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If you do not receive an income tax form in the mail, online creators must still report income from monetized content on their tax return. Even though other websites (like Etsy and Amazon) make tax filing more complicated by charging unneeded fees, it makes tax time more manageable, more accessible, and less stressful, giving your time to concentrate on the content.
Tax Season Insight: 1099-Ks
We'll start by defining the basics. What is a 1099-K? 1099-Ks are forms through the IRS which track credit and debit card transactions through third-party network payments. The processors of third parties (like PayPal, for example) can report on transactions their company processes. Therefore, if you're a creator and accepts payment via debit or credit cards then you'll most likely get a 1099-K in the mail along with the IRS. Because the IRS will receive every copy of your 1099-Ks it's essential to be transparent in filing tax returns.
Gross Payments
If you don't realize, gross payment comprise the total amount that you earn before tax 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. However, starting in 2022 the maximum gross amount to monetize online content has been cut dramatically to just 600 dollars.
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 below the $600 threshold and you are not a tax payer, then you do not need complete a form 1099-K.
Eliminating Hobby Classification
Hobby classification is an instance wherein the IRS decides that your company isn't really a company, but an activity. Certain content creators, particularly those new to this line of work, may consider it's a good thing. 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 if the IRS considers your company to be such.
State Sales Tax
Another thing to be aware of when preparing for tax season is that there is a state sales tax. This is especially important when you are an online creator since your items are available worldwide.
Get an Tax Professional
Although we are able to offer suggestions and tips for you but we're not accountants. We encourage all our website creators to seek out the assistance of a tax professional for an expert opinion on ways you can save money on taxes, stay clear of tax omissions and make the process of tax-paying easier.