In the US, streamers are obligated to pay twitch taxes on their income. In order to do this easily and efficiently, it is required that you keep accurate records of your streaming activity.
Streamers are often asked about their taxes, but it’s not an easy question to answer. What is the tax rate for streamers? How do I pay my twitch taxes? All of these questions can be answered with a qualified accountant.
Some streamers choose to use twitch TurboTax, but it does not handle twitch streaming income. Only income through twitch affiliate/Turbo subscription programs affect your twitch taxes. Without proper documentation.
How to Pay Your Twitch Taxes in the Most Efficient Way
When you start making money of your twitch stream, it’s time to start thinking about your twitch taxes.
If you’ve been streaming long enough and have seen steady growth in your viewership, you should be earning enough money to trigger twitch’s affiliate program.
If you are an twitch affiliate, this means that twitch will begin paying you 50% of your subscription fees for users who subscribe to your twitch channel using their twitch turbo service.
This also triggers the requirement for twitch TurboTax in order to help streamers pay their twitch taxes accurately.
How i can fill 1099 twitch form
A Form 1099 is a reporting form that the IRS uses to collect tax data on yearly compensation. If you received any of the following kinds of income in the year, you will receive a 1099 form in the mail.
You are required to pay income tax on all twitch TurboTax subscribers who have paid using twitch turbo service, even if you did not receive the twitch TurboTax directly.
- If you earned more than $600 in the US, the IRS’s threshold for issuing 1099s, you should receive one if you live there.
- PayPal issues its own 1099s for all contributions.
- Stripe sends out its own 1099s for any credit card contributions.
When is the deadline for filing a tax return for my Twitch earnings?
The IRS will begin accepting e-1099’s on January 2nd, 2022. You must post your e-1099’s by January 31st to be considered for this tax year.
What happens if you don’t pay your twitch taxes?
Even if you miss it by a single day, failing to submit an income tax return and paying an outstanding balance on time will result in fines plus accrued interest. Amazon submits all of its payments to the IRS, who will examine all of the submitted papers.
If their payment does not match the balance that they owe, there will be penalties and fines too.
What if you didn’t receive a form 1099 but were paid anyway?
Many individuals believe that if they earn less than $600, they don’t have to submit a 1099 form. This isn’t correct; failing to submit one may result in penalties.
You are not required to obtain a 1099 form from Amazon. Even if your earnings were under $600, they are taxable and sent to the IRS.
And there’s a difference between hobby and career.
How to Differentiate Between a Hobby and a Career
If you’re considering whether twitch streaming is a hobby or a career, the answer might sound like it’s in the eyes of the beholder.
There are two common ways to make money off twitch: twitch donations and twitch subscriptions. One allows members to donate money directly to streamers (twitch donations), while another requires them to pay for twitch TurboTax, twitch Prime or twitch turbo (twitch subscriptions).
Any of these incomes are taxable and should be reported on form 1040.
The IRS has a list of criteria that can determine whether or not a pastime is truly a business. They are as follows:
- If you run your channel like a business and keep track of your paperwork and books, see streaming as a job, not a pastime.
- A company is defined as “an organization that sells or distributes a product for money.” Spending time and energy into streaming in the hope of making money would be considered a business.
- You’re running a business if your stream funds your living or pays your bills.
- If you suffer losses that are beyond your control or common for streaming, it’s a company.
- Changing the way you stream or improving your features in order to be more profitable falls into the category of business activity.
The IRS will consider the following factors as well:
- Whether you made a profit in a similar project in the past.
- How much money you make every year.
- This would be the sum of your monthly income adjusted for inflation.
If the majority of these statements tilted one way or the other on your stream-watching attitude, you’ll know where you stand and how to pay taxes accordingly.
Twitch Taxes for Hobby Streamers
Any money earned through hobbies is taxable and must be recorded on line 21 of Form 1040 (other taxable earnings). If you made over $600, Twitch should send you a 1099.
In 2018, the ability to claim hobbies-related expenses was terminated, meaning hobby earnings could not be subtracted.
Hobbies are not subject to self-employment taxes, and they are only taxed at a personal income rate.
How To Make Twitch Tax Time Easier
It’s not unusual to be confused by the calculation. The good news is that if you’re looking to expand your business from home, there are programs available that can help you do so more effectively.
Using a program like Quickbooks to keep track of your stream revenue and expenditures throughout the year will be beneficial. It makes it easy to invoice people for your services, and they provide assistance if you have questions.
You’ll have everything you spent money on during the year documented, so when it’s time to file your taxes, you’ll know exactly where everything went. Then, when it comes to tax season, you’ll have all of your expenditures and deductions itemized so that preparing your taxes is easier.
You may also show an online accountant your clean paperwork, making it easier to complete your twitch taxes.
How Federal Taxes will affect the Career of Streamers
A streamer would be required to pay self-employment tax and income tax. The IRS considers a 15.3 percent self-employment tax as standard. According to the IRS, money is transferred to the “company” for which the streamer acts as a “work” (even though it’s usually them).
When a company pays a streamer, they are required to pay both the employer and employee Social Security and Medicare taxes. Social security is 6.2 percent on each dollar, while Medicare tax is 2.9% on each dollar. When you add it all up, social security comes to 12.4% and Medicare tax to 2.9%.
The streamer’s income for the year, less any legitimate taxes and expenditures, would be taxable.
Income tax is not calculated based on a set percentage of income, as self-employment tax is. Income taxation is instead determined by the amount of money that a person makes. This is done using a table
How Do I Calculate Federal Tax on Streamers?
There are a couple of things to consider.
To begin, all of your deductions and other costs must be deducted from your total earnings before you can calculate taxable income. To compute taxable income, you’ll need to fill out the Schedule SE. You’ll also need a copy of Schedule C for this process to work properly.
Second, this is a stair-step approach. simply because you made taxable earnings of say $100,000 does not imply that your overall tax rate on everything would be 24% (if you’re filing as a single). The first $9,875 is still taxed at 10%, the profits between $9875 and $40125 are taxed at
Income tax brackets are updated yearly, so don’t rely on this year’s figures for next year. (I think that adjusting for inflation is a good idea.) You’ll use the following table to prepare your taxes for 2021 in 2022:
|Tax Rates||Single||Married Filing Jointly||Head of Household|
|12%||$9,876-$40,125||$19,751 – $80,250||$14,101 – $53,700|
|22%||$40,126-$85,525||$80,251 – $171,050||$53,701 – $85,500|
|24%||$85,526 – $163,300||$171,051 – $326,600||$85,501 – $163,300|
|32%||$163,301 – $207,350||$326,601 – $414,700||$163,301 – $207,350|
|35%||$207,351 – $518,400||$414,701 – $622,050||$207,351 – $518,400|
State Taxes For Streamers
Every state has a similar income tax table. Only if you are itemizing deductions can you take deductions from your state taxes.
What Deductions Can Professional Streamers Take?
You may be able to deduct (at the absolute least) purchases and services if you’re streaming for a profession. The following are examples of claimed costs:
#1: Rent/Mortgage Payments
Even if part of a house payment or rent is attributed to business costs, there may be a room dedicated specifically to streaming or editing.
#2: Internet and Program Use
A partial deduction for business costs that may be used for personal purposes is permitted by the IRS.
As most streamers operate from their homes, the internet is frequently used for non-streaming activities. As a result, only a fraction of the overall internet bill would be deductible. In this situation, the content provider must estimate the percentage of his or her time spent streaming or performing personal tasks online.
The streaming proportion is deductible. This is true for all of the equipment and expenses that may be present.
#3: Streaming Equipment
The majority of the equipment needed for streaming may be deducted. Any equipment that is used solely to operate a company is deductible. This includes cameras, microphones, computers, desks, or any other piece of equipment as long as it is only utilized for streaming activities.
However, any improvements to equipment are deductible, and it is critical to note that any equipment sold must be recorded as income. There’s also a standard deduction or itemized deductions.
For example, let’s say that you purchased a new computer for $1000 in 2021 which was used exclusively for streaming or business purposes. You can deduct $500 in the upcoming year because you used this item for 50% of your business activities.
#4: Charitable Donations
You may now deduct up to $300 in donations from your taxable income as of 2021. All of your charity expenses above the threshold may be claimed if you track how much you spend. This is fantastic news for channels who frequently offer charity streams.
#5: Commissioned Work
If you purchase any commissioned work, then it is deductible whether or not you sell the item. Any expenses related to selling this type of art are also deductible. This includes the cost of advertising and trade shows, as well as commissions.
Unfortunately, there’s no straightforward answer here because every person’s situation is different. Every person’s tax position has to be taken into consideration when deciding whether or not a deduction is worthwhile.
It’s also possible to subtract any payments made to others in order to enhance the quality or editing of a stream. (Remember to pay relevant payroll and income taxes.) Any employer levies may also be subtracted.
Employment and Income Taxes
Employers must also withhold federal taxes, including the employee and income taxes. These taxes are due on a quarterly basis. On the other side, employers should exercise caution since the IRS is notorious for adding interest and penalties to tax bills, as well as any extra money.
You must pay quarterly installments on a 1040-es if you’re due for your tax return by April 15. If you earn more than $1,000 in federal income taxes each year, you must make estimated payments.
What are the different forms that Twitch taxes may be filed on?
Following documents will be submitted or utilized during the payment of Twitch taxes:
- 1099 – If you have made more than $600 from the platform, Twitch or another payer of royalties will send you a 1099-K. They will also provide the IRS with these amounts.
- 1040 – normal tax return statement.
- 1040 SE – Pay estimated taxes on a quarterly basis, as required by law.
- Schedule SE – Self employment tax.
- Schedule C – profit or loss from business (has business expenses and income)
If you found it complicated Feel free to join our community and ask whatever you want.
#Quick Case Studies
The case studies (for Federal taxes) that we’ve used as an example for you:
Michelle the Career Streamer
Michelle prefers to play old games while being deadpan. She has been streaming for years and has made it a career. She earned $68,200 in 2019.
She’s been saving money since the beginning of the year by previously paying her editor $4,000 throughout the course of the year. She also paid for a Stream Deck replacement of $250 and split her expenses to account for her home business. Overall, she has made a profit of $19,750.
Her taxable income is calculated as follows: She deducts the $19,750 she received from the $68,200 she was awarded, resulting in a taxable revenue of $48,450 (note: she may be able to take other deductions, such as the basic exemption of $12,000; however for simplicity’s sake we will omit them
She’ll need to pay 10% tax on the first $9,875 (or $987.50). She will need to pay 12% tax for the difference of $30,250 (or $3,630)
If you don’t pay your twitch taxes, the IRS will come knocking.
Whether it’s a hobby or a career, there are certain things streamers need to keep track of and file with their tax return if they want everything to be accurate come filing season next year.
Contact us today and let’s talk about how we can make this process easier for you!