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Even if you don't receive no tax-related forms via the mail, online creators have to report income from monetized content on tax returns. Although other online stores (like Etsy and Amazon) can make tax reporting more difficult by imposing excessive fees, they make tax time more manageable, more accessible, and less stressful--leaving your time to concentrate on the content you create.
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 credit and debit card transactions that are processed by third-party network transactions. The processors of third parties (like PayPal, for example) are required to report transactions their company processes. So if you're a content creator that accepts payments via debit or credit card and you'll probably receive 1099-Ks in the mail and so will the IRS. As the IRS will be receiving every one of the 1099-K, it's important to keep your information up-to-date when filing taxes.
Gross Payments
If you don't realize, gross payment are the sums of money you make before taxes and deductions. Up until recently, many content creators did not have to report their earnings since the minimum threshold for this qualification was the amount of $20,000. Beginning in 2022 the amount of gross compensation for monetizing online content has been cut significantly 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 are below the $600 threshold it is possible that you don't need complete a form 1099-K.
Avoiding Hobby Classification
The Hobby classification occurs an instance wherein the IRS determines that your business is not really a business--but an activity. Certain content creators, particularly newcomers to this area of work, might think that this is a great decision. If this is a pastime you can't tax me surely? Absolutely not. In fact, it's detrimental for you as well as your earnings in the event that you are taxed if the IRS considers your company to be one of these.
State Sales Tax
The last thing you need to keep in mind in preparing for tax time is state sales tax. This is especially important when you are an online creator since your product is sold globally.
Get a Tax Professional
Although we are able to offer useful tips and advice but we're not accountants. We encourage all our website creators to seek the help of a tax professional for an expert opinion on ways to save more on taxes, stay clear of tax omissions and simplify the process of tax-paying easier.