There’s one piece of mail that makes almost every content creator’s heart skip a beat — a letter from the IRS. Receiving it doesn’t automatically mean you’ve done something wrong, but it could signal that your taxes are being reviewed. Audits can sound intimidating, especially with all the horror stories online, but in reality, they’re often routine.
If you earn money from brand deals, affiliate links, ad revenue, or platform payouts, the IRS considers you self-employed, which can sometimes draw extra attention. The good news? Most audits are completely manageable when you keep organized records. Here’s what every content creator needs to know about IRS audits and how to reduce the risk.
What is a Tax Audit?
A tax audit is essentially a review of your financial records by the IRS to ensure that you’ve accurately reported your income and deductions. It doesn’t automatically mean you’re in trouble; it just means the IRS wants to take a closer look at your numbers.
Audits can be triggered for various reasons. Perhaps there was an inconsistency in your reported income or an amount of deductions that seemed out of line with your content creator income. Or you might have been selected at random.
Content creators often have multiple income streams, such as brand deals, affiliate income, ad revenue, etc., which can make tax reporting more complex and increase the chances of an IRS audit if records are not organized.
Why Might I Get Audited?
Here are some common reasons why content creators might face an audit:
Unreported income
If you’re earning money from multiple platforms and fail to report some of it, the IRS may flag your return. Platforms like YouTube, TikTok, and Patreon report payments to the IRS, so they’ll notice if you leave something out. The best thing you can do is stay on top of all income and expenses, and luckily, we made a free tracker to make your life easier!
Large or unusual deductions
Business expenses are totally fine to claim, but if you write off items the IRS isn’t used to seeing as business deductions, it can trigger further review. If these are legitimate business expenses, make sure you have documentation to prove how you use them for your business.
Cash payments or direct deposits without documentation
If you accept sponsorship payments via Venmo, PayPal, or direct deposit without proper record-keeping, it can look like you’re underreporting income. Just keep documentation for any cash payments you receive.
Mixing business and personal expenses
If you try to deduct personal expenses as business costs, it could look like you are doing something wrong. If you split the cost of personal items with your business, make sure you have documents that show the percentage of business use and that you’ve deducted the proper amount on your taxes.
Significant income changes
If your income suddenly jumps (say, you went viral and made six figures this year after making only a few thousand last year), the IRS may want to double-check that everything is reported correctly. The same can be true if you show a large drop in income from the previous year. Income in our line of work can fluctuate, so just keep good records to show that you have reported everything.
What Happens If I Get Audited?
The first step in an audit is that letter we dread. That initial communication typically will ask you to provide specific documentation or clarification of the information you provided on your tax return. There is usually a deadline attached, so make sure you open the letter right away.
Then you will submit copies of your documentation. Make sure you keep the originals on hand in case you need to provide them in the future or refer back to them for some reason. The IRS will then review what you’ve sent and decide whether it needs to make adjustments to the amount you owe. They may find that everything checks out and you don’t need to make any changes, that you overpaid and they owe you money, or that you underpaid and owe money.
Can You Protect Yourself from an Audit?
You can’t completely eliminate the possibility of being audited, but you can minimize the risk by following some best practices:
- Keep good records: Save receipts, invoices, and bank statements for all business transactions.
- Report all income: No matter how small the payment, make sure to report all earnings from sponsorships, brand deals, ad revenue, and fan donations.
- Separate business and personal finances: Use a dedicated business bank account and credit card for all content creation expenses.
- Be reasonable with deductions: Only write off legitimate business expenses. If you have legitimate business expenses that are out of the norm, keep documentation of the cost, the date you received the product or service, and why it is an essential component of your business. Download our handy cheat sheet to help you decide what is deductible and what isn’t.
Work with a Professional Who Understands Creators
A CPA or tax expert familiar with content creator taxes can help you navigate the complexities and avoid red flags. And, if we do say so ourselves, we can’t think of anyone who knows the business of content creation better than Cookie Finance. We are available to help you with bookkeeping, accounting, and taxes. Let’s hop on a call to see how we can work together to support your content creation business.