besides receipts, you’ll need a few key documents when you’re preparing to file your taxes:
- W9: This form gives you a Taxpayer Identification Number (TIN) if you make more than $600 in a calendar year with one platform, business, or other legal entity. For example, certain platforms like Patreon and TikTok (if you’re a part of the Creator Fund), will issue these forms so you are able to get a 1099-K.
- 1099-K: This form will be issued by any business that you make over $600 with within a calendar year.
Just in case tip #1 didn’t make this clear, if you make under $600 with a brand, you still need to claim this income too!
3. Create a business bank account
One top tip is to create a bank account that is only used for your business. This will keep all your business finances separate, making it so much easier to track down those pesky deposits and withdrawals when the tax deadline is looming. Also, in the rare case the IRS flags you for an audit, having all your affairs in a single place will speed up that scary process.
4. Don’t forget about deductions
When you started your YouTube channel, taxes probably weren’t the first thing on your mind (Yes, there’s specific tax requirements for YouTube). This means you might not even realize all the deductions you might qualify for as a creator.
The important caveat for all deductions is that you should only ever be deducting things that are expressly and exclusively used for your business. As the saying goes, don’t mix business and pleasure – be sure to denote and document exactly how an expense is used solely in your role as a creator. This way, you’ll be able to recall exactly why you claimed each expense in case — yes, the scary thing again — you’re audited.
Here are some areas that you can explore when thinking about deductions:
This category includes everything you need to do what you do best, like equipment and office essentials. This means a computer, camera, sound equipment, subscriptions, accounting and tax software, and more.
Outside of equipment, there might be other things you can write off. The general rule is that it should only be used for the content you’re creating – if it’s a product you use everyday, don’t deduct it. In the eyes of the IRS, there needs to be an express business usage.
If you work out of your home, you can deduct a percentage of your home costs in your taxes. You will have to do some math here, like calculating the square footage of your home office, but there are online tools to help. If you rent an office or have a membership at a coworking space, you can also deduct these costs.
Meeting clients or fellow creators may be a big part of your business. Room bookings as well as food and drink can be deducted if you’re exclusively discussing business. Track these expenses diligently and take meeting minutes to ensure everything is above board.
Whether near or far, if you’re traveling for your business, you can expense some, if not all your travel costs. Local travel counts too! If you travel to a co-working space, for example, you can claim your transportation. Be sure to look up the rates relevant to the tax year you’re filing for.
An important thing to remember is that there can be a high level of scrutiny around deductions, so if you’re unsure, ask your creator community and check in with a professional.
5. Set money aside all year long
As your own boss, you won’t have tax coming off each paycheck. The common recommendation is to put away 20% of your earnings to cover any owings. You might not need this total amount, but it’s better to over estimate so you’re not scrambling for funds come filing time.
6. Ask for help when you need it
Some people are good at making content. Some people are good at taxes. That means sometimes it’s worth leaving your taxes to the pros. Find someone who is familiar working with sole proprietors or freelancers – ask around in your community to find a recommendation. And remember, there is a wealth of information available from the IRS too.
Creator taxes don’t have to be complex. Start with these tips, devise a plan, and reach out to fellow creators for help. Remember: everyone has to do taxes – at least you get to do them to support your ideal career!