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Google to Begin Deducting Taxes From YouTube Creators

Google to Begin Deducting Taxes From YouTube Creators

In a move that will affect the income of millions of content creators, YouTube has announced that it will soon begin withholding federal income taxes on creator earnings generated from viewers in the United States. The policy change is set to kick in as early as 1 June 2021.

The video streaming giant has asked creators in the YouTube Partner Program to submit their tax information to determine their tax obligations.

Affected earnings include revenue generated by viewers in the U.S. through ad views, YouTube Premium, Super Chat, Super Stickers, and Channel Memberships.

Why is this happening

Google rolled out the new policy to comply with its obligations under Chapter 3 of the U.S. Internal Revenue Code. 

Under current tax rules, withholding agents that pay income to foreign persons are required to collect tax information, withhold income tax, and report to the Internal Revenue Service (IRS) any U.S.-sourced earnings.

Google sets May 31 deadline for YouTube tax information

In a statement to the YouTube community, Google has asked creators to submit a tax form in Google AdSense. The information would then be used to determine the correct amount of taxes to deduct, if any apply.

"All monetizing creators on YouTube, regardless of their location in the world, are required to provide tax info. Please submit your tax info as soon as possible," Google said on a support page.

Creators have until 31 May 2021 to comply with the new rules. If they are unable to provide the relevant tax information by the deadline, Google may have to withhold up to 24% of their total earnings worldwide, not just from U.S.-based viewership. 

Without the tax information, Google would have to default to U.S. tax rules to calculate a creator's tax liability. U.S. tax residents are taxed on their worldwide income.

However, once a creator submits their tax information, the tax will only apply to their U.S. viewership, and a different tax rate kicks in.

What's my tax rate

Your exact tax rate will depend on where you live and whether your country has an existing tax treaty with the United States. You can take advantage of YouTube tax deductions if you live in a country with a favorable tax treaty.

For instance, creators in the United Kingdom are exempt from paying taxes thanks to the U.K.-U.S. tax treaty, while Korean creators only have to pay 10 percent tax.

Google has streamlined the process for YouTube creators. Once they have uploaded their tax information to Google AdSense, the platform will automatically calculate their tax rate based on existing tax treaties.

Policy change won't apply to U.S. creators

The new policy only affects YouTube creators that live outside of the United States. YouTube creators based in the United States have already submitted their tax information—a requirement for joining the YouTube Partnership Program.

No additional taxes will be imposed on U.S.-based creators.

How to file YouTube taxes

You can always prepare your tax return yourself. However, the U.S. tax codes can be difficult to understand, and mistakes on your YouTube tax form can lead to expensive penalties and fines. To prevent any mishaps, talk to a tax professional.

Ines Zemelman, EA
Founder of TFX