The Creator Tax Time Bomb

Speaker A00:00:00

Most content creators don't get in trouble with taxes because they don't make enough money. They get in trouble because they don't respect when taxes actually hit. You don't have a tax problem. You've got a tax timing problem.And if you don't fix it, you're sitting on a financial time bomb that will go off in April. And here's the part that nobody tells you. The more money you make as a creator, the bigger that explosion becomes.

Speaker B00:00:32

Reasons why I got a vision and a voice they can't ignore Every beat I drive just opens the door yeah I'm rising, climbing, flipping the seed Break the chain, shite the dream I'm a creator a creator on fire hello there.

Speaker A00:00:49

I'm Ralph Estep Jr.I'm a licensed accountant with over 30 years of experience, and I work with content creators and small business owners all over the world, and I'm known as the content creators accountant. So what I'm about to show you isn't theory today. This is what I see every single tax season. Oh, and by the way, I'm a content creator as well.So in today's episode, I'm going to show you why creators don't actually have a tax problem, why April feels like a financial emergency every single year, and the simple system that eliminates that stress completely. Because once you understand this, you stop fear and tax season and you start controlling it. Well, let me start with a story today.I want to tell you about a creator I worked with. This creator had great content, had a huge growing audience, started landing some great brand deals. They made about $120,000 in a year.Not too shabby, right? Sounds like a win. But then April came, and the tax bill came. Ready for this? $28,000? Yeah, that's a big tax bill.Guess how much cash they had in the bank. Six thousand bucks. Let's talk about what happened. They didn't do anything wrong. All they did was spend the money as it came in.They reinvested in gear like most of us would do. They upgraded their lifestyle, but they never separated their taxes. And they thought they had the money, but they didn't.All they had was a big unpaid obligation. Which brings me back to the core issue today. Creators don't struggle with taxes because taxes are complicated. Yes, taxes are complicated.They're easy for me. I've been doing it since I was 8 years old. But they struggle. Specifically, creators struggle because income is irregular.I was just talking about that on the show yesterday. The money in your bank feels available and unfortunately for most content creators, taxes are delayed till April.So the brain says, I'll deal with that later, but that's not a good thing to do. So let's start by breaking down the real problem. The real problem is this. Taxes are invisible until it's too late. Just think about this for a second.Many of us have worked as a regular employee. And when you work as a regular employee, your taxes are taken out automatically. Maybe you get paid once a week or bi weekly.You get your take home pay, great. The employer handles all of all gets sent to the irs, it gets sent to the state, you don't have to worry about it.But as a creator, it doesn't work that way. You get the full amount, you get the big deposit number. So it feels like, hey, this is all mine. But it's not. Here's another big problem.Your income hits at random times. Brand deals might hit this month, you might not get another one for several months. Next month could be crickets.Your affiliate payouts, hey, who knows when you're going to get those? And ad revenue, we don't even want to go there. It's delayed at best. So even on your best day, you're always reacting, never planning.And here's the other issue. You're spending from the wrong number. Let's talk about that for a second. Because most creators use the bank balance.I don't know how many creators I've worked with that have said, Ralph, I'm doing great, look at how much is in the bank. But the bank doesn't consider what you're going to owe later. Or maybe you look at your stripe deposits. Hey, listen, stripe is fantastic.I'm selling coaching programs, I'm selling Patreon memberships, or hey, maybe the PayPal notifications look great. And that's what so many content creators use as their decision making tool. But I talked about this on the last show.That's not profit, that's not available money to you. That's pre tax revenue. And then April becomes a crisis for so many people, not a process at all. And when it's a crisis, what happens? You panic.You get scrambling for deductions. Listen, right now it's tax season for me. I got people like content creators coming in.They've got these 1099s they got, they got this money they deposited in the bank and they're trying to figure out, Ralph, what do I write off against this? They're scrambling for deductions. And then we file the tax return. And like the one I talked about at the beginning, $28,000 owed.They have $6,000 now. They got to enter into an IRS payment plan. Sure, the IRS will do that, but they charge you a penalty, they charge you interest.And you don't want to be, you don't want to have a lender. That's the irs. Not a good plan. And then it just get into this level of stress and shame.And then if you're not careful, it repeats itself again every April. I've worked with so many clients over the years that every April we're in the same thing. Crisis payment plan. Crisis payment plan.And it never goes away. But here's the real question. What if the problem was never the taxes in the first place?What if the real issue is you've never been shown how to handle money before taxes hit? Because that's where everything changes. You need what I call the creator tax vault system.See today's show, I'm giving you something you can take to the bank. I want to talk about the creator tax vault system. Let's get right into it because this will change the dynamic of how you see taxes.It won't be a crisis anymore because you're going to be planning as you go. Here's the first step. You got to separate immediately. The moment the money comes in, you don't keep it in one account. You split it out right away.I've talked about this on the show before. I like three accounts. An operating account, an owner pay account, and a tax vault. No exceptions.So as soon as that money comes in, and we've talked about your weekly money meeting, I think this is a great time to do that. Carve out what you need for operating. Carve out what you need to pay yourself.Listen, you got to pay your bills, you got to meet your personal obligations, but at the same time, carve out that tax money right away, no exceptions. And think about it like this. You got to have a percentage based allocation. Every single dollar that comes in needs to be assigned a task.Maybe for you it's 50% goes right into the operations account. You're going to do your operations with that. Maybe 30% goes to your owner pay and then 20% goes to taxes.And listen, the percentages vary, but the system doesn't. It's all about moving that money right away. So there's no surprises now once you move it. Here's the thing about the tax vault. It's untouchable.And this is critical. The tax account is not your emergency fund. Oh, we're having a rough month. Let me go rob it from the tax vault. No. That money is there for one purpose.It's not your opportunity money. It's not, oh, I've got this opportunity. I've got this gear on sale. You can't. Sweetwater's having a great deal. I gotta get this. No.Tax money is tax money. It's not your backup money. It's not, hey, we had a rough month. We're in this cycle of income. No, it's not that.It's in the vault because it's already spent. It's already being set aside for taxes, just not paid yet. Now, part of that, I think, is also paying your taxes proactively instead of fearing April.And we can get into a whole discussion about why you need to do this or why you should do this, but maybe think about paying quarterly. The irs, the states would love for you to pay them quarterly. In fact, there are penalties in interest if you don't.You can plan those things ahead of time. And when you do those things, when you set the money aside, when you pay it quarterly, you play it, plan transfers.Then you're moving out of crisis mode, and you have predictable outcomes. Now, maybe you're listening right now and you're thinking, Ralph, I don't have any of this set up. I don't even know where to start. Well, guess what?That's why I've created a place to help you. You can go to contentcreatorsaccountant.com Help me. I'll put a link to that in the show notes, but again, that's content creators.Accountant.com helpme and let's walk through your numbers together, because this is one of those things that's simple once you see it. But listen, it's very expensive if you ignore it.Well, now, let's take this one level deeper, because this is where I've seen most creators missing the mark. Taxes are not an expense problem. They're just a timing problem. And here's the problem. The IRS doesn't care when you spend the money.They don't care how you feel about it. They don't care what you've reinvested in. The only thing the IRS cares is you earn the money. And guess what? Uncle Sam wants his cut.The IRS doesn't care what you did. They don't care that you had a rough year. They don't care that you bought new gear.They don't care that you've spent it on your editing staff or subscriptions. They say, hey, you earned the money. You gotta pay Us. But here's the problem with most creators.As you start to grow, the more you grow, the more dangerous this becomes. Because think about it like this. The more income you have, the bigger the tax liability is. You just.You're paying it forward in a bigger future, Bill. So this chaos just adds to more chaos. And I say this to creators all the time. Success without structure creates financial instability.And that's why creators feel broke all the time.The thing I hear from a lot of creators, Ralph, I'm really doing well, man, but I feel broke because you can make $10,000 a month, you can make $20,000 a month, you can even make $50,000 a month and still feel like I don't have any money. Because you're holding the tax money, you're holding the business expenses, you're holding those future obligations all in one pile.It's not a good place to be. But when you implement this system, this tax vault system, everything shifts. You stop fear in April because you already know the number.I was meeting with a client the other day. They instituted this tax vault system. We did their taxes. I got done their numbers. And I said, here's what you owe the irs. And I wasn't.I wasn't sure what they were going to say. Big smile comes on their face, and they said, Ealph, that's fantastic news.I just told them they owed about $15,000, and they said, Ralph, that's great news. I've got 25,000 sitting in the tax vault. See, they were prepared. They hadn't overspend because they were spending money that was actually theirs.They had carved out the money and put it in the tax vault, which led them to real confidence, because their finances finally matched the reality on the ground. And they've become a real business owner. Not just a creator making money, but a creator keeping money. And that's really the key.And if you remember nothing else from this episode, I want you to remember this. You don't have a tax problem. You have a timing problem. And timing is something you can fix.The truth is, most creators wait until April to get serious. The ones who win, they fix it right now, in May.If you're ready to stop guessing in your content creator business and start running your creator business like a real business, I want to encourage you right now, go to contentcreatorsaccountant.com/helpme. I'll help you. I'll help you make this work for you. I'll help you grow, keep, and make sure this works for you.So until next time, I'm Ralph Estep Jr. And I am the Content Creator's Accountant, and I help creators protect, keep, and grow what they can. You work so hard for it. Let's do that together. Have a great day today.