Happy Financial Literacy Month! April is dedicated to raising awareness about financial education and empowerment. All month long catch us covering essential topics like creator taxes, affiliate monetization strategies, and setting solid financial goals to help you scale your creator business and make strong financial decisions.
What’s Inside:
01 TLDR
02 Tax Forms03 Creator Tax Deductions
04 The Filing Process
05 Creator Tax Resources
The TLDR
You are required to report affiliate earnings or sponsored income on your tax return if it exceeds $400 in a calendar year. (Generally if you had positive net income—your income was higher than your expenses—you will pay taxes). Below we cover commonly asked questions, key terms and dates, and resources creators at every stage should be aware of when filing taxes.
Ultimately, tax regulations and laws vary by jurisdiction and can be complex, and individual circ*mstances may differ. Always seek the advice of a tax expert before making any decisions or taking actions related to your taxes.
Tax Forms Creators Receive
You’ll receive Form 1099-NEC from each partner that pays you $600 or more. Form 1099 includes all payments received between January 1st – December 31st, from the calendar year relevant to your tax submission. Payments include all affiliate earnings, manual credits, campaign fees, gifting or any other reimbursem*nts related to the delivery of your services. If you receive these forms, it’s a clear indication that you need to report that income on your tax return.
If you establish an affiliate relationship with MagicLinks, we are required by the IRS to report the earnings you make on our platform via Form 1099. If you have generated $600 or more in affiliate earnings or through campaign payments in one calendar year, you will receive Form 1099 from us.
Tax Forms Creators Use to File
Whether you’re a full-time creator or creating content is just a side gig, you’re considered a business. Part time and full-time creator typically file taxes using the following forms:
- Form 1040 (Individual Income Tax Return) – Form 1040 reports income, including wages from a full-time job, income from creating content, and any other income made through freelance or contract work. Creators may also report deductions, credits, and taxes withheld on this form.
- Schedule C (Profit or Loss from Business) Schedule C is an additional form that is used by self-employed individuals, sole proprietors, and single-member LLCs to report income and expenses from their business activities. On Schedule C, taxpayers report their business income, deduct allowable business expenses, calculate their net profit or loss from the business, and report that amount on Form 1040.
Tax Deductions for Content Creators
The IRS acknowledges that operating a successful business requires many essential expenses. Therefore, you can deduct the costs of goods and services associated with your business on the Schedule C form. Content creators can claim deductions for items such as gear and equipment, software, domain and hosting fees, and insurance. If an item, like a computer or mobile phone, serves both business and personal purposes, you’re only allowed to deduct the portion of the expense attributable to business use. If you operate your business from home and have a designated studio or office exclusively for business purposes, you may qualify to deduct a portion of your household expenses.
The Filing Process
- Year-Round Documentation
Throughout the year, content creators should organize their financial records. This includes:- 1099 Forms: Keep track of the partners or platforms you might receive Form 1099 from at the end of the year
- Income Records: Keep a detailed record of all income earned from these partners and platforms. This may include revenue from sponsored content, affiliate marketing, merchandise sales, and other sources.
- Expense Records: Keep track of all expenses related to content creation, such as equipment purchases, software subscriptions, internet and utility bills, travel expenses, advertising costs, and any other business-related expenditures.
- Form Selection:
1040 Tax Return: Most content creators will file Form 1040, the standard individual income tax return.
Schedule C (Profit or Loss From Business): If you’re self-employed as a sole proprietor, you’ll complete Schedule C to report your business income and expenses. This form is used to calculate your net profit or loss from your content creation activities. - Filing
The deadline for filing your tax return is typically April 15th of each year. If you need more time, you can request an extension using Form 4868.
What is a business entity and should creators consider becoming one?
As creators become more serious about building their business, they might consider establishing a business entity. A business entity is the formal structure that defines your role as a creator, how you operate, and how you handle your finances. Think of it as the foundation that supports your creative work and helps you manage the business side of things. Your business entity determines how you report your income and expenses for tax purposes, your legal liability, and how you’re viewed in the eyes of the government.
- Business Entities
- Sole Proprietorship
You’re in charge of everything. It’s a business owned and operated by one person—you—with no legal separation between you and the business. It’s the simplest way to run your own side hustle. You do not have to register as a sole proprietor.
Who might consider: A creator whose earnings are low to moderate income and doesn’t anticipate significant growth or expansion in the near future. Learn more here.
- Sole Proprietorship
- LLC
- An LLC is a business structure that content creators can use to protect their personal assets while operating creative ventures. It provides a layer of legal separation between the business and the owner, shielding personal assets such as savings, home, or car from business liabilities. You have to register with your state as an LLC and pay a yearly fee.
Who might consider: Creators with multiple revenue streams, such as sponsored content and merchandise sales, or creators with long-term growth plans, such as expanding their team, acquiring assets, or seeking investment.
- An LLC is a business structure that content creators can use to protect their personal assets while operating creative ventures. It provides a layer of legal separation between the business and the owner, shielding personal assets such as savings, home, or car from business liabilities. You have to register with your state as an LLC and pay a yearly fee.
- S-Corp
- An S Corporation is like a more advanced version of an LLC. It has similar liability protection, but it offers pass-through taxation, meaning that business profits and losses are passed through to the individual and reported on their personal tax returns.
Who might consider: A creator who generates significant income.
- An S Corporation is like a more advanced version of an LLC. It has similar liability protection, but it offers pass-through taxation, meaning that business profits and losses are passed through to the individual and reported on their personal tax returns.
Creator Tax Resources
- Creator Banking Solution – Creative Juice
- Accounting for Creators – Cookie Finance
- Creator Payment Solutions – Lumanu
- Creator Asset Insurance – Notch
