How Influencers are Taxed
Being an influencer comes with many perks and advantages. You get to enjoy your interests while making money at the same time. But what should you do come tax time? Are you a business, or an employee? Here are the intricacies of social media influencer taxes in the US, and how to stay on top of your annual tax obligations as a leader in social media.
Influencers are Independent Contractors or Self-Employed
In most cases, if you earn money as an influencer you are considered to be working as an independent contractor for the brands you promote. In this way, you are self-employed. With a job as an employee, your taxes are automatically withheld from your paycheck.As a self-employed (SE) individual, however, you are responsible for withholding your own tax from the money you make each time you are paid as a contractor.
One of the first steps to ensuring you are ready come tax time is to set aside money for paying taxes each time you earn it. The general rule is to set aside between 25% and 35% of your income. It may be that you end up owing less (or more) than this, but this amount ensures you have a general ballpark amount set aside to pay your tax bill when you need it.
SE individuals are required to pay SE tax as well as income tax. SE tax is a Social Security and Medicare tax you must pay as this is not automatically withheld from your paychecks.
Taxes can become complicated as an influencer at times. If you earn money promoting companies and brands outside of your home state, in some cases you may be required to file multiple tax returns in order to cover all your state taxes.
When is Social Media Considered a Hobby?
If you earn over $600 as a social media influencer, you are required to pay tax on that income. It’s at this point that social media activity becomes a job and not simply a hobby.
Social media influencers can make money in various ways. These can include, but aren’t limited to, earning money for:
- Posting sponsored posts and blogs
- Selling ad space on your page
- Podcasts and webinar
Influencers may be paid to promote a brand through posts on their platform, or by promoting products and services to their followers through blog posts. You may also earn income selling ad space to brands on your personal pages, or having followers pay to access content such as a podcast or webinar you have created in collaboration with a brand.
What Expenses Can I Deduct as an Influencer?
As an influencer, you are running your own business. Good news! This means you can deduct your expenses incurred doing so at tax time. Influencers can write off all kinds of things from part of your phone bill, to fees you pay for apps that you use for your influencer work, to office supplies, makeup bills, and gas that gets you to events you document on social media. For a more comprehensive list of ideas click here.
(As a side note, if the IRS determines that you are an influencer hobbyist and not self-employed, you will not be able to deduct expenses).
What Tax Forms Do Influencers Need?
Generally speaking, as an influencer earning money, you will receive a FORM 1099-NEC from each brand that you have partnered with over the previous tax year. These are companies that have paid you $600 or more for your work. Projects that have earned you less than $600 are not obligated to supply you with this form, however, you are still responsible for reporting this income on your taxes.
Yes, You Can Get Consolidated 1099s with MatchPoint
At MatchPoint Connection we specialize in helping you get ahead in the world of influencer marketing. Our unique platform allows influencers and brands to meet easily in the digital world and to transact with each other.
We go that extra mile and help you finalize your influencer taxes. As an influencer, you may end up with multiple 1099s from various sources at tax time. It can become confusing!MatchPoint Connection offers you consolidated 1099 filings. So, if you have worked with 20 different brands through our platform in the past year, we can supply you with a consolidated 1099 form that aggregates all of your influencer income from the year into one form. It’s our way of helping you save time and effort while streamlining your interactions as a SE individual. We make it easy!
Get started today by downloading our app and creating a free profile.