It’s almost the greatest (read: most confusing) time of year! Tax season is almost here! And you know what that means. Yes, it means it’s time to send your accountant every last receipt you’ve had in the past year and hope to whatever deity you worship that they can find a way to turn a McDonald’s trip into a write-off.
But, on the off chance (read: likely chance) you’re not getting as many write-offs as you’re hoping for, it’s *really* important that you don’t accidentally end up overpaying on taxes you don’t need to pay. So, here’s a handy guide to what you *do* need to pay as a TikTok creator working aboard or as a U.S. company working with a TikToker not in the United States.
Quick disclaimer: This isn’t legal or financial advice. ✨Always✨ consult with an accountant or attorney for personalized guidance.
What to Know About Your Taxes as a Creator Abroad
Confused about where you’re paying taxes? Let’s break down some situations to understand what you have to pay where.
Situation: I’m a U.S. citizen living in another country.
Digital nomad who calls (called?) the U.S. home? While some TikTok stars are calling for not paying taxes this year due to the uncertainty about the app’s future in the United States, that will probably not go over so well with the U.S. government. Especially considering that 2024 taxes are due in April 2025, not 2025, and TikTok definitely existed in the U.S. in 2024.
In the U.S., any income from TikTok, including brand deals, is considered taxable, provided it’s over the minimum filing amount. Most TikTok creators are considered “self-employed,” the minimum filing amount would be $400 in net earnings. Also, because TikTok creators are self-employed, they have to pay more taxes than if they were employed by someone else. They have to pay both income and self-employment taxes. In most cases, this means you’re not just paying on April 15. You should be submitting quarterly estimated tax payments. If you’re not paying quarterly, you may be subjected to fines.
All of this probably doesn’t sound like great news, but here’s a silver lining: Americans aboard get a two-month filing extension beyond April 15, the big tax day for the year. Unfortunately, the bad news keeps coming, as you must pay your taxes by April 15 to avoid accumulating interest on your yearly tax bill. That’s a big reason why having a breakdown of your quarterly payments is so important — not to mention staying on top of them.
We’re so sorry, but we have some more not-great news. You also don’t just get to move abroad and stop paying taxes in your home state. States that are considered “sticky states” that make it hard to cut your tax residence include:
- California
- New Mexico
- New York
- South Carolina
- Virginia
You would need to formally cut ties as a tax resident and prove you had a new primary residence by:
- Selling any property you own in said state
- Closing any financial accounts that you had opened in said state
- Selling your belongings in that state
- Moving your belongings out of the state
- Canceling your state ID or driver’s license
- Updating all registrations, including voter, car, and even pet registration for a new location out of state
- Editing all official documents, like estate planning documents, to your new location
Those living in the U.S. who are self-employed generally need Form 1040 to file their federal tax return. But typically, if you live abroad, there’s more paperwork to do (yay, gotta love more paperwork!). You need to file the Foreign Bank Account Report (FBAR) if you have over $10,000 in foreign financial institutions. And no trickery allowed! For example, you still need to file this form if you have two accounts, one with $5,000 and another with $6,000.
If you’re *loaded*, you need to file more. If you, as a U.S. citizen, have foreign assets over $200,000 on the last day of the tax year or over $300,000 at any point during the tax year, you need to file the Statement of Specified Foreign Financial Assets (aka Form 8938).
And seriously, no trickery allowed. The U.S. uses the Foreign Account Tax Compliance Act (FATCA) to ensure that foreign financial institutions share the account info of all U.S. citizens with the U.S. government. Not complying with their tax requirements can result in fines and other penalties.
So, let’s say you live in another country outside the U.S. That *probably* means you’re a tax resident. Most countries have resident-based taxation systems. Taxation rules vary from country to country, so be sure you know the expectations of the country you live in. One of the most common rules is the 183-day rule, which means that if you live more than 183 days out of the tax year in one country, you count as a tax resident.
What if you earned income in a country you never lived in? Again, the answer depends on the country, but the government of that country may tax you even if you’re not a tax resident.
Now that we’ve gotten through the bulk of the bad news — here’s the good news! There are ways to avoid paying taxes on the same income in multiple countries as a U.S. citizen. The Foreign Earned Income Exclusion (FEIE) lets U.S. citizens living abroad exclude a certain amount of their income from U.S. taxation.
As of 2024, that number is $126,500. Just be careful on what you try to exclude. It only counts earned income, so interest, dividends, or other passive income don’t count.
To be eligible for the FEIE, you need to pass two tests (and you don’t even need to study):
- Physical Presence Test: The FEIE only counts for those who have spent 330 days or more in any 365 days outside the United States.
- Bona Fide Residence Test: The FEIE only counts for those who have been residents of another country for at least an entire tax year and have the official documents to back up their claims.
There’s also the Foreign Tax Credit (FTC). If you’re a resident of another country outside the U.S., you may get dollar-for-dollar tax credits on foreign income payments that you can apply to U.S. taxation bills. That’s good news for you since many foreign countries have higher income taxes than the U.S.; qualifying for the FTC *may* eliminate your U.S. tax liability. And as a bonus, you can get tax credits toward your next U.S. tax bill.
For example, let’s say you pay $20,000 to another country, but you owe $15,000 in the U.S. The FTC lets you subtract $20,000 from your U.S. tax bill and then gives you $5,000 in credits toward the following year’s U.S. tax bill.
Situation: I’m a non-U.S. citizen living in another country working with a U.S.-based company.
Let’s keep the ball rolling with more good news! You only pay taxes in the U.S. if you earned U.S.-sourced (read: income from a U.S.-based company) if you were physically present in the U.S. when earning said income. Generally, all non-U.S. citizens working for U.S-based companies pay taxes in their country of tax residence, which is, again, typically determined by the 183-day rule.
What if you don’t technically have a residence where you live for 183 or more days out of the tax year? You’ll generally pay taxes wherever you have the most residential ties. Remember that not paying taxes in your home country can bite you in the you-know-what later. You still want to make sure you’re paying social security contributions even if you’re living outside of your home country because, should you ever need it, you want to know you have the safety net of your benefit entitlements, like unemployment allowances.
You may also be asked by the U.S.-based company you’re working with to complete the W-8BEN form, which certifies that your tax residency is not in the U.S.
What to Know About Your Taxes as a Business Owner Working With a TikToker Abroad
Working with TikTok creators abroad? Here’s what you need to know to cover your behind as a U.S.-based business owner.
Situation: I’m working with a creator living outside the U.S. who is a U.S. citizen.
Generally speaking, if you’re hiring a TikTok creator, you’re hiring an independent contractor. Why does this matter? There are laws in the U.S. that dictate who can and can’t be an independent contractor. According to U.S. law, there are three things to consider to help you categorize employees and independent contractors:
- Behavior: Does your company control what your new hire does, when, and how they do it? Be careful: If you have collaboration rules for posts, like how often someone has to post about your brand, that’s not technically what we’re talking about here. You don’t dictate when the creator posts or expect them to be “on call” to post for you around the clock.
- Financial: Are you controlling the business aspects of the creator’s job? For instance, independent contractors typically use tools not given to them by you or reimbursed for. You *probably* don’t pay for your TikTok creator’s recording equipment, audio equipment, and editing tools.
- Type of relationship: You might want to highlight or star this one because it’s big! Is the work performed a key part of your business? If you run a business that generates TikTok content, you might have hired a new employee to create content. But if you run a frozen food company, your TikTok content is technically not instrumental to your business. The TikToker you hired in no way helps create your core product. Also, if you have an employment contract and are playing employee benefits like health insurance, you have an employee, not a contractor.
These rules still apply if the U.S. citizen is no longer based in the U.S. So, why does it matter that you have an independent contractor instead of an employee? The reason for this will be apparent during tax season. You do not have to pay U.S. taxes on payments to independent contractors. However, you do have to file Form 1099-MISC or Form 1099-NEC for every independent contractor every year if they did more than $600 of work for you in the tax year.
Remember that it’s important that your independent contractor is indeed an independent contractor. Misclassifying employees as independent contractors is a major no-no. You can be held liable for employment taxes and relief provisions.
Situation: I’m working with a creator who is not a U.S. citizen who lives abroad.
If you’re working with independent contractors, whether they’re U.S. citizens or not, the independent contractor is responsible for sorting out their tax obligations and liabilities. If you’re working with a foreign independent contractor, you do not need to report the taxes of that contractor to the IRS.
BUT you need to report any money you pay to said foreign contractor. You need to collect information on the foreign contractor and file Form W-8BEN to show that this person is a citizen of another country other than the U.S. and they are not performing work in the U.S. These forms are valid for three years. If you’re not collecting a W-8BEN, you need to withhold 30% of income tax from the pay of the foreign contractor. So, it’s just a lot easier to stay up on your W-8BEN forms.
Now let’s say that some of the work was done in the U.S. If the independent contractor was based in the U.S. during your working arrangement for at least 90 days and earned more than $3,000, you need to file Form 1099-NEC or 1099-MISC with the IRS for that tax year.
TikTok Taxes Can Be Taxing, but We Like to Make Things Easy
Hopefully, this guide makes navigating your TikTok taxes much more manageable, considering TikTok monetization can be a minefield. Around here, we’re big on making things easier, so we made a tool that simplifies engaging with your audience.
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