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As millions of people now have a presence on the internet and receive income for that presence, it is increasingly important for them to enlist the services of a CPA or tax preparer that understands taxes for internet content providers. Failure to document income and expenses through official channels in a timely manner could result in serious consequences for internet content providers of any size.
What Is an Internet Content Provider?
Internet content providers are considered to be people or entities that provide content for the internet to generally either:
- Help generate ad revenue for a specific content providing platform that they then get a percentage of revenue from
- Establish subscription services that the content providing platform then gives them a percentage of revenue
Taxes for Internet Content Providers
Some internet content providers have the potential to make a lot of money on various platforms. For example, a person may be providing content regarding clothes such as taking pictures in clothes from certain designers. The clothing manufacturer may then figure out how many sales are attributable to a content provider’s website and then will pay the content provider money for that service. Depending on the rate of success, this could result in potentially significant income for an internet content provider.
Many of these people tend not to be traditional businesspeople who are intimately familiar with accounting and tax compliance. This is a mistake. Payments to an internet content provider are considered income and are taxable. In other words, it requires that these individuals keep detailed records of expenses and that they file annual tax returns. Failing to do so can create significant headaches and potentially serious consequences that could yield adverse effects for the individual themselves as well as their occupation as an internet content provider.
What Internet Content Providers Need to Know About Their Taxes
With the rise of a growing population of internet content providers, the Internal Revenue Service is taking notice. To ensure that these individuals do not fly under the radar and are not exempt from tax regulation, they are developing standards for auditing these individuals and platforms. Currently, the IRS is sending out 1099 forms to content providers to gather accurate information. Platforms and content providers are expected to comply with the criteria set forth by the IRS, such as:
- Filing tax returns in a timely manner
- Paying the appropriate amount of taxes
A Real World Example of Tax Issues for Internet Content Providers
Recently, OnlyFans creators were contacted by IRS criminal investigators. This platform is said to have a lot of different things, but much of their revenue comes from thousands and thousands of adult actors or content providers who have subscribers. As a result, the platform is making an impressive amount of money, which has attracted the attention of the Internal Revenue Service, which is now resulting in investigations and subpoenas for some of the top earning content providers.
The people being subpoenaed are then faced with having to figure out what to do. In general, some of the actions these individuals should consider taking are:
- Enlisting the help of a reputable and experienced lawyer. Criminal investigations typically require legal representation, especially when it comes to the protection of fifth and sixth amendment rights. Ultimately, they will most likely end up having to share at least some bank account information and tax return documentation. Even if the person had a CPA handle the tax returns, that information may still end up being scrutinized.
- Including all their income in documentation. This can require extensive legwork to gather all the information pertaining to the income an internet content provider has received.
- Filing tax returns. Ideally, the content provider should have already filed a tax return. However, if they haven’t, they will need a professional’s guidance on when to do so and how to handle it. If the tax returns are incorrect, they may need amending and professionals can provide guidance on how to do this.
While these actions can be helpful for those on the OnlyFans platform, they may also be useful for any internet content provider.
The above includes good warnings to those who are internet content providers. The IRS is getting more sophisticated about recognizing this population of earners and the income they are bringing in. The government agency is taking active steps to ensure that these individuals are documenting their income and tax returns in a proper way.
This can look like keeping track of the money a person earns and the expenses they incur as a result of providing internet content. Their income and expenses must be accounted for and in the right way. This is true for content providers of any size.
Internet content providers need to have professionals that know how to prepare tax returns, comply with tax laws, and protect them from adverse tax or legal consequences from their otherwise legitimate business.
If you are an internet content provider and have questions about documenting your income with the Internal Revenue Service or filing tax returns, it can be a good idea to reach out to both an attorney and professional tax preparer today.
- Episode 302: Taxes for Internet Content Providers - February 20, 2023
- Episode 301: Subpoena of Tax Records - February 20, 2023
- Episode 207: Real Estate Personal Experience - December 17, 2022
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