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If you do not receive no tax-related forms via the mail, creators of online content must still report earnings from content that is monetized on their tax returns. Even though other websites (like Etsy and Amazon) complicate the tax process with unneeded fees, it makes tax season easier to manage easy, accessible and less stressful--leaving your time to concentrate on the content.
Tax Season Insight: 1099-Ks
Let's start with the basics. What is a 1099-K? 1099-Ks are tax forms issued by the IRS that track debit and credit card transactions through third-party network transactions. Third-party processors (like PayPal, for example) can report on transactions they process for their businesses. So if you're a content creator who accepts payment through debit or credit cards, you'll likely receive 1099-Ks in the mail along with the IRS. Since the IRS will be receiving every one of your 1099-Ks, it's essential to be transparent when filing taxes.
Gross Payments
For those who don't be aware, gross payments are the sums of money that you receive before taxes and deductions. Up until recently, many content creators did not need to worry about reporting their earnings, as the limit to qualify for this was set at $20,000. Beginning in 2022, the gross payment for the monetization of online content will be reduced drastically to $600.
With this transition, most online professionals--freelancers, artists, vloggers, and creators--will receive a 1099-K. A helpful tip in preparing for tax season is to record the money you make throughout the year, making gross income easier to file. If you find yourself under the $600 mark and you are not a tax payer, then you do not need to file a 1099-K.
Averting Hobby Classification
The Hobby classification occurs when the IRS determines that your business isn't really a company, but an activity. A few content creators, specifically those new to this line of work, might think it's a good thing. If it's just a hobby and I don't have to pay taxes, right?Absolutely certainly not. Actually, it's harmful to your personal income and you in the event that you are taxed if the IRS classifies your business as one of these.
State Sales Tax
One final thing to remember when preparing for tax season is that there is a state sales tax. This is crucial when you are an online creator since your items are available worldwide.
Consult an Professional in Tax Professional
Although we are able to offer advice and helpful tips We aren't accountants. encourages all of our online creators to seek out the assistance of a tax professional for an expert opinion on ways to save more on taxes, avoid any tax mistakes, and help simplify the process of paying taxes easier for you.