Why Bookkeeping Matters for YouTubers
YouTubers are focused on curating incredibly engaging content, expanding their viewership, and profiting from their hustle.
Nevertheless, just like video creation, managing your finances holds critical importance. Good bookkeeping allows you to:
- Track income and expenses efficiently
- Keep up with tax obligations
- Regain funds and maximize savings through deductions
- Make critical business decisions
- Ensure proper scoring from audits or penalties due to overdue or lack of record keeping.
- Sharpen quadrant expenditures for better content creation and upgrade to equipment for better policies and controls
- Grasp the company spending gap, profit margin, and cash inflow.
Whether you’re still new in content creation, or already have years of experience under your belt, with this guide, you will set up bookkeeping for your business easily to maintain proper financial posture as you grow.
Setting Up Your Bookkeeping System
1. Select A Business Model
Engage as a sole practitioner, limited liability corporation, or general incorporated enterprise. All structures have distinct taxation rules and legal responsibility responsibilities:
- Sole Proprietor: Easy to operate, but business debts could have your assets at stake.
- LLC (Limited Liability Company): Provides taxation opportunities but still keeps your assets safe.
- Corporation (S Corporation or C Corporation): More compliance and documentation, but has great tax saving schemes.
The LLC is usually chosen by YouTubers as it provides the right amount of liability insurance protection and tax advantages. Speaking to a lawyer or financial planner will help you figure out which structure will work best for your interests.
2. Set Up A Business Bank Account
Separating personal and business accounts makes bookkeeping and taxes easier. A designated business account:
- Protects tax complexities with a commingling of funds.
- Clarifies financial statements when applying for business loans or supporting sponsorships.
- Makes tracking funds coming in and going out straightforward.
- Makes a business appear more credible and professional while working with brands and advertisers.
Furthermore, having a business credit card will allow you to separate personal expenses from business expenses and will assist in establishing business credit.
3. Use Appropriate Online Bookkeeping Software
Purchase EasyBooks, QuickBooks, Xero, or Wave to simplify tracking income and expenses with technology. These platforms:
- Connect to the bank account to track transactions as they happen.
- Generate a variety of reports for better financial decisions.
- Forecast quarterly taxes so payments don’t sneak up on you
- Store receipts and invoices in the cloud to eliminate the risk of losing them.
Bench is a specialized service used by some YouTubers. They take care of bookkeeping services allowing entrepreneurs to focus on growing their business.
4. Monitor Every Income Stream
Content creators and social media influencers have various income sources such as:
- YouTube AdSense: Revenue from ads displayed on your content.
- Sponsorships: Brand deals and endorsements.
- Affiliate Marketing: Revenues earned from product suggestions.
- Merchandise Sales: Sales of branded products: t-shirts, hats, and more.
- Crowdfunding (Patreon & Buy Me A Coffee): Support given directly by your fanbase.
- Memberships (YouTube Memberships and other exclusive content sites)
- Digital Products: Online courses, presets, e-books, and even workshops.
Considering all these sources, it is critical to maintain thorough records. Use invoicing software or accounting tools capable of such tasks so that your money is recorded and reported correctly.
Managing Expenses Along With Deductions
1. Common Deductible Expenses
As a YouTuber, several business expenses can be covered and these will reduce your overall tax obligation. The most popular deductions include:
- Production Equipment: Cameras, microphones, tripods, drones, storage devices, and lighting.
- Software subscriptions: Video editing tools (Adobe Premiere Pro, Final Cut Pro), stock footage, music licensing, and Canava for design.
- Internet and Mobile Expenses: Only the part attributable to business.
- Home Office Expenses: Rent and utilities for your dedicated workspace, along with office supplies and furniture.
- Marketing and Advertising Done by Outsiders: Sponsored advertising, hosting a website, promoting via social media, and sending marketing emails.
- Travel Spending: Airfare, lodging, car rentals, food, and any relevant activities (if it’s related to content).
- Staff and Freelance Contracting: Video editing, graphic design, VA services, and writing.
- Online education: Courses, coaching, and training to help improve your YouTube performance.
2. Keep Receipts and Records
Always keep a digital or physical record of your receipts in case of an audit. Use a receipt scanning app like Expensify or Shoeboxed, or save them in Google Drive. Plenty of bookkeeping solutions let you upload invoices directly for easy record-keeping.
3. Categorize Transactions
You should create and maintain records of your spending and income throughout the year to aid when tax season approaches. It’s more convenient to designate specific records like “Equipment Purchases,” “Marketing Expenses,” and “Software License Fees,” so that business expenses can be monitored in detail for possible tax deductions.
Tax Responsibilities for YouTubers
1. Understand Your Tax Obligations
All earnings from YouTube must be disclosed. Some important points of your taxation are:
- In the US, YouTubers are self-employed, and income has to be reported on Schedule C (Form 1040).
- If you exceed a certain amount, you might need to submit the estimated tax every quarter.
- Earned income from YouTube is also deemed self-employment income subject to self-employment tax (Social Security and Medicare).
- Depending on the tax treaty the YouTuber’s country has with the United States, receiving an AdSense payment from the US might trigger some forms of withholding tax obligations.
- In certain countries, there is a requirement for YouTubers to register for VAT or GST once they achieve a certain level of income.
2. Save for Taxes
Put aside around 25 – 30% of your earnings for tax payments, and make sure to save it on a different account to make sure you’re ready for the tax season.
3. Professional Tax Advice
A tax advisor can do the following for you:
- Help maximize deductions and eliminate as much tax as they can
- Assist in ensuring compliance with the relevant tax obligations
- Advise on the best business structures to facilitate less tax
- Assist in managing international tax responsibilities where the taxpayer has multiple sources of income from different countries
Best Practices for Bookkeeping Success
- Manage your documents regularly: Make sure to do your finances at least once a week, or even once a month.
- Automate where possible: Let accounting software take over the manual work and minimize errors.
- Keep an eye on income and expenses: Keeping track of money flowing in and out of the account can save you from bankruptcy.
- Growth strategies: As your account grows, consider delegating bookkeeping to a professional.
- Reassess your investment strategy: Spending money on better equipment, hiring experts, and increasing advertisements can significantly help grow your channel.
- Analyze financial statements: Spotting noticeable data trends and financial difficulties can be done in monthly or quarterly reports.
- Avoid Long-Term Negatives: Make sure to renew your business registration on time, pay your taxes, and fulfill any legal responsibilities so that you do not face fines.
How EasyFiling Can Assist YouTubers in Bookkeeping
Handling finances for a content creator on YouTube can be quite difficult and time-consuming. EasyFiling provides bookkeeping services that are customized for creators. This makes it easier to keep your records and pay taxes.
Here is how EasyFiling can help:
Accounting Services: We ensure that both income and expenses are accurately tracked for precise recording.
Tax Filing Services: We help you file your taxes. Our attention makes the chances of penalties much lower.
Expense Classification: We collect and arrange all your expenses for higher deductions.
Compliance and Advisory: We tell you how to deal with tax for your business while adhering to the regulations posed by the IRS.
Business Structuring: If you need to form an LLC or a corporation, EasyFiling has made it easier for you to register and decide the best structure for your business.
Become relaxed while we handle your number and deal with your bookkeeping. This will let you concentrate on making videos for YouTube. Book a free consultation today, and grow your YouTube career without any inconveniences with ease.
Final Remarks
Even though bookkeeping is something that needs to be done regularly, it is a dull aspect of YouTube content creation, though it is essential for success. Being financially sound enables the YouTube creator to:
- Achieve higher profits with thorough expense and deduction management.
- Use precise reports to base business decisions on.
- Prevent unfavorable and unexpected taxes from arising.
With these bookkeeping procedures, YouTube can become a financially sustainable business, successfully thriving for years. Take action toward your financial goals today!
Nabin Adhikari
