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Although you may not get any tax forms in the mail, creators of online content are still responsible for reporting earnings from content that is monetized in their tax return. Although other online stores (like Etsy and Amazon) can make tax reporting more difficult by imposing unneeded fees, it makes tax season easier to manage easy, accessible and less stressful--leaving the time for you to concentrate on the content.
Tax Season Insight: 1099-Ks
Let's start with the basics. What exactly is a 1099-K? 1099-Ks is a form issued by the IRS that track credit and debit card transactions through third-party network transactions. The processors of third parties (like PayPal, for example) can report on transactions that their business processes. Therefore, if you're a creator that accepts payments via debit or credit card then you'll most likely get 1099-Ks in the mail and so will the IRS. Because the IRS will be receiving every one of the 1099-K, it's crucial to remain transparent in filing tax returns.
Gross Payments
If you don't realize, gross payment represent the amount of cash that you earn before tax and deductions. In the past, content creators did not have to declare their income--since the threshold for this qualification was $20,000. Beginning in 2022, the gross payment for the monetization of online content has been cut drastically 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 under the $600 mark and you are not a tax payer, then you do not need to fill out a 1099-K.
Eliminating Hobby Classification
Hobby classification is an instance wherein the IRS determines that your business isn't really a company, but it is a pastime. Some content creators, especially people who are new to this field of work, may consider that this is a great decision. If it's a simple hobby, I can't be taxed is it? No, absolutely not. In fact, it's detrimental to you and your income if you are taxed if the IRS classifies your business as such.
State Sales Tax
One final thing to remember in preparing for tax time is the state sales tax. This is crucial for online creators since your items are available worldwide.
Contact with a Tax Professional
Although we are able to offer suggestions and tips for you We aren't accountants. Encourages all of our web creators to seek out the assistance of a tax professional for professional advice on how to reduce taxes, prevent tax mistakes, and help simplify the process of tax-paying easier.