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Tax Tips for OnlyFans Creators from The Only Consultant

SWCEO Interviews Katherine Studley

Blog Post Written By: MelRose Michaels

 

In the adult entertainment and content creation world, the path to financial empowerment is often as complex as it is colorful. MelRose Michaels recently sat down with Katherine Studley in a recent Twitter space to peel back the curtain on the unique financial challenges and solutions tailored for the 'spicy' side of entrepreneurship and talk tax tips for OnlyFans creators.


Raised in Buffalo, NY, Katherine is a tax accountant by trade but a creative in essence. 

In 2021, she founded The Only Consultant, a judgment-free consulting firm dedicated to providing tax and financial advice to adult creators, exotic dancers, and other creative freelancers looking for a non-traditional tax experience. She had the idea while scrambling eggs with $400 in her bank account.


Despite having no prior experience in entrepreneurship or the "spicy" industry, it became crystal clear there was an overwhelming need for straightforward, compassionate, judgment-free financial help. Her client list quickly grew to hundreds of small businesses. 


In 2022, she founded Prisma Tax Group to help her clients achieve financial success and peace of mind. The multicolor light beams of a prism are each unique, just like the pathway to success in small business.  By focusing on innovation, collaboration, and empowerment, this is not your typical accounting firm.



MelRose Michaels: To kick off, could you tell us a little about your background and how you became The Only Consultant? What inspired you to end up in this specific industry?


Katherine Studley: Yes. So, I'm an accountant by trade. I have a bachelor's degree in accounting. I worked at several CPA firms in Buffalo and was having a very bad time. I said, "Okay, I'm never doing taxes again. This is sucking out my soul." So, I moved to DC and worked for the intelligence agency for a year. Then the pandemic hit, and I spent much time on social media, where I first heard about OnlyFans. As an accountant, I thought, "Oh my God, everyone is going to get a 1099, and they're going to have to file a 1040 with a Schedule C." I realized this was something I could help people with.


MelRose Michaels: That's perfect. The industry is so underserved and marginalized. It makes sense that this would stand out to you.


Katherine Studley: Exactly. I had no idea how underserved the industry was. I thought I’d make an ebook, do some taxes, and work with OnlyFans creators. I advertised on TikTok, and then exotic dancers, sugar babies, and many freelancers under the sex work umbrella found me. So, I ended up specializing in all of sex work and the adult industry.


MelRose Michaels: Just saying "judgment-free" goes a long way. What are some of adult creators' most common misconceptions about their taxes?


Katherine Studley: Many people are confused about which tax return they need to file, whether they need an LLC to take write-offs and business expenses, and if they have to set themselves up on a W-2 and payroll to pay themselves, which is not the case. Many miss relevant tax deductions and credits because we're never taught how taxes work.


MelRose Michaels: I’ve experienced this personally. When I started in the industry, I had no idea that taxes weren't withheld. By the end of that year, I had a huge tax bill and had to figure out what to do next. It was such a rude awakening. Can you explain the differences between a 1040, 1120S, and 1065?


Katherine Studley: Yes, of course. A 1040 is an individual income tax return due April 15th. If you’re a sole proprietor or a single-member LLC, you file a 1040 with Schedule C. An 1120S is for S corporations. You need an LLC or corporation and then file the S corp tax election, requiring a separate tax return due March 15th. A 1065 is for LLC partnerships with more than one owner, filed if you haven’t made the S corp election.


MelRose Michaels: It’s interesting that different types of tax selections have different filing dates. Can you discuss the pros and cons of filing each way?


Katherine Studley: Sure. An LLC doesn’t equal tax savings; it separates your business and personal assets, protecting you if you’re sued or go bankrupt. An S corporation, beneficial for those consistently earning around $65,000 in self-employment profit, allows you to pay yourself on a W-2 and set a payroll, saving on self-employment tax.


MelRose Michaels: That makes sense. Do you assist creators with estimated tax payments, and why are they important?


Katherine Studley: We generate vouchers for federal and state estimated tax payments. These are quarterly payments to prepay your taxes, avoiding interest and penalties when you file. Payments are due June 15th, September 15th, January 15th, and April 15th. Always file your taxes even if you can’t make the payments to avoid additional fees.


MelRose Michaels: It’s scary and overwhelming. What factors should creators consider when calculating a salary?


Katherine Studley: For S corporations, we review your profit, hours, income streams, and duties to calculate a reasonable salary. Self-employed creators deposit 100% of their income into a business bank account, save 25% for taxes, keep 25% for business expenses, and transfer 50% to personal accounts.


MelRose Michaels: Are there tax deductions that are commonly overlooked by creators?


Katherine Studley: Yes, health insurance, a portion of rent and utilities as a home office expense, phone usage, and miles driven for business purposes are often missed. Track all business-related expenses and keep receipts for audits.


MelRose Michaels: Can you provide tips on effective bookkeeping practices for adult creators?


Katherine Studley: Find a sustainable system, whether a spreadsheet, app, or journal. Track all self-employment income and related expenses by category. Keep receipts organized, and use a separate bank account for business transactions.


MelRose Michaels: How can creators plan for long-term financial sustainability and tax efficiency?


Katherine Studley: Set up proper cash flow, keep up on tax payments, file taxes on time, and consult a financial planner for retirement and investing strategies. Work with a tax professional to ensure compliance and maximize benefits.


MelRose Michaels: Do you have financial planners to recommend?


Katherine Studley: Yes, we have a network of spicy-friendly professionals for financial planning, real estate, mortgage lending, and more.


MelRose Michaels: What are the main tax compliance issues adult creators need to be aware of?


Katherine Studley: Issuing 1099s to independent contractors, filing taxes on time, and filing the beneficial owner's report for LLCs are key. Track all income and issue 1099s for payments over $600.


MelRose Michaels: Are there specific tax planning strategies for adult creators to minimize their tax liability?


Katherine Studley: An S corporation can save significant taxes for those earning over $65,000 in self-employment profit. Track income and expenses accurately, ensure appropriate expense accounts, and work with a financial planner for additional tax savings.


MelRose Michaels: How do you ensure confidentiality and privacy for your clients and creators?


Katherine Studley: We use a customized infrastructure with VPNs, virtual machines, daily data backups, and 24/7 monitoring. All staff are background-checked and educated on the nuances of the sex work industry.


MelRose Michaels: How has the rise of OnlyFans and similar platforms changed the landscape of tax consulting and accounting?


Katherine Studley: There’s more interest in the industry, but many accountants don’t understand its nuances. The industry is shifting towards being more judgment-free, and resources for self-filing taxes are increasing.


MelRose Michaels: Are there unique challenges that adult creators face compared to traditional freelancers or small business owners?


Katherine Studley: Yes, there’s significant judgment and discrimination. Clients often face financial discrimination, such as losing bank accounts. From a tax perspective, it’s the same as other freelancers, but expenses and the stigma differ.


MelRose Michaels: Do you have any success stories where you significantly benefited adult creators?


Katherine Studley: Yes, we've caught clients up on multiple years of taxes, set up S corporations, saving them between $5,000 and $90,000, and amended tax returns to secure refunds. A fresh set of eyes can make a big difference.


MelRose Michaels: Can creators easily transition to working with you if they already use services like QuickBooks or another accountant?


Katherine Studley: We can work together regardless of your current setup. We tailor our services to the industry, ensuring a smooth transition and appropriate support.


MelRose Michaels: Thank you so much, Katherine. This has been amazing, and I’m sure it won’t be the last time we have you on. How can creators reach out to you to become a client?


Katherine Studley: Thank you so much for having me and everyone for tuning in. To become a client, you can fill out the "Become a client" form on my website for more information.


 

Some parts of the above interview have been condensed or edited for clarity. Listen to the entire Twitter space for the full interview.


Find Katherine Studley on Instagram and Twitter


Interested in becoming a client? Fill out the contact form here.


Disclaimer: The views and opinions expressed in the interview are those of the guest speaker and do not necessarily reflect the official policy or position of SexWorkCEO or MelRose Michaels. Anything said or written is of their opinion and is not intended to malign any religion, ethnic group, club, organization, company, individual, or anyone else.



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