Can I Make Myself a W-2 Employee?

Can I Make Myself a W-2 Employee? As platforms like OnlyFans grow in popularity, many creators find themselves wondering about the best way to structure their income for tax and business purposes. One common question is whether it’s possible to classify yourself as a W-2 employee. While this may seem straightforward, the answer involves a mix of personal and business considerations.

W-2 Employment

A W-2 employee is someone who works for a business and receives a regular paycheck. Then, the taxes are automatically withheld by the employer. Typically, W-2 employees are hired by a separate entity like a company or corporation. They are distinct from independent contractors who handle their own tax obligations as self-employed.

If you are a creator on OnlyFans, you are likely conducting your professional activities as an independent contractor or sole proprietor. This means you’re responsible for managing your own tax implication which includes self-employment tax and income tax alongside any other obligations. In order to make yourself a W-2 employee, you would need to create a business entity that employs you.

Steps to Become a W-2 Employee of Your Own Business

If you would like to consider this route, we present our simple guide below:

1. Establish a Legal Business Entity
   • Create a corporation or an LLC (Limited Liability Company) and elect to be taxed as an S corporation if it suits your needs.
   • This step separates the personal income from the business income. It is a vital requirement for becoming your own W-2 employee.
2. Obtain an EIN
   • An Employer Identification Number is an essential number for your business. It is issued by the IRS.
   • Then you will need this to hire yourself and manage payroll requirements.
3. Set Up Payroll Services
   • Use a payroll provider to handle regulars like tax withholding and reporting practices.
   • Payroll services simplify compliance with employment tax regulations.
4. Pay Yourself a Reasonable Salary
   • The IRS requires S corporation owners to pay themselves a “reasonable” salary if they work in the business.
   • This salary will be subject to employment taxes. But the remaining business profits can be distributed to you without incurring additional self-employment tax.
5. File the Appropriate Forms
   • Submit payroll taxes and file W-2 forms annually in order to report wages paid in your structure.
   • Make sure of full compliance with state and federal employment laws.

Attracting Benefits

Significant advantages are presented by structuring the income in such way as outlined below:

• Tax Savings: If you are taxed as an S corporation, you can reduce the amount of income subject to self-employment tax.
• Retirement Contributions: W-2 employment establishes easier contributions to retirement accounts, particularly to 401(k).
• Professionalism: Operating as a formal business has promising features like increased credibility. Demonstrating such professionalism would be considered by future collaborators and corporate brands.

Negative Impacts to Keep in Mind

While the benefits are appealing, there are also unfavorable elements to switching to a W-2 Employee:

• Administrative Burden: Managing a corporation and payroll requires significant time and dedication.
• Costs: Establishing a business entity and maintaining it alongside payroll services are considerably costly operations.
• Compliance: Filing the correct forms and staying fully compliant with employment laws adds extra complicated compliance requirements.

Alternatives Routes to W-2 Employment

If the W-2 route doesn’t satisfy your needs, we would like to indicate other available options as below:

• Sole Proprietorship: Simply continue operating as a sole proprietor and use estimated tax payments for managing tax obligations.
• Independent Contractor with an LLC: Form an LLC for liability protection without electing S corporation status. In this way, operations are simplified while certain legal benefits are still presented.
• Get Professional Opinion of Professionals: A tax expert can ensure full tax compliance while optimizing your tax situation without requiring you to become a W-2 employee.

Smart Questions Before the Switch

• Are the tax savings worth the administrative effort?
• Can your income justify the costs of forming and operating a corporation?
• Do you have a reliable payroll system in place?

Final Remarks

It is possible to make yourself a W-2 employee of your OnlyFans business. Yet, this decision depends on the financial and operational circumstances. The added administrative work and costs outweigh the benefits in many cases. Fortunately, numbers do not lie. The structure as explained above can still be a valuable path to consider.