From side hustle to small business
As the creator economy expands into what industry estimates place at a $205 billion global market, many content creators are discovering that growth brings new business responsibilities alongside creative opportunity. That shift was a central focus of From Passion to Profit: What Creators Should Know for Tax Season 2026, a February 11 event in Greenpoint, Brooklyn, hosted by H&R Block, which brought together tax professionals and creators to discuss how quickly creative ventures can evolve into businesses facing tax, payroll, and compliance obligations.
Andy Phillips, Vice President of The Tax Institute at H&R Block, framed creators as part of a broader trend affecting small businesses. “Creators are just a microcosm of small business, of the broader small business community,” Phillips said, noting that creators often encounter tax and payroll issues earlier than many traditional entrepreneurs.
Financial pressure is already widespread. Phillips cited research showing that finances rank as creators’ top concern. “Seven in 10 said their biggest business concern is finances, and a quarter said [their] biggest piece of stress or trepidation is taxes,” he said. For payroll and tax professionals, the findings point to a fast‑growing population of business owners scaling quickly but often without formal compliance systems in place.
The W‑2 mindset meets self‑employment reality
A part of the discussion centered on the transition from traditional employment to self‑employment. Many creators begin as W‑2 employees, accustomed to employers managing withholding, payroll reporting, and year‑end compliance. That mindset often carries into their first year of creator income.
“A common mistake new small business owners, including creators, make is they jump into it and don’t think about their taxes and their finances and bookkeeping and accounting early on,” Phillips said. As a result, many delay addressing tax obligations until filing season. “They haven’t paid quarterly estimated taxes, they haven’t been tracking income or expenses closely, and oftentimes they’re left with a large tax bill.”
That realization often comes suddenly. Phillips said creators frequently reach out after recognizing the scope of their obligations, asking: “Hey, I think I’ve gotten myself into a bit of a bind. Can you help me unravel that?” By that point, creators are often reconstructing months of income and expenses, revealing recordkeeping gaps that can complicate both tax filing and future planning.
Contractors first, then employees—and payroll complexity follows
As creator businesses grow, many begin by hiring independent contractors to support production and operations. Phillips outlined basic compliance steps, including collecting Forms W‑9, tracking payments, and issuing Forms 1099‑NEC when required. Even at that stage, he noted, the administrative burden is often underestimated.
The compliance load increases significantly once creators hire employees. “When you get employees, you introduce a whole new set of responsibilities for tracking payroll and submitting paychecks,” Phillips said, pointing to withholding obligations and the employer share of payroll taxes.
Beyond federal income tax withholding, creators must also account for Social Security, Medicare, and unemployment taxes at both the federal and state levels. Phillips explained that “understanding unemployment, state, and federal requirements beyond just income, Social Security, and Medicare tax” is another area where many first‑time employers struggle.
Later in the evening, creators Caitlyn Kumi (founder, Miss EmpowHer), Joe Ando (fashion designer/content creator), and Kyle Bray (“Pickle Pete”) echoed that assessment during a panel discussion with Phillips where adding workers, employees, and other payroll-related functions were described as a difficult inflection point by some in scaling a creator‑led business, noting that hiring even a single employee could foce a long‑delayed reckoning with organization, cash flow, and compliance. Phillips emphasized that payroll errors can carry immediate consequences for workers, making it a challenge that creators can no longer afford to treat as an afterthought.
Reporting changes under the One Big Beautiful Bill Act
Phillips and the panelists also discussed how tax law changes enacted under the One Big Beautiful Bill Act (OBBBA) are impacting creators beginning in 2026, particularly in the area of information reporting. Phillips addressed updated Form 1099‑K thresholds for third‑party payment platforms commonly used by creators.
“Probably the biggest one for this year is the change for the Form 1099-K threshold,” he noted. The OBBBA restores the federal Form 1099‑K reporting threshold to more than $20,000 and 200 transactions, repealing the planned $600 rule for payment apps and online marketplaces. The change affects who receives the form—not whether income is taxable, which must still be reported regardless.
Changes to Form 1099‑NEC reporting were also highlighted, a key issue for creators who regularly contract out work. Starting in 2026, Phillips said, the reporting threshold increases to $2,000 and will be indexed for inflation each year thereafter. While that may reduce the number of forms some businesses issue, Phillips and the panelists cautioned that accurate tracking remains essential, particularly for creators managing contractors alongside payroll.
Entity decisions and the S corporation payroll trigger
As income grows, creators often reevaluate business structure. Many begin with single‑member limited liability companies (LLCs) to obtain liability protection. “A lot of folks start with an LLC,” Phillips said, noting that the entity is generally disregarded for tax purposes unless an S corporation election is made.
Electing S corporation status can reduce self‑employment taxes in certain cases, but it also introduces formal payroll requirements. “You still have to pay yourself a reasonable wage,” Phillips said, referring to the requirement that S‑corp owners receive W‑2 wages subject to payroll taxes.
Panelists emphasized that creators often focus on potential tax savings without fully accounting for the administrative and compliance obligations that follow. For payroll professionals, the discussion reinforced a common reality: an S corporation election does not reduce payroll obligations—it creates them.
Multi‑state work and worker classification risks
Creators’ work arrangements frequently span state lines, adding further complexity. Many hire workers in different states or travel extensively for content creation, events, and brand partnerships. Phillips warned that these activities can trigger unexpected state and local tax obligations.
“If you’re sending people to different cities and different states, you may have to track when [you] need to withhold and submit taxes for that state,” he said. In some cases, creators may also fall under entertainer or performance tax rules with relatively limited physical presence.
Worker classification remains another area of risk, particularly in states with strict standards. The discussion referenced California’s ABC test and New York’s convenience‑of‑the‑employer rule as examples of how easily creators can misclassify workers if they rely on informal arrangements or outdated assumptions.
Compliance hygiene and audit readiness
Throughout the event, attendees emphasized basic compliance practices familiar to payroll professionals. Chief among them was keeping business and personal finances separate. “That commingling is a definite red flag,” Phillips said, warning that mixing accounts can complicate audits and lead to disallowed deductions.
Panelists encouraged creators to maintain separate business accounts for expenses such as travel, equipment, software, and contractor payments. They also discussed the challenge of irregular income, which can complicate payroll funding and tax planning. Several creators described setting aside a portion of income for taxes to ensure funds are available for quarterly payments and payroll obligations during slower periods.
What payroll professionals should take away
For payroll and tax practitioners, the Greenpoint event offered insight into how the creator economy is reshaping the small‑business landscape. As creators increasingly hire contractors and employees, many are encountering payroll, classification, and multi‑state compliance requirements for the first time.
Phillips emphasized that once creators begin hiring, they must be “intentional,” because payroll errors can quickly cascade and “unintentionally cause problems for your workers as well.” As the creator economy continues to grow, payroll, tax, and accounting professionals are likely to see increased demand from creators seeking guidance as they move into employer status.
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