Overview of IRS Focus on OnlyFans
In 2020, OnlyFans posted a gross revenue of $2.3 billion. Just one year later, that figure increased to $4.8 billion. When the IRS sees that a single industry is producing this level of growth and revenue, it is just a matter of time before they will begin to investigate the entity and its officers.
Current IRS Investigations
In the last month, our firm has received numerous phone calls from individuals connected to OnlyFans. Under investigation, these are the items that are being examined by the IRS:
- Bank statements
- Social media revenue
- Expenses related to OnlyFans income
Bank Statements
These will show the amount of money being deposited into the accounts of individuals connected with OnlyFans. This is used to determine their gross income.
However, there is another element that must be examined — Schedule C and transfers. Many OnlyFans contractors have 1099 income that is sent to their individual Social Security number.
In turn, you cannot simply 1099 that income from yourself to your own S-Corporation and then take a dividend from your company. That is the equivalent of creating a shell company.
Social Media Revenue
Simply put, many individuals are not reporting this income. Just like a contract job at FedEx, you have to report the 1099 income that you receive from platforms like:
- TikTok
- YouTube
Expenses Related to OnlyFans Income
Section 162 of the Internal Revenue Code clearly states that expenses must be in the ordinary and necessary course of business.
For example:
If you are a dog groomer, but you have expenses related to the construction industry such as the purchase of heavy construction equipment, the IRS will likely undo those expenses.
Similarly, if you are a model at OnlyFans, deducting any expenses requires you to have a clearly defined need for the expense. It must be related to your line of work and work description.
Contact an Experienced Tax Attorney
If you have been contacted by the IRS, call our office to discuss your case.
Frequently Asked Questions
Is OnlyFans income taxable by the IRS?
Yes. Income earned through OnlyFans is considered self-employment income and must be reported to the IRS. This includes all payments received through the platform and any related revenue streams, such as tips or paid messages.
What kind of financial records does the IRS examine for OnlyFans creators?
The IRS typically reviews bank statements, 1099 forms, and any relevant social media income. These records help determine the total gross income and whether the income is being reported accurately.
Can I deduct personal expenses as business expenses for my OnlyFans work?
No. Only expenses that are “ordinary and necessary” for your business, as outlined in Section 162 of the Internal Revenue Code, are deductible. Personal expenses or unrelated business costs can be disallowed by the IRS during an audit.
What happens if I transfer OnlyFans income to my S-Corp?
If you receive 1099 income personally and then transfer it to your S-Corp without a proper structure, the IRS may view this as a shell operation. This can trigger penalties and legal scrutiny.
Do I need to report income from other social platforms if I’m an OnlyFans creator?
Yes. Income from platforms like Instagram, TikTok, or YouTube is also subject to IRS reporting. Failing to report these earnings could lead to back taxes, interest, and penalties.