Self-employment taxes essentially apply to people who work for themselves, such as freelancers, contractors, and yes, OnlyFans creators.
In this post, we will explain how self-employment taxes work, how and when you need to pay them, and most importantly, how you can reduce them.
Are You Self-Employed?
If you are generating income through OnlyFans, you are considered self-employed by the IRS. This means you are responsible for managing your own taxes.
Self-employment taxes cover Social Security and Medicare, ensuring you have access to these crucial benefits later in life. Think of it as an investment in your future self.
These are the same taxes that employees pay through their payroll deductions. Because self-employed people do not have an employer, they have to pay them on their own.
How Do You Pay Taxes as an OnlyFans Creator?
As a self-employed individual, you have to make estimated tax payments on a quarterly basis. These estimated taxes are periodic payments of income tax that self-employed people have to make to the IRS throughout the year.
They are based on your expected income and expenses for the current year, not the previous year. You have to pay estimated taxes if you expect to owe at least $1,000 in tax for the year.
However, it can be challenging to estimate your income and expenses accurately, especially if you are new to self-employment or have a fluctuating income. That is why it is important to consult a professional accountant who can help you with your estimated tax calculations and payments.
How Can You Reduce Self-Employment Taxes?
There are a few ways you can lower your tax bill as a self-employed individual, such as:
- Claiming all the deductions you are entitled to. You can deduct any expenses that are ordinary and necessary for your OnlyFans business, such as equipment, software, internet, phone, advertising, fees, supplies, travel, etc. These deductions will reduce your net earnings, and therefore your taxes.
- Contributing to a retirement plan. You can set up a solo 401(k), a SEP IRA, or a SIMPLE IRA and contribute a portion of your self-employment income to these plans. These contributions are deductible from your income, and they reduce your self-employment tax base. Plus, they help you save for your future.
- Forming an S corporation. This is a more complex and costly option; however, it can save you a lot of money in taxes. An S corporation is a type of business entity that allows you to split your income into two parts: salary and distributions. You only have to pay self-employment taxes on your salary, not on your distributions. However, you have to pay yourself a reasonable salary for the work you do, and you have to comply with the rules and regulations that govern S corporations.
Taxes Do Not Have to Be Scary
We know navigating taxes can be overwhelming. However, you do not have to do it alone. We can help you. At Quilca CPA Group, we understand the nuances of the OnlyFans world. We are not just number crunchers; we are your financial allies, here to guide you through the process.
Self-employment taxes are a significant cost for OnlyFans creators; however, they are not even remotely as scary as they look. With proper planning and guidance, you can reduce your self-employment tax burden and keep more of your hard-earned money.
That is where we come in. Our team of experienced accountants, who specialize in helping self-employed people like you, can help you with:
- Preparing and filing your tax return
- Calculating and paying your estimated taxes
- Maximizing your deductions and minimizing your tax liability
- Resolving any tax issues or disputes with the IRS
- Planning and strategizing for your future tax goals
Call us at (786) 310-5582 or email us at [email protected] to schedule an initial consultation and learn more about our services.
