Are you confused about how YouTube and taxes work?
Vlogging or video blogging has taken off more than the written blog today. Millions of vloggers or Youtubers make a living or at least supplement their income making videos.
Thinking outside the box is one of the best, and for some, the only way to make money during these trying times.
If this sounds like you – congratulations. You’ve found a way to make money and probably help others (videos are so helpful). But before you go spending that cold, hard cash, understand YouTube taxes and how to pay them.
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YouTube Taxes – Do you Have to Pay Them?
The short answer is ‘yes,’ YouTubers pay taxes. But it’s more complicated than that.
You won’t receive a W-2, complete a 1040, and be done. YouTubers are self-employed, so they pay self-employment taxes.
What does that look like?
First, you pay income taxes like everyone else. Next, you pay self-employment tax which covers the Medicare and Social Security taxes normally covered by an employer. As a YouTuber, you are the employer.
The good news is, you’re likely eligible for tax write-offs for YouTubers. More on that below, for now, let’s focus on how YouTube taxes work.
How do YouTube Taxes Work?
YouTube doesn’t take taxes out of your income. You are responsible.
Use these steps to make sure you file your taxes correctly:
Step 1: Choose your business type
Most YouTubers operate as a sole proprietor, but you may operate as an LLC or partnership. Consult your financial advisor to choose what’s best for you.
Step 2: Track your income and expenses
Skip the shoebox method, you want everything together at tax time. Keep all receipts and proof of income. Use an app or software, like FreshBooks to keep you organized.
Step 3: Make your estimated quarterly tax payments
Don’t wait until tax time to pay your taxes. Not only will you get hit with a large tax bill, you may pay penalties for not ‘paying as you go.’
Every April 15, June 15, September 15, and December 15 pay your estimated taxes. If you aren’t sure what you owe, use IRS Form 1040-ES.
Step 4: Don’t forget your YouTube tax deductions
Fortunately, YouTubers are business owners and can deduct certain expenses. Keep every receipt – you never know what may be eligible for a write-off.
Remember: Keep track of your expenses and income on a spreadsheet or bookkeeping program such as FreshBooks.
5 Common Tax Deductions for YouTubers – Don’t Miss Them
This is the most important (and fun) part of your taxes. There are many YouTube tax deductions that you don’t want to miss.
- Equipment: You’ll need to depreciate your equipment (take a prorated deduction for a specified period), but a write-off is a write-off. Take it.
- Marketing costs: If you pay someone to market your business or you pay for advertising spots, it’s a valid expense.
- Home office: Do you use part of your home EXCLUSIVELY for your YouTube business? You may write off the appropriate portion of your mortgage interest, rea estate taxes, and utility costs.
- Mileage: If you drive for your videos, record the mileage. You can take the standard mileage deduction or record actual expenses. The standard mileage deduction is much easier.
- Software and programs: Any software or programs you buy to make your videos, publish, or edit them is a tax write-off.
Other Common YouTube Tax Deductions
Here are a few more commonly missed YouTube tax deductions that are often overlooked:
- Internet costs
- Subscription Fees (TubeBuddy, VIDIQ, Morning Fame, Canva, Adobe, Dropbox, etc.)
- Fiverr
- Computer
- Tablet
- Research outline tools
- Educational resources (books, YouTube courses, conferences)
- Travel Expenses
- Phone costs
- SEO service fees
- Data storage fees
- Any professional services (consultation)
- Website domain and hosting fees (if you own a website)
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How to Tell if You Need to Pay Taxes as a YouTuber
So how do you know if you need to pay taxes if you have a YouTube channel? Here’s an example.
John runs a YouTube channel for his RC habit. He loves showing off his new cars and tricks. He doesn’t monetize his channel – he just does it for fun. John doesn’t make any money on it, or advertise it anywhere. John doesn’t have to pay taxes on his channel.
Here’s another example:
Jason runs a YouTube channel as an influencer for RC brands. He advertises the latest models, and provides a link where viewers can buy what he’s promoting. If they do, Jason makes a small commission on it. Jason also earns money from other advertising efforts on his YouTube channel. Jason must claim all income earned on YouTube on his tax returns.
Frequently Asked Questions
Now that you understand the basics, let’s go through a few of the most common questions asked.
How to file taxes on YouTube income?
You should receive Form 1099-NEC from any company that pays you more than $600 for the year. Claim this income on Schedule C of your tax return.
How to pay taxes on YouTube income?
If you pay taxes on your YouTube income quarterly, complete Form 1040-ES and send your estimated payments in. At tax time, you’ll record those payments, and figure out if you overpaid or underpaid for the year, much like you would if you had a W-2 position.
How does quarterly income taxes work for a YouTuber?
Paying quarterly taxes avoids the tax penalty for not paying your taxes on time. The United States is on a ‘pay as you go’ system, so if you don’t pay each quarter, you’ll pay a penalty. You can file your estimated payment online or mail them into the IRS.
Does YouTube send me a 1099?
Yes, YouTube as well as any other companies you advertise for who paid you more than $600 will send you and the IRS a 1099-NEC.
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7 Easy YouTuber Tax Tips to Remember
- All deductions must be related (and ordinary) for a YouTube business
- You must claim all income, even if you didn’t receive a 1099
- Keep careful track of your expenses or you can’t claim them
- Keep a separate bank account for business income, business expenses, and business taxes
- Set aside 20% – 30% of each payment for taxes
- Make your quarterly tax payments
- Work with a professional to make sure you get all YouTube tax deductions
Remember: Keep track of your expenses and income on a spreadsheet or bookkeeping program such as FreshBooks.
Pay your YouTube Taxes on Time
Don’t be caught by surprise at the amount of YouTube taxes you owe. Do the work all year round, saving for taxes, keeping track of your income, and expenses so you get the most YouTube tax deductions possible.
I hope this article helped you gain some control of your tax plan this year. Remember not to stress out. Don’t forget to check out Tax Forms page for any additional online tax checklists and forms you may need this year.
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Get started on your taxes early here!
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