Some people turn to adult content platforms such as OnlyFans to generate income. Recently, a few that have made significant amounts of money went on podcasts to explain the life and finances of an adult content creator. Some did not make wise financial decisions with the money they made, which includes not paying taxes. These bad decisions came back to haunt them later.
For most of these content creators, their shelf life is short. But if they leave the industry with a large tax bill, can tax collectors have a say on how they make their money to pay back taxes?
Some content creators get into tax trouble because they are not paying taxes as they go, in other words paying estimated taxes during the year. Generally, content creators for sites like OnlyFans are treated like independent contractors which means that no taxes are withheld from their earnings. This means they must pay income taxes on their net income after deducting ordinary and necessary business expenses. But they must also pay self-employment taxes on their net income which is 15.3% of their net income up to the first $184,500 of income, combined with any W-2 employee wages they receive. The latter tax catches many business owners and independent contractors by surprise.
Many of these people are very young and have not had to make serious financial decisions while growing up. So they used their money to buy expensive clothes, cars, and houses. So that leaves little to no money to pay taxes.
Those who continue to stream and consistently make money will eventually pay off any delinquent taxes through an installment agreement. Hopefully they will also learn to set aside any future income and pay future estimated taxes so they won’t get a bill next April.
But one day, adult content creators must choose a different career for various reasons. Some will lose subscribers and other revenue sources as time passes. Others will stop voluntarily and seek to return to a regular life.
The fortunate ones may be able to get (or return to) jobs that pay well. But many creators who later seek a “normal life” confront practical barriers: their prior work may not translate easily into most jobs, public stigma can hinder hiring, and regular employment may pay far less than prior earnings. So when large tax liabilities remain, the only realistic way to generate the cash needed to pay back taxes is to go back to streaming.
So how would the IRS look at a former adult content creator who makes far less money working a regular job? Would the IRS be willing to settle the debt for less than they owe after listening to their story?
The IRS generally settles tax debts for less than they owe in several ways. The first is the partial-payment installment agreement (PPIA). A PPIA is similar to an income-based repayment plan for federal student loans. The taxpayer will pay a monthly amount based on her income and reasonable living expenses. This payment plan will continue until the tax bill is uncollectible due to the statute of limitations which 10 years unless an exception applies. While this plan can be effective, most taxpayers want relief now rather than wait up to 10 years.
The second way is through an Offer in Compromise Doubt As To Liability. This is where you show the IRS that the tax is incorrect. For adult content creators, maybe the tax is incorrect because the tax returns were prepared incorrectly. This may be a solution where a content creator’s manager handled her financial affairs, including preparing and filing tax returns.
The third way to settle a tax debt is by submitting an Offer in Compromise Doubt as to Collectibility. This basically shows the IRS that it is better off settling the tax debt under alternative terms if they believe that a prolonged conventional installment agreement with the taxpayer will nor result in the collection. To be considered for this option, the taxpayer must disclose all financials, including assets, income, and reasonable living expenses. If the taxpayer makes a large amount of money, has significant assets, or both, the IRS will generally deny an Offer in Compromise.
Finally, the IRS allows the taxpayer to submit an Offer in Compromise Effective Tax Administration if the taxpayer has the resources to pay the tax debt in full but has identified special circumstances. According to the Internal Revenue Manual, the IRS may compromise to promote effective tax administration where compelling public policy or equity considerations identified by the taxpayer provide a sufficient basis for compromising the liability, and there are no other grounds for settling the tax debt.
Can a former adult content creator settle her tax debt through an Offer in Compromise Effective Tax Administration? Can she successfully argue that forcing her to return to streaming adult content to pay taxes is a violation of public policy or is an affront to public morals?
The federal tax laws and the IRS’s operating procedures do not force taxpayers to get a certain job that will most effectively pay an outstanding tax debt Taxpayers remain free to accept lower-paying work and the IRS adjusts installment agreements or evaluates collection potential according to actual income and allowable expenses.
The Treasury Regulations give examples as to when settling a tax debt due to public policy may be considered. But generally, they involve cases where the taxpayers are senior citizens with fixed income and no assets, and people will serious health problems requiring expensive medical care. They also do not list occupations (or former occupations) that deserve special scrutiny or special treatment. The IRS is not authorized to act as an arbiter of the social acceptability of legal income sources.
Adult content creators who experienced sudden high earnings but failed to plan for taxes may not get special treatment or much sympathy because they left the streaming industry. They can use existing settlement programs that can address inability to pay or genuine living-expense hardship. The public-policy/equity branch of the Offer in Compromise Effective Tax Administration remains tightly constrained and is not a vehicle for moral judgments about OnlyFans work or for preferential treatment.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email
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