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Even if you don't receive an income tax form in the mail, creators of online content are still responsible for reporting the income earned from their monetized content on tax returns. While other e-commerce sites (like Etsy and Amazon) can make tax reporting more difficult by imposing unnecessary fees, makes tax time more manageable easier to access, less difficult, 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 is a form issued by the IRS that track credit and debit card transactions that are processed by third-party network transactions. Processors that are third-party (like PayPal, for example) are required to report transactions that their business processes. Therefore, if you're a creator that accepts payments via credit or debit then you'll most likely get a 1099-K in the mail, as will the IRS. Since the IRS will have access to every single copy of your 1099-Ks, it's important to keep your information up-to-date in filing tax returns.
Gross Payments
For those who may not know, gross payments are the sums of money that you earn before tax and deductions. Until recently, many content creators did not have to report their earnings, as the limit for this qualifier was the amount of $20,000. However, starting in 2022 the amount of gross compensation for monetizing online content has been cut significantly to 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 fall less than the threshold of $600, you may not have to file a 1099-K.
Averting Hobby Classification
A hobby classification happens an instance wherein the IRS determines that your business is not really a business--but it is a pastime. Some content creators, especially newcomers to this area of work, might think this a good thing. If it's just a hobby you can't tax me surely? Absolutely not. Actually, it's harmful to your personal income and you in the event that the IRS classifies your business as an entity that is classified as.
State Sales Tax
Another thing to be aware of while preparing for tax season is that there is a state sales tax. This is crucial for creators who are online since their items are available worldwide.
Contact with a Tax Professional
We can provide advice and helpful tips but we're not accountants. Encourages all of our web creators to seek the help of a tax expert to gain an expert opinion on ways to save more on taxes, prevent tax oversights, and simplify the process of making tax payments easier.