There are hundreds, no, thousands, of people who post videos on YouTube every year. If you are reading this, you are probably one of them. One plus of engaging in this activity is that YouTube/Google will send you a check every now and then. They’ll give you a share of the income they generate running ads at the start of your videos. The amount you earn is determined by a secret formula based on the number of views, and likes, and subscriptions your films generate. What you might not have expected is that if those checks total $600 or more each year, YouTube/Google will also send you an IRS tax form called a 1099-Miscellaneous (1099-Misc) so you’ll know how much business income from filming and internet publishing you have earned. This is money you have to report when you file your tax return for that year. Bummer! IRS takes the fun out of everything.
These payments from YouTube/Google are NOT gambling income. It doesn’t matter for your video filming business whether you won or lost or got a W2G or no form of any kind for any film you show the rest of us. Your gambling wins are reported on line 21 of your 1040, and your losses (up to the amount of your winnings) are deducted on Schedule A if you are able to itemize, just the same as they would be if you hadn’t ever recorded the film. This income is different. The amount reported on the 1099-Misc is NOT income from gambling. It is income from publishing films of your games on the internet. The business code you will be using is the one for information services which includes internet publishing: Code 519100. (You can find the business code for any business venture at the end of the Schedule C instructions.)
The payment you earn from YouTube/Google is reported as business income — not as gambling income — in the tax year YouTube/Google sends you the check. It is reported on Schedule C or C-EZ and is carried from that schedule to line 12 of your 1040. (And also to Schedule SE. - I’ll explain that later.)
Some of you don’t want to think of posting on YouTube as a business. You don’t want to keep records. You just want to enjoy the activity. I’ve read threads on SlotFanatics saying as much. Wise people, these YouTubers.
OK. That’s no problem. This doesn’t have to be hard. if that is how you feel, and you don’t want to keep records and deduct expenses of earning your YouTube checks, you don’t have to. (I wouldn’t either.) Use Schedule C-EZ instead of Schedule C. Report the amount from your 1099-Misc in Part II, line 1. Put 0 on line 2 for your total expenses. This difference from line 3 (which will be the same as line 1) goes from this form to line 12 of your 1040 (and to Schedule SE to calculate self-employment tax and the line 27 adjustment). That’s it.
Except, of course, unless you have another self-employed activity that you earn money at. (IRS can never tell us anything without an “except” or an "unless" to complicate things!) In that case you have to file a Schedule C for each of them - not C-EZ. But if you have that problem, you probably also have an accountant doing all this for you.
If you don’t deduct any expenses, there is nothing to this. No record keeping requirements even, because, since you are not deducting your business expenses of filming, YouTube/Google has kept the only record you need, the record of the income they paid you.
Now, if you WANT to deduct expenses that your business incurred, that’s a different story. Everything between the $$$ is tax talk that most of you will want to ignore. Feel free to skip to the summary at the end.
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Business expenses are deductible for your video filming business, but you must be very, very careful to keep detailed records if you are going to write off your filming expenses. And to do this correctly, you’ll be keeping these records for five years, even if you give up the business before then.
I am not saying this will be easy. I’m not recommending you do this. I’m just saying it’s legal, and I’ll help you all I can. But believe me, you are NOT going to want to do this. Not with the amount of income your business generates. There are only three areas I can think of where you MIGHT have tax write offs: depreciating your filming equipment, MAYBE meeting the requirements for home office deductions, and MAYBE mileage write offs between casinos on the days you film. I’ll share some very basic tax information on all three items, but, be warned, you’ll need to study and learn a lot more if you decide to do this, or you should plan to pay a tax specialist to do it for you. (And that may cost you more than YouTube/Google paid you.)
Let’s look at depreciation first. What makes this so difficult is that the type of assets you use in this filming business — cameras for instance — cannot be written off in the year you purchase them like some things used in business can. Assets like video cameras fall in a class called listed property. Pull up Form 4562 and its instructions off of the IRS web site. Just looking at this form is going to make you want to forget the whole thing.
Listed property is reported in Part V on the back of this form. Listed property is given special attention by IRS. The business assets in this group are ones frequently subject to abuse. They are items bought for use in a business that are very attractive and desirable to own, and items that you might like to have for personal use as well as for your business: cars, computers, video cameras - business assets used for entertainment, recreation, and amusement. Things you might buy for yourself and try to write off as a business expense. Things that IRS agents are going to scrutinize more closely than less attractive assets such as filing cabinets and the like. That’s why they have you LIST these things so they can look for them on your return in other years…unlike things like office furniture and backhoes that all get lumped together because there is little chance of abuse.
The next thing to notice about listed property is that you have to have records of how much of the use of this asset was for business and how much was personal use. If your business use is more than 50% (and will remain more than 50% over the entire 5 year recovery period), you’ll be using line 26. If it is less than 50% business use, you’ll be using line 27 — and in addition, you must recover your cost through straight line depreciation - not any accelerated method - if you might use that asset less than 50% for business any year if the recovery period. Discussion of various methods of depreciation and recovery periods is a whole other topic to cause you headaches.
Did I even tell you what a recovery period is? It’s how long the IRS expects you to be able to use an item in your business. This time period is different for different items - there’s a chart at the end of Pub 946 to give you the recovery periods of common business assets. The time periods are not even realistic sometimes. Who is going to use a computer for five years in a business in this day and age! But it is what it, is and you have to use the methods and recovery periods IRS says to use.
You probably have no idea what I just said. I’ve probably lost you already, and we’ve just started. I’m sorry this is so difficult. Feel free to decide to change your mind about taking business deductions at any time during this discussion! No one would fault you at all.
There are tables in the depreciation publications 946 and 583 to tell you what percent of the cost of your business asset can be written off each year of its recovery period depending on the depreciation method you are using. To make things even harder, you may be getting only a half year or a quarter year’s write off the first year depending on what month you put your camera in service in your business. This is very, very complicated stuff. I cannot teach you depreciation in a computer blog - it would take a book, maybe a couple of books, to do this right. Even then you might not understand. Look at the instructions to the form 4562. If it is gobbledygook to you, I’d advise you to just forget about deducting depreciation expenses. You probably don’t have that much income from YouTube/Google to offset anyway.
The second deduction I want to just touch on and discourage you from taking is the home office deduction. Some people who run a business out of their home do it in such a way that they can write off some household expenses that are normally personal nondeductible expenses as business ones. To do this, their home office must be used exclusively and regularly as their principal place of business for that business. This allows them to deduct a portion of certain household expenses, and, of more value, to deduct travel expenses from the home office where they do their editing to the place they do their filming.
The requirements for this write off are also very, very strict, and ANY personal use of that office at all causes it to not qualify. If you so much as watch a friend’s YouTube video or a movie on Netflix in the office where you do your editing, you have not used that office EXCLUSIVELY for business, and the deductions will not be allowed if you are audited. Warning: businesses with home office expenses are frequently chosen for audit. You also get into issues of depreciation here too. If you use your computer in your business in your office, you find yourself in a catch 22 situation. If your depreciation schedule for your computer doesn’t show 100% business use (which is NOT going to happen — don’t be checking email or Facebook on it if you plan to say it does) you have automatically made your home office disqualify. If you own your home you normally deduct mortgage interest and real estate taxes on Schedule A. You’ll find with a qualifying home office you are expected to calculate the percentage of your home taken up by the office and allocate those deductions based on square footage between Schedules A and C. You are also allowed depreciation deductions that complicate your return if you ever sell your home. If you’re interested in learning more about home office deductions, read IRS publication 587. I think you’ll find this too is more trouble than it is worth.
The third write off is vehicle expense deduction. Vehicles used in business can be depreciated — but believe me, you don’t want to get into that. There is also a standard mileage rate than can be used in place of the cost of the car and all other expenses of operating it for business. (Things like gasoline, repairs, etc.) The standard mileage rate for this year (2015) is 57.5 cents per mile, up from 56 cents per mile in 2014. It goes up slightly every year, just like our living expenses do.
You are not allowed to deduct mileage to and from your principal place of business from your home on your tax return. Commuting expenses are not deductible. If you have more than one place of business you are not supposed to deduct mileage between your home and first stop nor between your last stop and home. However, if you have more than one place of business, you can deduct mileage for your trip between these two sites in the same day. The reason some people try to deduct business in the home expenses is really to get this mileage write off by conducting some business in that home office before driving to the other location where they conduct business activities. They sometimes forget minimal business use does't count. You office has to be your main place of business, not just another one.
I'll go out on a limb and opine that It appears to me that travel between two casinos where you film videos in the same day could be justified as a business expense, but not the travel from or back to your home. However, I am not a CPA or an enrolled agent, and the law does not allow me to give tax advice, so please don’t say I told you to do this. Read the IRS literature on business expenses, discuss the subject with your paid preparer, file as honestly as you can, and remember ultimately YOU are responsible for whatever you put on your return. Regardless of who advised you that you could or could not do something! My advice, for what it is worth which is less than nothing, is forget about all the headaches this will cause and just report the income and don't mess with expenses. But don’t say I’m the one who told you so.
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Back to the basics. We do need to talk just a little bit about Self-employment tax since both Schedule C and Schedule CEZ refer you to Schedule SE. Self-employment tax is really Social Security and Medicare tax. When you work for someone as an employee, half of this tax is paid by your employer and half is withheld from your pay. (It’s frequently called FICA from the Federal Insurance Contribution Act.) When you work for yourself or when you are paid as a subcontractor, you pay both parts yourself. To make it easier to pay in, it is calculated on Schedule SE of your 1040 and carried to line 57 in the other taxes section. You are given an adjustment for half the tax on line 27 since you are paying both parts.
There are two schedule C-EZs - a short one on the front of the form which almost everyone does and a long one on the back for special cases. There’s a flow chart to tell you which one to use.
(There are two forms because there are special tax provisions in the law for certain categories of filers such as ministers and Christian Science practitioners, some members of certain religious orders, and certain church employees. There are also special calculations for people who have exceeded the Social Security threshold of $117,700. (This is the 2014 amount - it changes each year). Certain people with unreported tip income can’t use the simpler form. Also there is an optional method for people who don’t have enough Social Security coverage who are willing to pay in more - even with losses - to build up their earnings record. None of these will likely apply to you. Almost everyone will use the short Schedule SE.)
You do the arithmetic on the SE form to get the amount of self-employment tax to put on line 57 and to calculate the adjustment for line 27. Self employment tax gets added to your income tax when you file your return.
So, in summary, here's all you really need to know, Filming slot videos for YouTube is a business if you are getting paid to do it, but it is not a gambling one. Gambling wins and losses don’t matter on your filming business schedule. The simplest way to handle everything for taxes is report the figure from the YouTube/Google statement on Schedule C-EZ and line 12 of your 1040. Figure your self-employment tax on the short Schedule SE for line 57 and the adjustment on line 27. And don’t worry about record keeping for filming and editing expenses if you aren’t deducting expenses.
Report the wins and losses from your wagering the same way you always have. And do keep a record of your gambling wins and losses in a simple, daily gambling diary of some sort especially if you are able to itemize. Your casino win/loss statements by themselves will not be enough. They are supporting documents. Even the print out from the casino says you can’t rely solely on them. Ignore your gambling diary and your win/loss statements for your filming business — they’re records for your personal casual gambling, not for your business. And if you need help with any of this, I’ll try to answer your questions if I can .
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