"@bonsaiinc is probably my all time favorite freelance tool. hands down. the team is super responsive and accessible when i have questions."
David Urbinati
Motion design / animation
How To File Your Twitch 1099 Taxes (Step-By-Step Walkthrough)
8
Min Read
By January 31, Amazon (the owner of the interactive live streaming service) will send you a Twitch 1099 who made income on the platform in the last year. Taxes are a complicated subject, but in this guide, we'll have an expert walk you through, step-by-step, what you need to do to properly file your Twitch taxes.
We'll go over the forms you'll receive as a Twitch streamer, the taxes you'll be responsible for, tips for tax deductions you can take advantage of, and more. Without further ado, let's dive in.
First, let's go over the taxes you'll owe.
Note: If you want an easy way to handle your Twitch taxes, try Bonsai Tax. Our app automatically scans your bank account/ credit card statements to discover tax write-offs you can take advantage. In fact, the majority of our users save $5,600 from their tax bill. Claim your 14-day free trial today.
Paying Self-Employment Taxes On Twitch Earnings
If you are earning money as a Twitch streamer, the IRS considered you to be self-employed. The payments made to you from your audience are taxable. The self-employment tax rate is comprised of Social Security (12.4%) and Medicare Taxes (2.9%). So, you'll owe the IRS 15.3% of the revenue you generate as a streamer.
The only time you would not be responsible for self-employment taxes is if you made less than $400 streaming. If you earned less than $400 in streaming income, your payment is not subject to self-employed taxes. You will still need to file income taxes, however. Whether you classify your income as royalties or self-employed non-employee compensation, you'll need to report all your income.
In order to quickly calculate your self-employment taxes, try Bonsais' free tax calculator for 1099 income.
Normally, a person who is a non-U.S. resident is not subject to U.S. income taxes. However, income received by foreign creators on Twitch is subject to U.S income taxes.
Hobby or Business?
The IRS has different reporting requirements for folks who stream as a "hobby" and not a business.
If your activity fits the classification of a hobby, the income will be subject to income tax, but not to self-employment tax (which is an additional 15.3%). You must instead declare any income earned from it on Schedule 1, line 8, "Other Income," of your personal tax return, Form 1040.
Here is the list of IRS qualifications for a hobby versus a business for your earnings.
Differences Between a Business And A Hobby
- If you run your channel like a business and keep track of your records and books, you are a business.
- Putting time and energy into streaming in an attempt to make it profitable would classify it as a business.
- If you rely on the income of your stream to live or pay bills, you'll be deemed a business
- If you are constantly tinkering or upgrading features to monetize your stream to be more profitable, you are a business.
- If you have business expenses or lose money due to circumstances out of your control, it is a business.
The IRS will also consider other factors such as how much income you make from streaming, if you've done something similar in the past for profit, and the chances you'll earn a lot of profits in the future.
It should be noted, if you are classified as a hobby, you CANNOT write off business expenses from your earnings. If you are a serious streamer looking for profits, we'll go over self-employment tax deductions you can take advantage of later in the article.
Hopefully, this can clear the lines to determine if the money you make while you are streaming is a hobby or a business.
As A Streamer, Do You Need An EIN?
As a Twitch streamer, if you don't want to give out your social security number (SSN), then you could acquire a free EIN instead. An EIN number does not mean you'll pay separate taxes for your business, it simply replaces your SSN as a tax ID.
1099-NEC (No Longer The 1099-MISC)
Twitch is required to send you a 1099 tax form by January 31 if you meet the reporting requirements. So, if you meet the qualifications, you'll receive your 1099 form in early February.
In prior years, the 1099-MISC was used. However, the non-employee compensation portion was moved over to the 1099-NEC in 2020.
The reporting requirement to receive a 1099-NEC is if you were paid $600 or more in a calendar year from a business that is not your employer.
Bits are virtual goods you can buy on the platform that gives you the power to encourage and show support for streamers. If you were paid more than $10 in bits as royalty income, then you would file them separately through Form 1099-MISC.
What If You Don't Receive A 1099 Form?
If you don't receive an IRS 1099 tax form, and you know you earned revenue from streaming, there are a few reasons why you may have not received your information return.
If you were paid less than $600, Twitch is not required to send you a 1099 form. Again, 1099 forms are only sent out to freelancers who earn more than $600.
If you were paid more than $600 streaming, regardless of your payment method, and you did not receive a tax form, then log into your Twitch account to make sure all your information is correct. The tax form could have been sent to the wrong address.
Remember, just because you did not receive a 1099 form does not mean the IRS forgot about you. Twitch will report how much revenue you earn to the IRS. If you do not file a tax return, you may be penalized.
You could still, in fact, file a 1099 tax return without a form and report your taxes. The 1099 in only an information return. Simply review all of your bank/PayPal statements to manually total up how much you were paid and then report it.
If you are registered as a limited liability company (LLC) you when you had your tax interview for Twitch onboarding, then you won't receive a 1099-NEC.
The filing deadline for the majority of States for Federal taxes has been moved to May 17th. If you need more time, then you can file for a 1099 extension beyond that due date for your federal taxes.
Contact Twitch Support services if you have any questions about receiving your 1099.
Now, that we discussed the tax forms you'll receive for streaming, let's go over IRS quarterly taxes.
Quarterly Taxes 101
The U.S. operates on a "pay-as-you-go" system. What that means is that you'll pay taxes throughout the year instead of all at once. If you are expected to owe more than $1,000 in taxes, you are required to send in estimated tax payments.
To calculate your estimated tax payments, simply take your total tax liability from the previous year (self-employed taxes, income taxes, other taxes, etc) and divide that number by four.
You'll need to send estimated tax payments four times throughout the year. Mark your calendar because if you forget to send in estimated taxes, you could face penalties. Let's go over the U.S. due dates for quarterly taxes.
Deadline For Quarterly Taxes
The dude dates to pay quarterly taxes are:
- April 15th (First Quarter)
- June 15th (Second Quarter)
- September 15th (Third Quarter)
- January 15th of the following year (Fourth Quarter)
You can send payments via IRS Direct Pay. For more comprehensive instructions to file quarterly taxes, check out our resource for how to file estimated taxes.
It is important you send the right amount in for your quarterly taxes. You need to have paid at least 90% or 100% of your previous year's tax return to avoid paying an underpayment penalty rate.
Use an online calculator or Form 1040-ES to calculate the correct amount.
Deductions You Qualify For As A Twitch Streamer
If you stream for business purposes, you can qualify for some nice tax deductions you can use to lower your taxable income. You'll need to file a Schedule C along with your 1099 form. A Schedule C simply tells the IRS and helps you determine profits and losses you incurred throughout the year while running your Twitch stream business.
Be sure to keep track of all your receipts or business expenses to deduct them at the end of the year. The IRS needs proof of your purchases reported in order for you to claim a loss.
Here's a list of write-offs you can qualify for.
Common Twitch Expenses You Can Deduct From Your Taxes
Here's a list of expenses you can deduct from your taxable earnings.
- office expenses
- webcam
- microphone
- ad costs
- streaming software
- cameras
- desks
- internet
- home office space deduction
- rent/mortgage payments
- Goodwill or charitable donations
- Fees for tax preparation
Check out our list of other 1099 deductions you may qualify for.
Note: If you want software to scan your bank/credit card receipts to automatically discover all your tax write-offs for you, track and maximize your tax deductions, try Bonsai Tax. Our hands-off scanning feature allows you to sit back as our app records all the potential business-related expenses you can deduct from your tax bill. Try a free trial for 14 days today.
Time To File Your Twitch 1099!
We hope our article offered a lot of tips to take you through step-by-step for filing the money you earn from Twitch. Mark your calendars so you don't forget to pay quarterly taxes and get unnecessary fees. Remember, if you want one tool to help you accurately complete your tax filing, try Bonsai Tax.
Our app will make the filing process a breeze. We'll create an expense report with all your deductions, estimate your taxes and send you filing reminders throughout the year. Try a 14-day free trial today.
Disclaimer: If you have any questions or concerns about filing your streamer 1099, we always advise you to seek help from a tax professional or accountant. An accountant, CPA, or tax professional can give you tips for all the latest tax regulations and guide you through filing
What Defines a Verbal Contract?
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
When is a Verbal Agreement Legally Binding?
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
- Offer and acceptance: An offer is made and accepted by another party involved in the agreement;
- Consideration: The involved parties must exchange something of value (money, a service, time, etc), this is known as consideration;
- Intention and certainty: All parties must fully understand the terms of the contract and intend to make a legally binding agreement freely; and
- Capacity: The parties must have the capacity to legally enter into the contract; they're above age and of a stable mindset.
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
How strong is a verbal agreement in court?
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
Are you a freelancer?
Join 150,000+ freelancers using Bonsai's free contracts & invoices.
get started nowWhen are verbal agreements not enforceable?
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
- The sale of real estate or vehicles
- Real estate leases lasting longer than one year.
- Property transfer following the death of the owner.
- The case of a party agreeing to pay debt for someone else.
- Any contract that requires more than a year to fulfil.
- A contract involving and exceeding a specified amount of money (which varies by state).
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
How are Verbal Contracts Enforced?
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
How can you prove an oral contract?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Written vs Verbal Contracts: What's the Verdict?
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Say hello to digital contracts
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
Benefits of written contracts
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Create Professional Contracts with Bonsai
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?
Join 500,000+ freelancers using Bonsai's free contracts & invoices.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
