One of the things we see most overlooked with brands or agencies paying out UGC creators is properly filing their taxes. It’s absolutely crucial that you get this right, or else you and your business are at risk of fines and penalties.

The good news is that it’s very easy to get an understanding of how to properly handle taxes in the United States. We always advise getting an accountant, or even a tax lawyer if some things are very complicated for your specific situation (we are not lawyers or accountants, and this is not legal or official tax advice), but you can get a very general sense of how to be compliant quickly.

Let’s jump into it.

What taxes are in play here?

There are two main tax compliance tracks you need to be wary of: 1. Bookkeeping with invoices, for business deductions, and 2. IRS reporting and withholding paperwork.

I’ll explain it pretty simply, one by one.

The first one: Every time you payout a creator, the creator must send you an invoice. This invoice is a crucial document for your business, because it is proof that you paid someone else for a service, and therefore that money was paid out as a business expense. These costs are generally deductible and reduce overall taxable income.

The second one: Every time you payout a creator over $2000 total within a year (as of 2026), the IRS requires you to declare that as an amount disbursed, and it must be reported on the receiving party’s taxes, in this case, the creator. These must be dealt with using the correct IRS tax forms, you’ll have to collect the W-9 or W-8 BEN(-E), and issue a 1099-NEC when the threshold applies.

The 1099-NEC form is a standard form used to handle tax compliance pay contractors (which your creator is, in this case) for work that they did. The 1099-NEC is only applicable to United States persons. It is your responsibility to collect the right tax form, a W-9 in this case, and file what is required. The 1099-NEC form tells the contractor that, in most cases (but not all), no tax was withheld on their behalf and they must pay the taxes on their own.

The W-8 BEN (W-8 BEN-E for entities) is a standard form used to certify non-United States tax resident contractors and their foreign status (and treaty claim, if any). It’s your job to request and hold onto this form and apply the correct withholding and reporting treatment. The W-8 BEN(-E) tells the IRS that the contractor has foreign status claims (and potential treaty claims), and the contractor handle taxes on their own.

Handling the Invoices

We’ll knock off the easy one first. In order to be able to report these creator payouts as business expenses, you must have a paper trail of information leading to the creator to prove that the payment was done for business reasons. This comes in the form of an invoice.

The creator must invoice you, and must invoice you correctly using their legal name, address, tax ID (if applicable), and the date. If they have a business, it must be included there as well. This invoice must be addressed to you or your business. This should be in a non-editable format, like a PDF, and saved for tax season.

Many creators are not well versed in properly issuing invoices, so it is absolutely crucial that you look through all the invoices and ensure that they are made out properly.

Handling the Tax Forms

This is the harder problem out of the two.

You can file these yourself with the IRS, there are tools online for you to do it, however that can become a very big hassle, very quickly.

Lucky for you, there are some platforms that natively handle this.

Deel

Deel is known for being the go-to option for paying out contractors globally, and they take care of all the compliance and taxes for you. Contractors must onboard, individually, each time. Total cost is, at cheapest, $49 per contractor, per month.

Gusto

Gusto is another payroll provider based in San Francisco, it’s also capable of paying contractors out globally, with full compliance. Contractors need to onboard, individually, each time. The total cost here is, at cheapest, about $35 per month, plus $6 per contractor per month, and an additional add-on for the global contractor payouts option.

Grade

Grade is a payroll system built specifically for creator payouts like this. We handle all of the global tax compliance, invoices, analytics tracking, and so much more. There is no onboarding for creators, and no overhead for brands or agencies. Total cost is $0 per month and $0 per creator, just a small 5% fee is charged to creators on payouts.

How Big Brands and Agencies Deal with Tax Compliance

We have worked with many large brands and agencies globally, which pay creators all around the world. The most common method of dealing with tax compliance is by using one of these payroll solutions.

Many of our customers previously used Deel, and are now using us exclusively to manage their global creator payroll. If you chose not to use Grade, we would probably recommend Deel.