While keeping people entertained and getting views are a top priority for online video creators, another responsibility that’s sometimes overlooked is that if they’re making money, they have to give some of it to Uncle Sam. Yes, since YouTube creators make a living off of reviewing the latest viral videos or singing in their bedrooms, among other things, they are pretty much small businesses, and small businesses pay taxes.
For the YouTube creator who makes money producing videos, it’s daunting to go through the piles of paperwork wondering whether or not that trip to Las Vegas was a business expense. To help ease your tax filing burden, here are NMR’s five tax tips online video creators should consider.
1. Treat Your Passion Like A Business
One big rookie mistake for online video creators is that they don’t treat their passion like a business, says Rick Norris, a Los Angeles-based CPA specializing in the entertainment industry. He says, “The IRS looks dimly at people who do this because it can be considered a hobby” and recommends that they seek professional help in ensuring that they make it into a full-fledged business and pay the right amount of taxes.
2. Know The Difference Between Being An Employee and An Independent Contractor
If you have an agreement with another company to produce YouTube videos, make sure to know whether you’re an employee or an independent contractor. Norris said that being an employee has benefits such as the employer paying their portion of Medicare and FICA taxes, but being an independent contractor means they have to pay twice as many taxes on their Medicare and FICA. Check with your state’s laws to determine whether your YouTube work makes you an employee or an independent contractor.
3. Keep Track of Your Expenses
Of course the most important thing about running an online video business is keeping track of your expenses. David Rogers of Actors Tax Prep in Burbank, California said that keeping good records should be something that content creators must do.
“If you’re ever audited, you have to have [good records]. Second, if you don’t keep records and do it on a regular basis, you’re just going to miss taking a lot of good deductions that otherwise you would be able to take.”
Those receipts you have from that business dinner you had with a studio or those receipts from filming that destination episode will determine whether you pay more or less taxes. Using software such as Quickbooks to keep track of your income and expenses definitely helps. You will definitely need your stuff together when you go to your accountant to figure out your tax liabilities before April 15.