Almost nothing is more exciting than being at the forefront of a cutting-edge industry. Streamers, you know what we mean.
Streaming is still relatively new compared to other industries, but today, it’s a robust sector and a source of income for many. And while making money doing something you love can be a dream, it comes with one complicated reality: there are detailed accounting and tax requirements.
That’s why we’re diving into guide to accounting for streamers with everything you need to know about it. This includes setting up certain tax structures, getting your backend together (like opening a business bank account), and understanding what expenses you can claim as a tax deduction (trust us, this can be super nuanced and specific to your work).
While it might sound like a lot, we’ve got you covered. Let’s dive in!
What to Account for as a Streamer
Why is it crucial to understand step-by-step accounting for streamers? Streaming is a unique industry; because of this, it comes with unique accounting and tax obligations.
Think about it: if you’re making money from streaming, you’re not getting a “typical” income from a full-time employer. This means you’re not having taxes withheld and have different needs for everything from expenses to payments.
The truth is that when it comes to accounting for streamers, there are a lot of specific considerations to be aware of. With that in mind, here’s everything you need to understand.
Step 1: Choose a Tax-Advantageous Business Structure
Getting started as a streamer is one thing. You might buy some equipment, work up the nerve to go after your dream, and get excited when money starts rolling in. But setting up your business is something else entirely.
One aspect of your streaming business you need to be aware of from the beginning stages is registering a name for your business to operate under, which is also called a DBA (“doing business as”). This is an excellent option if you plan to operate your business under your streaming name or handle and want this name to reflect all of the accounting aspects of your business (such as your taxes).
If you’d like to use your legal name, you don’t need to file a DBA; you can simply operate as a sole proprietorship (a common tax structure for self-employed independent workers).
When filing taxes, both DBA and sole proprietorships operate similarly (for example, they’re both subject to income and self-employment tax). The difference is in what name you’d like to use for the business.
Step 2: Set Up a Business Email
As a streamer, you have the exciting opportunity to craft whatever public-facing persona you dream of. But on the backend of your business, it’s highly recommended that you treat it as professionally as possible.
This means that you should have an organized system for emails and a separate account for your business correspondences. You might talk to customers with this email, receive important documents or messages, or use it for other critical correspondences. Because of this, your business email should align with the name of your streaming business, be professional, and be set up in a way that helps you stay organized.
Step 3: Set Up a Bank Account
You probably already have a personal bank account, but consider setting up a separate one for your streaming business. This can be another personal or business bank account, which has different benefits.
Typically, business bank accounts make it very easy to organize your finances and come with features that can help you seamlessly manage aspects of your business (such as tax preparation features or tools for accepting credit card payments). Also, remember that business bank accounts are legally required for certain business structures (such as LLCs).
A separate bank account for your streaming business is useful for many reasons. First, you can ensure all earnings are coming into these accounts, so you can easily keep track of your income. You can also use these accounts for business-related expenses, which can help with your record-keeping and tax preparation (especially when claiming tax deductions).
Step 4: Set Up a Payment Processor
You'll have to set up a payment processor if you’re accepting payments for your streaming business. A payment processor is a vendor businesses use to accept credit card payments, and setting up a payment processor allows you to take payments via credit card.
You’re probably familiar with some common payment processors such as Stripe, PayPal, and Square, but there are some things to remember when setting one up for your business. For example, there are many options for payment processors out there, and they operate differently, might require extra apps/equipment, and also might take additional fees (this is common for business transactions). Make sure you compare options to decide the best one for your streaming business.
Step 5: Start Tracking
Regarding your streaming business, there is no one to track your work besides you. There’s no clocking in, no required 40 hours per week, and no need to request time off for vacations (which is one of the perks if you ask us).
But despite these freedoms, you need to keep precise records of your work, how much you’re earning, and what expenses you’re incurring. You can manually track your work, expenses, and income or use an app or program to help.
Step 6: Get Legal Help
There will likely be a point in your streaming business when you need to turn to legal professionals for guidance. Suppose you’re signing contracts, working with brands, earning income, and navigating other aspects of being a professional streamer. In that case, it’s wise to turn to a legal professional to ensure you’re dotting your i’s and crossing your t’s.
Step 7: Bookkeeping and Accounting Software
To best keep track of your work, income, expenses, and accounting needs, you can turn to bookkeeping and accounting software. This type of software is robust, user-friendly, and specifically designed to help entrepreneurial businesses (like your steaming business) keep track of all things financial. This software is adaptable to your needs as an influencer and avoids the risk of human error.
Step 8: What Expenses Can You Claim as a Social Influencer?
Ah, claiming expenses. This is a critical part of preparing your taxes and can significantly impact the amount of money you ultimately owe in taxes. Understanding what expenses you can claim is a key part of this, so you know what counts as a legitimate deduction and what doesn't.
While what you can claim as an expense differs depending on your type of work, you can generally deduct expenses you incur for your business. For streamers, this might include games you buy and stream, subscriptions you pay for, in-game purchases, and hardware such as cameras and headsets. Before making a deduction, ensure that it’s appropriate for your business.
Step 9: Paying Self-Employment Taxes on Earnings
Individuals classified as self-employed by the IRS must pay a self-employment tax on their earnings. It consists of Social Security and Medicare and is similar to the Social Security and Medicare taxes withheld from those who receive a paycheck working a full-time job. The amount you pay in self-employment tax depends on how much you earn.
Step 10: Be Your Own Boss
So the nuances and intricacies of your business are set up; now what? Being a self-employed streamer means being your own boss, which can sometimes be an entirely new experience for people.
You set your own working hours, decide how much to work, and ensure the back end of your business is running smoothly. Being your own boss can be exciting, but it also requires ongoing work to ensure your business is seamless.
Need More Help With Accounting?
Working as a streamer is incredibly exciting and can be a very lucrative industry. But we get it: the accounting aspects can be particularly complex.
Instead of spending your time trying to navigate your accounting needs, we’ve got you covered. Here at Hiline, we offer accounting services specifically for streamers.
Yep, our accounting experts provide straightforward accounting for a not-so-straightforward industry. We’d love to partner with you to ensure your accounting needs are taken care of today and that you’re setting up your streaming business for future financial success. Reach out to get started.
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