Preparing For Tax Season: Tips For Online Creators
As creators wrap up their last-minute holiday sales, tax season is waiting right around the corner. While most people will receive their W2s in the mail, online creators are often responsible for other forms come tax season, like 1099-Ks. Even if you don’t receive any tax forms in the mail, online creators are still responsible for reporting income from monetized content on their tax returns. While other e-commerce sites (like Etsy and Amazon) complicate the tax process with unnecessary fees, SamCart makes tax season more manageable, more accessible, and less stressful—leaving you more time to focus on your content.
Tax Season Insight: 1099-Ks
Let’s start with the basics: what are 1099-Ks? 1099-Ks are forms through the IRS that track credit and debit card transactions through third-party network payments. Third-party processors (like PayPal, for example) will report the transactions that their business processes. So if you’re a content creator who accepts payment through credit or debit, you’ll likely receive a 1099-K in the mail, as will the IRS. Since the IRS will receive every copy of your 1099-Ks, it’s essential to be transparent when filing taxes.
For those who may not know, gross payments are the sums of money you make before taxes and deductions. Until recently, many content creators didn’t have to worry about reporting their income—since the threshold for this qualifier was $20,000. However, starting in 2022, the gross payment for monetizing online content has been cut drastically 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 find yourself below the $600 threshold, you may not have to fill out a 1099-K.
Avoiding Hobby Classification
Hobby classification is when the IRS determines that your business is not really a business—but a hobby. Some content creators, especially those new to this line of work, might think this a good thing. If it’s just a hobby, I can’t be taxed, right?Absolutely not. In fact, it’s detrimental to you and your income if the IRS classifies your business as such. Running a hobby as a business by deducting business expenses or taking losses on your tax return may trigger an audit. As we mentioned above, a healthy habit to maintain is keeping track of the amount of money you’re making throughout the year. One surefire way to avoid hobby classification is proving you’ve returned a profit for three to five consecutive years. Through SamCart, we make this especially easy for our creators, as our fees are significantly less than our competitors.
State Sales Tax
One final thing to remember when preparing for tax season is state sales tax. This is especially important for online creators since your products are sold worldwide. An important term to understand in this process is the sales tax nexus. Simply put, you’ll have to pay taxes in whatever state you have a robust economic standing in or where your office is located (even if you work from home). Thankfully, SamCart makes this easy with our sales tax and VAT feature built into every SamCart account, making tax season much less daunting and more accessible to our clients.
Consult a Tax Professional
While we can offer some advice and helpful tips, we are not accountants. SamCart encourages all of our online creators to seek the help of a tax professional for expert insight into how to save more on taxes, avoid any tax oversights, and make the process of paying taxes easier for you.
Getting Through Tax Season With SamCart
We know tax season can be stressful, but it doesn’t have to be! SamCart’s e-commerce platform is built to help alleviate the administrative stressors creators might face when working to monetize. Sign up for your free trial today, and see how SamCart can help your online business grow.