The Easy Way to File Your Twitch 1099 Taxes
At the start of the tax-year Amazon sends out Twitch 1099 forms for all streamers and content creators in the United States who made an income through Twitch last calendar year. (As you probably know, Amazon owns Twitch) This goes for all their affiliates and partners. Since dealing with taxes is a delicate matter, we talked to our accountant and gathered everything you need to know.
Are Twitch payouts taxable?
Yes, they are. Let's get some facts straight. All of your payouts from Twitch are considered as taxable income by the Internal Revenue Service (IRS). Amazon keeps track of it and reports it to the IRS complying with the U.S. tax law. Since taxes on your payouts aren't withheld, it's YOUR responsibility to include it on your tax return and pay accordingly.
For you to avoid fees, interests, other nasty surprises, this guide shows you step-by-step how to handle taxes and 1099 forms as a twitch streamer.
What happens if you don't?
Failing to file a Twitch income tax return and paying an outstanding balance on time, will result in penalties with interests, even if you miss it by a single day. Amazon files all of their payouts to the IRS, who will look through all the filed documents.
With that out of the way, let's get into it!
Twitch sends you a 1099 form
1099 forms are issued on January 29th by Amazon to anyone who received more than $600 in the last calendar year (2020). Amazon also sent a copy of your received form and sent them to the IRS.
The first thing you need to determine is whether you stream as a hobby or for profit.
Hobby or career streamer?
Filing as a hobby or a business will determine the way you file your income, what you can deduct, and how much you're taxed.
According to IRS, here's how you determine if your streaming qualifies as a hobby or a career:
- If you stream in a businesslike manner, maintain complete, accurate books, and records.
- If you put time and effort into your streaming to make it profitable.
- If you had success in streaming or similar content creation before and how much profit you made.
Hobby streamer taxes
Once you decided that you stream as a hobby, all your income from Twitch should be claimed in your 1040 form in the "Other Taxable Income" box with your tax information. This adds up to your total earnings and falls under your income tax.
Since 2019, the IRS doesn’t allow deductions for hobby activities and you are not allowed to reduce that income by any expense.
However, if you are serious about your streaming by meeting certain qualifications, you can show that it’s a business to take advantage of deductions. For you, it means that you can deduct business expenses related to your streaming from your taxes.
To prove that your streaming is a business that can be done by some of these things:
Show the effort and time you’ve spent streaming, a business plan, being profitable for at least 3 out of 5 years, a separate bank account for streaming, and your expertise.
Career streamers' federal taxes
If you’re streaming as a business, the IRS considers you self-employed and you have to follow different rules.
Your payment isn't subjected to your income tax. The self-employment tax is set as 15.3% as the IRS sees you as both the employer and employee. You have to file form Schedule C, your 1099, and other tax information. To see how much taxes you’ll owe, use a free self-employment calculator.
Deductions for career streamers
The good thing about being self-employed is that you deduct your streaming expenses from your taxes before you pay them.
You may deduct the equipment and expenses related to your streaming. These include your webcam, microphone, streaming software, ad revenue, commissioned work, state taxes if you itemize your deductions, partially your desktop, and anything you need for your streaming. You calculate your taxes as self-employed on Schedule C
To help you keep an eye on your deductions, use Keeper Tax to monitor your account activity and it will help you find out what you can deduct, how much you need to pay in taxes, and file them for you.
Quarterly taxes for Twitch streamers
If you expect to owe more than $1.000 in taxes, you’re going to make quarterly estimated tax payments to avoid penalties. Use this tool to estimate your quarterly taxes.
You need to pay your estimated quarterly payments on the 1040-SE form
When quarterly taxes are due
First Quarter - April 15th
Second Quarter - June 15th
Third Quarter - September 15th
Fourth Quarter - January 15th
Knowing this, let’s take a closer look at the 1099 forms.
Twitch 1099-NEC explained
At the end of the tax year, you'll receive a form 1099-NEC (nonemployee compensation) from Amazon. In 2020, this replaced form 1099-misc, which was previously used to file payment of freelancers, contractors, and non-employees.
Your earnings from bits or cheers are considered as royalty income. So, if you made more than $10 from bits, you need to file them separately on form 1099-MISC and not include them on your form 1099-NEC.
If you didn't receive a form 1099 but still got a payout
A common misconception is that if you made less than $600, then you don’t have to file a 1099 form. That is not true and not filing one, will get you penalties.
Amazon isn't required to send you a 1099 form. If you made under $600, your income is still taxable and reported to the IRS. Therefore you should file a 1099-NEC anyway.
How to see your Twitch payouts
Log in to Amazon Tax Central. If you don't have an account, create one, and go through the verification process. Remember to use the same email as you use to log in to Twitch.
In the Dashboard, you will find your twitch activity and your payouts.
If you made more than $600 and didn't receive a 1099 form, it’s because you may have registered your channel as a limited liability company (LLC), when you had your tax interview with Twitch during onboarding. In this case, Amazon treats you as a C- or S-Corporation and doesn’t issue a 1099-NEC.
TwitchSupport can be slow at times. So if you have any questions, see our free resources. If you didn't find the answers you were looking for, always contact a professional. When using Keeper Tax, your freelancer software account has a dedicated bookkeeper to help you out.
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At Keeper Tax, we’re on a mission to help freelancers overcome the complexity of their taxes. That sometimes leads us to generalize tax advice. Please email email@example.com if you have questions.