Patreon income is subject to self-employment tax in most cases.
Dear Tax Genius,
I have an anime podcast and earn money from it through Patreon. Patreon didn’t say anything to me about taxes, so do I have to pay taxes on my Patreon money?
- The Phantom Podcaster
Dear Phantom Podcaster,
Income from Patreon, Substack, and similar platforms qualifies as self-employment income and it can make taxes especially confusing, so here are three things you need to know about taxes on Patreon income:
One, your Patreon earnings are taxable income unless you’re a qualified nonprofit, so you should report all Patreon income on your tax returns.
Two, most Patreon members won’t get any tax forms. The company issues a 1099-K to report your earnings, but tax law doesn’t require that it send that form unless you received at least $20,000 (some states require sending the form starting at earnings of $600 or $1,000).
Three, you may have to pay self-employment tax if you made at least $400, since this type of income qualifies as self-employment income for tax purposes. Reporting self-employment tax can, quite frankly, be a pain, and require you to attach multiple forms to your federal tax return.
The information above also generally applies to any untaxed income you earn (“untaxed” meaning that income and payroll taxes weren’t already removed). So you are probably in the same boat if you earned income as a freelancer or contractor, like as a ride-share driver. Digital content creators are also affected, including someone who earns money from Substack, Twitch, Cameo, or other sites where you sell digital assets as a photographer, video creator, or visual artist.
(One notable exception is GoFundMe, where donations usually count as a “gift” and are affected by a gift tax that recipients don’t need to worry about — donors pay gift tax if they give more than a certain amount.)
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A 1099 form is used to report any income you received that didn’t already have income taxes withheld. Just about everyone with income needs to pay certain taxes — Social Security tax, Medicare tax, and personal income tax — based on how much income you had. Those taxes usually aren’t withheld unless you’re a regular employee on an employer’s payroll, but if you earned a certain amount, the person or company paying you is still required to tell the IRS how much they paid you. As a general rule, you could qualify to receive a 1099 if you completed a copy of Form W-9 for someone.
Learn more in our complete guide to 1099 forms.
In the case of Patreon members, your earnings are reported to you on a copy of Form 1099-K, but usually only if you earn at least $20,000 through Patreon. Some exceptions are that you’ll get a 1099 if you live in Maryland, Massachusetts, Vermont, or Virginia and earn at least $600, or if you live in Illinois and make at least $1,000.
Any time you get a 1099, it means the IRS has also received a copy. But even if the IRS doesn’t know about your income, you should include it when you file taxes. Reporting this income usually requires filing self-employment tax.
Self-employment income covers just about any money you earned that didn’t already have tax withheld. It applies to freelancer workers, independent contractors, self-employed people, and just about anyone else who gets paid for work they do. It doesn’t apply to income reported on a W-2.
To ensure you pay the necessary taxes, the IRS requires you to pay self-employment tax if you have at least $400 of net income from self-employment. The self-employment tax rate is 15.3% and it covers Social Security and Medicare taxes. Half of the tax is deductible, so you only end up paying 7.65%. This tax applies in addition to any personal income tax you may owe.
Paying self-employment tax can be a pain. And if you use a tax-filing software or online service, it probably means you’ll have to pay extra. Most tax-filing services require you to buy a more expensive package if you need to report any self-employment income, even if you don’t actually have to pay self-employment taxes. For example, one popular tax service requires that someone who could otherwise file for free must upgrade to a package that costs $120 (plus $50 per state return) if they have income on a 1099.
To save money on tax filing, consider one of this year’s best tax-filing services.
If you use a tax service to file, it will probably do most or all of the work for you, but it’s good to know what your final tax return should look like. Most taxpayers with self-employment tax will need to attach the following tax forms to their return:
Form 1040 Schedule C to determine your net profit from self-employment
Form 1040 Schedule SE to calculate your self-employment tax and your self-employment tax deduction (half of your self-employment tax is deductible)
Form 1040 Schedule 2 to report how much self-employment tax you owe
Form 1040 Schedule 1 to claim your your self-employment tax deduction
For more help, start with our guide to Form 1040.
Again, any online tax-filing service will help you fill out all the necessary forms, but you will likely have to pay extra since most services charge based on which tax forms you need to fill out and claiming self-employment income is usually included in the most expensive option. If you want more personal guidance on filing your personal income taxes, consider talking with a tax professional or hiring a tax preparer instead of using a digital service.
If you have significant self-employment income, you may have underpaid your income taxes for the year. The IRS can charge you a penalty if you underpaid federal taxes by at least $1,000 or if you paid less than 90% of your annual tax. There are two options for avoiding tax penalties: withhold more from another employer’s pay via Form W-4 or pay estimated taxes.
For workers with an employer who already withholds income taxes, you can adjust how much they withhold in order to cover your untaxed self-employment earnings. This is as simple as filling out Form W-4, which many employers now allow you to fill out online. Some companies require employees to fill out a paper W-4, but you can always update your W-4 for free and as often as you want. So if you have a side hustle or otherwise take part in the gig economy, this may be the easiest way to avoid owing the IRS any money come tax season.
For workers who don’t have an employer withholding income tax, you'll need to make quarterly estimated tax payments to ensure you cover your annual tax liability (the amount of tax you owe for the year). The process is generally simple but requires some math. You need to estimate how much you will make over the next three months and make a tax payment to the IRS based on that estimated income. You can calculate your tax and make your quarterly tax payments with Form 1040-ES. Learn more in our guide to estimated taxes.
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