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Curious to know how the Canadian tax system applies to OnlyFans (OF)? Generally, you are responsible for paying your portion of income tax if you have joined OnlyFans as a performer and have begun earning money.
Whether making $10 or $100,000 on the site, you must record it to the Canada Revenue Agency (CRA) as income from self-employment. A person’s line of work is of little concern to the CRA. Taxes are simply due to the government.
You may file your Canadian taxes quietly, thanks to how direct OnlyFans taxes are for Canadians. Another perk of being your own boss is the potential for a lower tax payment through tax deductions.
If you’re an OnlyFans performer, you’ll find all the information you need to file your taxes here.
Do OnlyFans Creators Have to Pay Taxes?
Yes, OF creators are required to pay their taxes. All earnings made as an OnlyFans creator are considered taxable income. Subscription fees, pay-per-view purchases, and tips are just a few examples of the types of income that may come in for an OnlyFans creator.
What Happens If You Don’t Pay Your Taxes?
Not filing your tax return may result in a late-filing penalty. Further, you may be subject to a daily compounding interest as CRA’s prescribed rate (3% in 2022). Be sure to file your tax returns on time to avoid fines and penalties.
Can OnlyFans Creators Be Considered Business Owners?
Yes. Your status as an OnlyFans creator is equivalent to that of an individual engaged in business, which meets the definition of business in accordance with the income tax act. Please note you must include all your taxable services (Subscription fees, Collaborations, Ads) when computing your gross revenue. This can be off-set by claiming deductible business expenses, which can reduce your taxable income.
Understanding Your OnlyFans Payments
All bank deposits received by creators are only 80% of their advertised subscriptions. This is due to OnlyFans deducting 20% as their administration fee prior to disbursement. Therefore, you should vary when reporting your sales correctly on your tax return.
Contact our professionals at FShad CPA Professional Corporation, and we can assist you with your tax return, so you never miss a deadline!
You may be inclined to report only 80% as sale, as that’s what you received in your bank account. However, the correct procedure is to report 100% of your sales (add-back the 20%) and claim 20% as an administration fee on Line 8871 (the “Management and administration fee”) on T2125 – Statement of Business or Professional Activities.
Here is an example of a possible scenario:
In 2022, your subscriptions totaled $100,000 through your 10,000 subscribers who paid $10 per year. However, you only received $80,000 in your bank account. What would be the correct way to report taxes?
You report $100,000 as total revenue and deduct $20,000 (20% x $100,000) as an admin-fee. This will give you a taxable income of $80,000. If you report only $80,000 as income and CRA finds out as part of their inquiry, they will require you to correct the error in reporting (though trivial) and may review your tax return on an annual basis in subsequent periods.
OnlyFans is a British company with a tax treaty with Canada. Therefore, you are not subject to pay taxes in the United Kingdom as long as payments have been made in Canada.
Claiming Your Business Expenses
On your tax return, you can claim any business-related expenses. If you’re an OnlyFans creator, you may have expenses like rent or mortgage, cell phone bill, internet, advertising, staff/assistants, photographers and equipment (camera & computers).
Freelancers often fail to claim all their eligible business expenses which results in a higher tax bill. Another pitfall is when individuals claim 100% of their home-office expenses for business purposes. However, you’re only eligible to claim a portion of home expenses that relate to business purposes. Please, contact FShad CPA Professional Corporation and we can help you with understanding this difference.
Since your payments are coming from international bank accounts, you will be subject to foreign exchange rates. These foreign exchange rates often result in currency losses due to fluctuations in currency accompanied with banking fees. Depending on your bank account currency and accounting processes, you may be eligible to claim losses on foreign exchange, business expenses and any wire-transfer fees.
You need to keep receipts if you want to claim business expenses. These receipts prove how much you spent and will help if you are audited by the CRA. CRA will deny all expenses for which you fail to provide an associated invoice. It is important to note, CRA does not accept bank statement transactions as an invoice, nor credit card receipts!
Our recommendation is for you to take a picture or scan the invoice through your smartphone, and save the file on a cloud-based software (i.e Google Drive, iCloud). Save the file in the folder for their respective tax-years – for example, all invoices and expenses relating to the 2022 tax-year would be saved in a folder labeled “2022 – Receipts”).
Filling Out the T2125 Form
If you are self-employed, you need to fill out a T2125, which is a Statement of Business Activities. Your net income is simply your business earnings, less the expenditures.
Please note you’re able to report your OnlyFans side-hustle on the T2125 in addition to holding a full-time job. You’re not limited to reporting only as a full-time employee while running a business – this may be similar to working full-time in the morning at your corporate job and operating as an Uber Driver in evening. In both cases, you will need to report your income on T4 from your full-time job and prepare a T2125 for the Uber service.
Contact Fshad CPA Professional Corporation to prepare your corporate tax return correctly.
Sales Tax (GST/HST)
If your gross sales as a sole proprietor for the past four calendar quarters is a total less than $30,000, you are exempt from GST/HST registration.
Your earnings are “zero-rated” since they originate primarily from overseas companies like OnlyFans, headquartered in the United Kingdom. This means that the effective sales tax rate is 0%. However, you can still recoup any GST/HST paid or payable on-purchases and operational expenditures by claiming input tax credits (ITCs). However, there are situations in which enrolling before reaching that income threshold (called “voluntary registration”) is advantageous.
Depending on your business’s income, you may need to file sales tax returns once a year, four times a year, or once a month.
Registering for a GST/HST Number
Effective July 1st of 2021, significant changes were made to the GST/HST rules in Canada. These rules specifically target online platforms (i.e. OnlyFans, Netflix, Amazon, Airbnb, Facebook) operating outside of Canada who avoid their GST/HST obligations – even if they are selling their goods and services within Canada. The purpose of this rule was to level the playing field and allow Canadians to remain competitive.
Subject to these new rules, OnlyFans is now required to register for GST/HST, collect the GST/HST on sales to subscribers and remit it to the CRA. This means OnlyFans creators are not liable for paying HST twice on their income, as it was not collected by them.
When your annual freelancing income in Canada exceeds CA$30,000, the Canadian government requires you to apply for a GST/HST number. After registering, you must begin including tax in your service prices. The difficulty is that you can’t collect taxes through OnlyFans because you can’t enter your GST/HST number.
Sadly, the CRA thinks you should be collecting taxes. Producers of original content have assured us that only the proceeds from those sales are subject to tax (what you make after OnlyFans takes their cut). In addition, you wouldn’t add in any gratuities or presents you’ve given.
Assume, for the sake of argument, that you are a resident of Ontario who has chosen to register for HST and your entire income is $50,000 – that is, after the OnlyFans fee, but before any subscription tips. This way, you received $44,247.79 in revenue and an HST of $5,752.21.
Although this is frustrating, consider that you would be losing 20% to OnlyFans, up to 13% in sales tax, plus the standard taxes you pay on your income. Feeling like you’re being taxed twice is a valid perception!
For comparison, Canadians can automatically enter their HST number on comparable sites to collect taxes on services. None of that applies to OnlyFans.
Content providers should opt for the expedited way of calculating HST rather than the standard method. It will not only lessen the workload but also probably lessen the amount of HST you owe.
Unlike other companies, OnlyFans will not withhold income taxes from a Canadian user’s pay. In light of this, it is incumbent upon you to ensure that you save sufficient money each year to cover your tax liability when the month of April comes.
A tax calculator can help you determine your potential tax liability and marginal tax rate. We advise keeping your tax savings in a separate bank account (preferably one with a high-interest rate) and setting aside a certain amount from each paycheck following your typical tax rate.
Tax Best Practices
Find a qualified CPA tax accountant and work with them all year to ensure you are prepared to file your taxes when it comes.
Take advantage of accounting software or hire a bookkeeper (or a virtual accountant). As a result, you won’t have to worry as much about keeping track of every penny spent in preparation for tax time. We recommend using Quickbooks Online as our go-to accounting software.
Get yourself a new bank account to place all your revenue, and from which you can pay all your outgoings. This raises the likelihood of a positive audit by clearly delineating your company activities from your private life. Similarly, it’s best to maintain your personal and professional spending on different credit cards.
Use your phone’s camera to scan receipts and create copies of them for easy filing.
Canada Pension Plan Contributions
Employee CPP contributions are due if your self-employment revenue exceeds $3,500. The maximum yearly pensionable income in 2022 is $64,900.
Using Your Credit Card for Business
Your professional costs can quickly become mixed in if you use the same credit card for both.
You may want to apply for a business credit card, like the American Express Business Platinum Card. Keeping your business costs separate from your personal ones is much simpler with a credit card that serves only that purpose (and keeps them private). It’s worth noting that the cost of your business card’s annual renewal may be tax-deductible!
When You Should Use an Accountant
If you’ve been keeping track of your earnings and expenditures, you should be able to handle filing your Canadian taxes for OnlyFans on your own. It is common for younger people to have a family member take their tax preparation. Doing your taxes is simple, so it’s not strange to tell a loved one that you want to gain independence in this area.
It’s easy to see the lines when following tax regulations, but a tax professional may be more appropriate for some individuals. An accountant will not judge you for working in the sex work industry.
However, anyone who typically relies on friends or family to file their taxes would also benefit from seeking a professional’s assistance. Having that close friend or relative spread rumors about you is the last thing you need!
Tax Savings: How Much Should You Save?
Canada uses a progressive tax bracket system which varies on the amount of taxable income you earn in a tax-year. For simplicity, marginal tax rates are used to get an accurate estimate on taxes owing. As a rule of thumb, we recommend putting away 35% of your income for taxes.
All sources of income are taxable. As we mentioned before, you’re able to hold a full-time job and operate a side-hustle. In a full-time job, your paycheck is usually paid net of taxes-withheld – in other words, your employer deducts your income taxes on each paycheck and remits it to the CRA on your behalf.
As a sole-proprietor, you are responsible for paying and managing your taxes. As mentioned earlier, OnlyFans is not responsible for paying income taxes on your behalf! Therefore, to determine how much to save, in order to pay for your taxes (on your OnlyFans side hustle), we need to determine how much income you’re earning in total.
We have no doubt you’re an incredibly successful entrepreneur earning in the highest tax-bracket in Canada. Therefore, we recommend saving at least 35% of your OnlyFans income for paying for income taxes, though we anticipate the actual amounts to be north of 45%. You’re able to reduce your tax liabilities by incorporating, where you pay less in taxes.
Please contact FShad CPA Professional Corporation to start discussing on how to incorporate tax advantages.
Utilizing Foreign Exchange Rates and Bank Fees
The difficulty of receiving payment is a big problem for Canadian content providers on OnlyFans. The following are your current choices:
The best approach to convert dollars is through a bank transfer to the local currency. You need to make a few adjustments to convert US dollars to Canadian currency.
Verify beforehand if your already-established bank has any presence in the States. If they allow it, you can create a bank account with them in the United States – TD Bank, for instance, is a bank with locations throughout the United States. Therefore, to open a bank account in the United States, you could contact TD Canada!
Incorporating Your Business
The decision to incorporate ads into your OnlyFans work is something to consider if you’re a high-income content creator on the platform (instead of being a sole proprietor). Although there is some administrative work involved, the financial benefits are substantial. All you have to do is:
- Hire a lawyer to do your incorporation
- Make sure the share structure is correct
- Hire an accountant to prepare your T2 corporate returns
- Get a bank account in the company’s name
- Prepare your certificate and articles of incorporation
- All money must go to the corporate bank, and any money left in the company is taxed at 9% federally and at whatever your local rate is. In Canada, Ontario has the highest provincial rate at 3.2%
- Then, you plan with your accountant and financial advisor about how best to take your money out of your corporation or invest it within it
To Canadians, paying OnlyFans taxes is the same as paying freelancer or self-employed taxes. The Canada Revenue Agency (CRA) does not care what you do, as long as you file your tax return and pay what you owe. The CRA sees OnlyFans as no different than any other independent contractor.
- Will OnlyFans Show Up on My Taxes?
As part of the tax filing process, you must list your occupation. You might call yourself a writer, editor, or video game designer. It is optional to include OnlyFans as a source of income.
- Is Every Content Creator On OnlyFans Subject To Taxes?
Yes. Any OnlyFans creator who earns taxable revenue must pay taxes on that income; otherwise, the creator would be subject to penalties.
- Are OnlyFans Content Creators Considered Self-Employed?
OnlyFans creators who do not work for a company are considered self-employed.
This publication is produced by FShad CPA Professional Corporation as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors. Your use of this document is at your own risk.