The rise of social media has opened up interesting questions in how income earned through YouTube gets reported. A few questions that come to mind are:
- Do these earnings count as reportable income?
- Most importantly, do YouTuber’s have to pay taxes on this income?
- What is the tax filing process like?
This article will take a closer look at whether or not YouTubers pay taxes on the money that they earn through their videos.
Ways YouTubers Make Money
In order to know if YouTubers pay taxes, it’s important to know in what ways they are earning money.
According to the most recent information, the most common ways that YouTubers make money are the following.
This is the most common method of earning income for YouTubers. YouTubers profit off of the ads that play before their videos and earn roughly $18 per 1,000 views ($.01-$.03 per view) that their video gets. This number varies depending on how many people actually click on the ad.
It’s worth noting that in order to get paid from YouTube, you need to reach a minimum $100 balance (approximately 20,000 views). YouTube (owned by Google) also keeps 45% of all Adsense revenue and 55% is paid out to creators.
Affiliate marketing is a way for a marketer to earn income by refering products to their audience. YouTubers will do this by giving out links for purchasing products. If the link is used for a purchase, the YouTuber will get a commission on that. This is usually between 5%-20% of the sales price.
This is when brands pay YouTubers to promote their product in a video. The payments can vary widely. This can also involve much upfront before ever receiving your first paycheck.
YouTuber Tax Requirements
Whether YouTubers pay taxes depends on how much they have earned and how they have earned it.
YouTube treats monetized content creators as independent contractors (meaning that they’re self-employed and not employees of YouTube/Google).
- Self-employment tax – This tax is paid by people who work for themselves and don’t have employers withholding taxes year-round. This tax is 15.3% overall and mainly to compensate for Social Security and Medicare (12.4% for Social Security + 2.9% for Medicare).
Self-employment tax must be paid if you earn more than $400 net earnings from being self-employed. These can be paid quarterly or in a lump sum payment.
- Income tax – Standard income taxes are required to be paid on income from YouTube.
When filing these taxes, there are several different ways that a YouTuber can choose to structure their income.
- As an individual – This means that they file and report their earnings as a sole proprietor.
- As a business entity – If they choose, a YouTuber could set up a corporation of some kind and report their earnings as business income.
Even if the bulk of their earnings come from affiliate marketing, YouTubers are still considered independent contractors. Similarly to adsense revenue, YouTubers have the option to report this income as either a Sole Proprietor or a business entity (LLC, S-Corp, etc.)
To read more on paying taxes on affiliate income, click here.
When it comes to YouTubers partnering with brands, form 1099-MISC is used for brands that pay them $600 or more. This is generally a form that brands will create and send to the YouTuber. Even if a form is not sent, YouTubers are responsible for reporting projects under $600 on their tax return.
Brand deals can get a little tricky when it comes to filing state taxes because YouTubers will most likely live in one state but get paid by a company who resides in another state. If you have more questions on this, check out this Taxslayer article.
Lower Income Amounts
Overall, you’re technically required to report any income that you earn over $400. This means that it’s not just the Logan Paul’s who are earning millions of dollars that need to report their earnings. Even if you earn anything over $400 on YouTube, you are required to report it.
In conclusion, YouTubers can get paid in various ways. Yes, YouTubers are required to pay taxes on their income, even as it may be earned through these different ways.
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