June 19, 2024

OnlyFans Taxes Explained – Lexology

OnlyFans Taxes Explained – Lexology

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If you’re a content creator on OnlyFans, you may seek ways to earn a quick buck. But before making money on the platform, you must understand OnlyFans taxes.

The IRS has recently started contacting OnlyFans content creators regarding potential criminal investigations.

In this blog post, we’ll dive into the world of OnlyFans taxes to help you understand what you need to know to stay on the right side of the law.

OnlyFans Tax Rules

OnlyFans is strict regarding tax compliance, and as a creator on the platform, you must agree to maintain full tax compliance.

If you end up facing a tax issue, it’s your responsibility to notify OnlyFans within 7 days.

Not only do you have to inform the platform of the problem, but you also need to explain the steps you’re taking to remedy it and how to prevent it from happening again.

Given this, it’s always a good idea for creators to consider consulting with a tax lawyer to help understand their responsibilities, ensure that they comply with tax laws, and avoid any potential issues.

OnlyFans Tax Forms

OnlyFans content creators can expect to receive one or more 1099 forms at the end of a tax year.

The most common form creators will receive if they earn more than $600 a year is the 1099 NEC, also known as the non-employee compensation form.

If the creator only receives OnlyFans income, this may be the only tax form they receive.

However, if the creator accepts payment through other channels such as Venmo, PayPal, Cash App, or Zelle, they may also receive a 1099-K at the end of the year. This form reports gross payment card and third-party network transactions.

OnlyFans creators need to understand the different tax forms they may receive at the end of a tax year.

Knowing which forms to expect and what they are can help you be prepared and file your Onlyfans taxes correctly.

Hobby vs. Business Income

At the end of the year, when OnlyFans content creators receive a 1099 form, they may need help with what to do with it.

The IRS typically splits income into hobby or business income, and the distinction between these two is crucial as it determines whether expenses can be deducted.

If you classify the income as a hobby, you cannot deduct expenses, and you must report the income as other income on the 1040 form.

On the other hand, if it is considered business income, it will be reported on a Schedule C.

The creator must list their gross income and any related expenses or deductions. This calculation will give the creator their net income, which they must pay taxes on, including self-employment taxes.

Content creators may be able to deduct expenses incurred in the production of the income, such as:

  • Cameras
  • Microphones
  • Lighting
  • Clothing specific to work

However, the IRS will consider whether these expenses are ordinary and necessary for the production of income.

The IRS has guidelines to determine whether the income is hobby income or business income, including factors such as:

  • Actively seeking to make the venture profitable
  • Tracking income and expenses
  • A prior history of money-making ventures

The IRS also considers whether the venture has been profitable in the last 3 out of 5 years.

Determining whether you consider your OnlyFans income as a hobby or a business is important, as it will impact your tax obligations and deductions.

Stay Compliant With the IRS

Being a content creator on OnlyFans can be a lucrative opportunity, but it comes with its tax implications.

Creators need to understand the different forms they might receive at the end of the year, such as the 1099 NEC or 1099K, and the difference between a hobby and business income.

Creators must consult a tax attorney to determine the correct tax classification and understand their tax obligations, including self-employment taxes.

Failure to comply with tax regulations can result in IRS penalties.

Ultimately, being a successful OnlyFans creator involves more than just creating content but also staying informed and compliant with Onlyfans taxes.