Decoding Content Creator Taxes: What You Need to Know

The role of “content creator” is relatively new, but that doesn’t mean it doesn’t pay well. Content creators can ink lucrative deals with partners, build thriving brands, and enjoy rewarding careers.

Of course, there’s the challenge of dealing with content creator taxes. The IRS classifies you as self-employed, but with multiple streams of income, wide-ranging expenses and deductions, and an ever-evolving industry, it’s challenging to keep up with everything you need to know.

We’ll explore what content creators need to know about their tax situation.

Why Taxes Are Unique for Content Creators

Taxes are rarely simple, but content creators face unique hurdles that other professionals do not. Part of this is because they deal with multiple revenue streams, including ads, sponsorships, merchandise sales, and more. Each revenue stream adds complexity and comes with different tax implications.

Then there’s the issue of being self-employed in the eyes of the IRS. This means content creators are responsible for more taxes because there is no employer to pay a percentage of them. Self-employed professionals should also file their taxes quarterly rather than annually.

Filing Processes for Content Creators

While dealing with taxes as a content creator is complex, we can break it down into three primary steps:

• Documentation – First, you’ll need to collect and organize all the necessary financial records. That includes 1099s from various partners, a record of income from partners and platforms that didn’t provide a 1099,  and a record of expenses you incurred that were related to your content creation.

• Form Selection – Now, it’s time to choose the right tax forms. These will vary depending on how your company is set up and the nature of your expenses. For most creators, this will just be the typical 1040 tax return with a Schedule C.

• Submission – Once you’ve chosen and completed your tax forms, you’ll need to submit them. Understanding how, when, and where is important.

Potential Deductions for Content Creators

Interested in keeping more of your hard-earned money and giving the government less? It’s all about claiming the right tax deductions. As a content creator, you have access to a wide range of different deductions, although each situation is unique. Speak with a specialist to determine which deductions apply to you. Below, we’ll explore some of the most common options.

Home Office

You need a place to work, and for most content creators, that ends up being space within your home. The good news here is that you can turn this to your advantage with a home office tax deduction.

To qualify, you must regularly and exclusively use this space for your business. That doesn’t mean that you cannot use that space to make a personal phone call, but it should be primarily the place where you do business. So, if you have a living room that serves as both a workplace and a place for the family to watch movies together, it will not qualify.

How much can you get as a deduction? Under the simplified IRS rules, you can deduct $5 per square foot, up to 300 square feet. So, a home office that measures 200 square feet would give you a deduction of $1,000 on your taxes. Another method is to figure out what percent of your home is dedicated home office space and to deduct that percent of your rent and utilities. This method usually gives you a larger deduction.

Equipment

You’ll need a wide range of equipment to operate your business, depending on what you create. This can include laptops and computers, sound equipment, lighting, cameras, and a great deal more.

Almost all of the equipment you purchase that is below can be written off immediately. However, major investments (like a car) may need to be depreciated over several years to get the maximum value. Depending on the type of equipment and the amount of the write-off, you may choose to designate it as Section 179 property, which includes a car that was acquired for business use, and acquired by purchase, rather than lease.

Save the receipts for each equipment purchase and notate any relevant information about its use or purpose for your business.

Travel

Depending on your business model, you may need to travel as a content creator. If you’re traveling specifically for business needs, you can write these costs off on your taxes. That includes:

• Airfare
• Ground transportation
• Accommodations
• Meals

Keep all records of travel-related expenses and note how they relate to your business.

Common Pitfalls and How to Avoid Them

It’s important to get your taxes right the first time, and that requires knowing a few pitfalls and how to avoid them.

• Underreporting Income – Underreporting income is exactly what it sounds like –– telling the government you made less money than you actually did. Doing this puts your business at risk, and could have legal repercussions, including heavy fines.

• Overclaiming Deductions – This involves claiming too many deductions. If the IRS decides your case is fraudulent, they can tack on an additional 20% penalty.

• Missing Deadlines – You must submit your taxes promptly. Missing deadlines means the IRS could hit you with a 5% penalty for each month or portion of a month that your return was late, up to 25%.

• Mixing Personal and Business Finances – Keeping your business and personal finances separate is crucial. Blurring the line can increase the risk of an IRS audit and put your deductions at risk.

How do I know if I qualify as a self-employed content creator for tax purposes?

Typically, if you earn income outside of traditional employment, such as a 9-5 job where you collect a paycheck, you’re considered self-employed.

Do I need to pay taxes on gifted products or services?

The fair market value of gifted items or services counts as taxable income. It’s crucial to document and report these. However, this only applies in situations of barter. If a brand gifts you something with no strings attached, you do not have to report it as income.

Can I deduct expenses from before I started making money as a content creator?

Some startup expenses can be deductible, even if they occurred before you began earning income. However, specific rules apply, so consult a tax professional.

What if I make income from multiple platforms?

You must report income from all sources.

Conclusion

Proactive tax planning and organization are critical steps for content creators. However, it can be very complex, particularly if you have multiple revenue streams or need to depreciate the value of an asset over time. Unfortunately, missteps here can have significant ramifications. If you’re not sure of your ability to accurately deal with taxes, seek professional guidance from a specialist with deep experience in the industry.