Are you a small creator, who just received their first payout from Twitch or YouTube, and you aren’t sure what to do? Do you spend it on new lights, or perhaps that new camera you’ve been looking at? Maybe you’ll take your friends out for dinner to thank them for their support.
Did you put any aside for taxes?
One of the common mistakes made by new creators is to spend their first cheques cut for them from their various companies, spending it as quickly as it comes in. Then, come tax season, they find themselves owing, and sometimes it’s no small expense either! So, how do you keep track of your taxes, and are there any ways to reduce that daunting number?
Let’s start with the first question, how do you figure out your taxes? Your calculations will vary country to county, and then often regionally within that country as well. In Canada, for example, you will have to pay Federal and Provincial income taxes on that (assuming you haven’t incorporated). There are tons of great tools to calculate the rough amount (though talking to an accountant is always a better way to ensure accuracy). A tool many have found useful in the past here in Canada is this income Tax Calculator, which has a fairly detailed breakdown of taxes you may have to pay. As mentioned, you can talk to an accountant, and have them handle your bookkeeping, though this will come with an additional cost.
Next, the big one of “how do I reduce those costs?” Well, the simple answer is having expenses. As a content creator, especially a full time creator, you are going to have expenses. Internet, home rent, new equipment, your accountant, any other services you pay for. A full list to think over can be found on our blog here. Documenting these expenses and declaring them on your taxes is going to reduce the amount of money you owe to the government at the end of the year.
The easiest way to keep track of it all is to use an expense tracker (or more formally, bookkeeping software) to keep an eye on everything as it comes and goes. Many look to use free software such as WaveApp, or Google Sheets, but there are other options. We have a whole blog on that here.One of our staff does some content creation, and when talking to him he said he spends an hour a month to organize and figure out his finances, so that he always has a record of it. At the end of the year, he takes that to his accountant, with a neat set of transactions lined up to show what he has spent money on, where it has gone and come from, and where he got the money for it. Means at the end of the year everything is sorted nice and easy, and his process is painless.
So, creators, if you are making money from your art, first, congratulations, and second, remember to track your expenses.