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Although you may not get any tax forms in the mail, creators of online content must still report the income earned from their monetized content on their tax returns. Although other online stores (like Etsy and Amazon) complicate the tax process with excessive fees, they make tax time more manageable easier to access, less difficult, and less stressful--leaving you more time to focus 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 they process for their businesses. So if you're a content creator who accepts payment through debit or credit cards, you'll likely receive an e-mail with a 1099-K, as will the IRS. Because the IRS will have access to every single copy of the 1099-K, it's crucial to remain transparent in filing tax returns.
Gross Payments
For those who may not realize, gross payment are the sums of money that you receive before taxes and deductions. Until recently, many content creators did not have to worry about reporting their earnings, as the limit for this qualifier was $20,000. However, starting in 2022 the maximum gross amount for monetizing online content will be reduced 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 under the $600 mark, you may not have complete a form 1099-K.
Eliminating Hobby Classification
Hobby classification is when the IRS decides that your company isn't really a company, but it is a pastime. Certain content creators, particularly newcomers to this area of work, may consider this a good idea. If it's just a hobby and I don't have to pay taxes surely? Absolutely certainly not. It's actually 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 while preparing for tax season is state sales tax. This is especially important for creators who are online since their items are available worldwide.
Contact with a Tax Professional
While we can offer some useful tips and advice We aren't accountants. Encourages all of our web creators to seek help from a tax expert for professional advice on how you can save money on taxes, avoid any tax omissions and simplify the process of tax-paying easier.