Do Youtubers need to pay tax: A Complete Guide

Digital content creators leave no stone unturned to fulfill the informational and educational needs of people.

Millions of them achieve this incredible feat by leveraging the potential of YouTube, the king of content streaming platforms.

The platform allows them to monetize their content through YouTube Partner Program (YPP) to earn their livelihood.

Do YouTubers need to pay tax?

Many YouTubers do not know about this. They deserve the correct answer to this million-dollar question.

Content producers catering to the informational and learning requirements of online streamers through YouTube, have to pay two different types of taxes.

Income Tax:

It is the tax you pay on the income you earn through YouTube.

Google performs the responsibility of withholding the income tax deducted from your earnings.

The search engine also performs the duty of informing the IRS (Internal Revenue Service) if you earn any amount of revenue from the viewers living in the United States through the following:

Advertisement related views
YouTube Premium feature.
Super Chat feature.
Super Stickers feature.
Channel Memberships facility.

Self-employment tax:

YouTubers monetizing their content are Self-employed people. They are under obligation to pay Self-employment tax.

What is the reason?

The credit goes to changes introduced in Chapter 3 of the US Internal Revenue Code.

Chapter 3 of the IRS Code is dedicated to “withholding of tax on nonresident aliens and foreign entities.”

These changes are to make sure Google preemptively withholds taxes from all content producers participating in YouTube Partner Program and are earning income from US nationals.

What does it mean?

All YouTubers have to pay taxes on US-based AdSense, YouTube Premium, Super Chat, Super Stickers, and Channel Memberships. They are taxed at US rates.

The amount YouTubers are taxed:

It depends on multiple factors. For example:

The amount of money you are earning from US-based viewers.

The sooner or later you submit your tax information to Google.
Tax treaties of content creators’ home country.

The list does not end here only.

All YouTubers should send their income tax information to Google by the given date. Those who fail are penalised.

Failure to send tax information to Google results in 24% tax on worldwide income instead of the US-based income only.

Why So?

There are two reasons for this.

24% is the standard amount of federal tax for all self-employed people. All YouTubers fall in the category of self-employed individuals, believes the IRS.

Secondly, if you do not submit your tax information, Google will not know where you file your taxes. How much money do Youtubers will need to pay tax in this situation? Google will assume that you file your taxes in the US. In this scenario, you could be taxed 24% of your global earnings instead of the income from the United States only.

Content producers who are nationals of the countries that do not have tax treaties with the government of the United States are 24% of their US-based revenue.

Significance of Tax Treaties:

All YouTubers may not have to pay such a whopping amount of tax.

Those who send their tax-related information and reside in nations with US Tax Treaties stand a chance of getting taxed at affordable rates.

YouTubers who hail from countries with US Tax Treaties are taxed only $15 from their paycheck.

We suggest you visit the official website of the IRS to see if your country is on the list of countries with US Tax Treaties or not.

YouTubers within the United States will not see any changes to their income. This facility is for some time only.

The platform is working on updating its Terms & Conditions, where the earnings of US-based YouTubers will also be considered royalties from a U.S. tax perspective.

All YouTubers are emailed about updates related to withholdings.

These taxes affect creators’ income in multiple ways. Creators will get to know about it only through YouTube Community Forum posts only.

Do you want professional help to file taxes on your YouTube earnings?

Let us know right now!

We are here to help you.

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Alan Chen

Alan Chen, CEO of FreeCashFlow.io and licensed CPA. With over 11+ years of service in the Accounting and Finance industry. Alan graduated with a masters of accounting at the university of Alabama, began his career at Ernst & Young (Big 4 – E&Y) and Riot Games (creator of League of Legends) and has moved into helping online entrepreneurs like yourself save millions in taxes.