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Even if you don't receive no tax-related forms via the mail, creators of online content must still report earnings from content that is monetized in their tax return. Although other online stores (like Etsy and Amazon) complicate the tax process with excessive fees, they make tax season easier to manage easier to access, less difficult, and less stressful--leaving the time for you to concentrate on the content you create.
Tax Season Insight: 1099-Ks
Let's start with the basics. What exactly is a 1099-K? 1099-Ks are forms through the IRS which track debit and credit card transactions through third-party network payments. Third-party processors (like PayPal, for example) can report on transactions they process for their businesses. So if you're a content creator that accepts payments via debit or credit card, you'll likely receive a 1099-K in the mail and so 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 when it comes to filing tax returns.
Gross Payments
For those who don't be aware, gross payments comprise the total amount you make before taxes and deductions. In the past, content creators did not need to worry about reporting their income--since the threshold to qualify for this was set at the amount of $20,000. Beginning in 2022, the gross payment for the monetization of online content has been cut dramatically to just $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 and you are not a tax payer, then you do not need to file a 1099-K.
Avoiding Hobby Classification
A hobby classification happens when the IRS decides that your company is not really a business--but it is a pastime. Certain content creators, particularly newcomers to this area of work, may consider it's a good thing. If this is a pastime you can't tax me, right?Absolutely no. In fact, it's detrimental for you as well as your earnings if you are taxed if the IRS categorizes your business as one of these.
State Sales Tax
The last thing you need to keep in mind when preparing for tax season is the state sales tax. This is particularly important for creators who are online since their products are sold worldwide.
Get a Professional in Tax Professional
While we can offer some suggestions and tips for you We aren't accountants. Encourages all of our web creators to seek out the assistance of a tax expert to gain an expert opinion on ways you can save money on taxes, stay clear of tax mistakes, and help make the process of tax-paying easier.