Do you dread taxes or worry you aren’t using the right entity for your speaking business? In this post, we are going to tackle how to pay taxes as a speaker. As a full-time speaker, I sometimes get asked about how to structure a speaking business for tax purposes. The first thing to know is that there is no one “right” way to do it. It depends on your particular situation. That said, there are some general principles that can help guide you in making the best decision for your business. We’ll tackle those more in detail below.
You may be wondering some of the following questions. For instance, you may want to know, What are the differences between an S Corporation, sole proprietorship, and an LLC? What are the benchmarks you should be looking for when moving to an S Corp? How do you set aside money for taxes? What can you write off as tax-deductible? What happens when your business crosses state lines?
Want to know the answers to all of these questions? Then this is the article for you! To learn more about how to pay taxes as a speaker, read on. (Disclaimer: we are not tax professionals here. If you want professional legal or tax advice, reach out to your local CPA.)
Determining your tax status as a speaker
Josh Bauerle, CPA, accountant, and all-around tax wizard joined the Speaker Lab podcast to talk about how to pay taxes as a speaker. Josh has started his own business working directly with entrepreneurs as a CPA. Between tax entities, business entities, and deductions, there’s a lot to know, and Josh has you covered. Josh has worked as an accountant for over a decade, and currently works as a CPA for Entrepreneur on Fire as well as running CPA on Fire. In this episode, he talked through the different types of small business classifications and how taxes factor into each of them.
Tax structure options for your speaking business
The first step to figuring out taxes as a speaker is to understand the difference between an independent contractor and an employee. An independent contractor is someone who is in business for themselves. They are not an employee of the company they are contracted to work for. This means that they are responsible for their own taxes and expenses. An employee, on the other hand, is someone who works for a company and is paid a salary or hourly wage. The company is responsible for withholdings and payroll taxes.
As a speaker, you will most likely be considered an independent contractor. This means that you will be responsible for paying
1. Self-employment taxes
2. Income taxes
3. Estimated taxes
Self-employment taxes are Social Security and Medicare taxes. As an employee, these taxes are usually withheld from your paycheck. But as an independent contractor, you are responsible for paying them yourself.
“As both a sole proprietor and an LLC,” Bauerle said in the podcast, “not only are you going to pay the ordinary taxes at whatever your ordinary tax rate is, they are also going to turn around and crush you with what they call self-employment tax…this is an additional 15.3% tax on top of what you are already paying.”
“You are basically an independent contractor,” said Grant Baldwin on the same episode of the Speaker Lab Podcast. So event organizers will send him a 1099 form at the end of the year, saying that they hired Grant, and paid him $1000 (or however much) for his services. They also send that to the government saying, we paid Grant $1000, so make sure Grant files this on his taxes.
“As your speaking business grows, by the end of the year, you start to have a lot of 1099s,” Baldwin said. As a result, you “have to make sure that’s all categorized and filed correctly.”
S-Corporations for your speaking business
One way you can start saving some taxes is as an S corporation, Bauerle said. As with the LLC, all the money flows through to you personally. You pay all the ordinary taxes on it, but you are not going to get hit with those self-employment taxes. You’ll still have to pay payroll taxes of 15.3%, the same as the self-employment taxes. But you can keep your salary as low as possible so that your tax savings come on the difference between those profits and your salary (usually the lowest the IRS allows is 25% to 50% of net income).
You do not want to make this move too soon because there are expenses involved with maintaining that S corporation, Bauerle said. The big expense is putting yourself on payroll and paying a payroll company for that. His general guideline is once you hit $30,000 in net income, after all expenses are accounted for, consider pursuing this route.
If you are a sole proprietor or only owner of an LLC speaking business, you need to actually report your 1099s received separately in your tax return. Where a lot of people run into problems is that they report the income, but they do not actually show it as a 1099 form received. So the government will send you a notice saying, Hey, you had this $30,000 that you did not include on your tax return, so please send us the $5,000. Then you have to backtrack and prove that you did report it.
Tax deductions for speakers
What is deductible, and what is not for most speakers? “So here’s the rule,” Bauerle said. “If you follow this rule, you’ll be 90% of the way there. If you spend money on something and you can prove that it either increased your income or decrease the expenses you spend in your business, there’s a good chance we can deduct a portion, if not all of it.”
When it comes to any type of tax deduction, and when it comes to the IRS in general, documentation is the biggest thing to nail down.
Any travel that you are doing directly for speaking is certainly 100% deductible, flights, hotels, mileage, any of that stuff,” Bauerle said. “One important thing to note there is whether the company you’re speaking for reimburses you or not.”
If they do reimburse you, Bauerle continued, they can record that reimbursement amount on your 1099 and then it is going to show as income. So you are going to have to turn around and deduct those expenses on your tax return. Others just give you a reimbursement, and do not report it on your 1099, which means you are not going to be able to deduct that. So make sure you get clarity on how they compensate you for that specific speaking gig. If they pay for your airfare, make sure that you get a receipt for the airfare, the airlines or the credit card statement showing that the airfare was paid by them.
What states to file in as a speaker
If you live in Tennessee, and you come to Ohio and do a speech there, the state of Ohio would more than likely want to charge you taxes on that. How much should you pay?
Most states have a minimum threshold for whether you have to actually file the tax return, often around $6,000. For a lot of states, if you do not make over that $6,000, you’ll be fine.
But not all states are like that. So you can do one of two things. You can look into the rules for every state you’ve spoken in, or you can just file in every single state just to be safe. And people do it both ways. “Either way is fine as long as you’re making sure you’re covered for those states that you actually do have to report and pay in,” Grant Baldwin said in a podcast with CPA Josh Bauerle.
So you’ve now learned a little more about how to pay taxes as a speaker. Clearly, all of the tax implications of a speaking business can quickly become hard to keep track of. And this is where you may want to hire a CPA or a tax professional to sort it out. To add another layer of confusion, if you live in Tennessee and you paid those taxes to maybe Ohio where you spoke, the state of Tennessee may still say, “Hey, wait a minute. Your business still runs in Tennessee, so we need you to report that on your Tennessee return as well.” It can be helpful to have a CPA sort that out for you.
Want to go deeper? In this episode of The Speaker Lab Podcast, Grant Baldwin goes more into depth on taxes for speakers. On this episode, listener Maia calls in with a question about how to pay taxes on the fees you charge as a speaker. She asks if you pay taxes on the entire amount you receive, or can you subtract travel expenses too? For the answer, check out the episode here.
Still want more? Check out our blog post on how to find paid speaking opportunities in any industry. Happy speaking!