Updated: Oct 15, 2023
A career as an influencer did not exist a few years ago, but today it constitutes a very lucrative career path. Because the space is new, there are a lot of myths that need debunking so you can confidently navigate your taxes.
A career as an influencer did not exist a few years ago, but today it constitutes a very lucrative career path. Because the space is so new, there are a lot of myths that need debunking so you can confidently navigate your taxes.
It’s essential to your financial health and compliance to understand the tax rules as an influencer. In this post, we’ll debunk some of the most common myths surrounding influencers and taxes.
This is demonstrably false for several reasons. One of those is the relatively low threshold for filing taxes in the first place. The IRS stipulates that if you have $400 or more annually in net earnings, you’re required to file an annual return as a self-employed individual. It’s very easy to reach that mark and many influencers earn substantially more than this.
This depends on the nature of the gift. If a brand “gifted” you a product or service in exchange for a review or post, you must report that as income. These arrangements are considered “barter”, which is a trade of like value for like value. Those situations are taxable. The IRS states that “you must include in gross income in the year of receipt the fair market value of goods or services received from bartering.”
If a brand gave you an unsolicited gift with no strings attached, you do not need to claim that as income.
It’s easy to see how this myth got started. After all, many legitimate business expenses are write-offs. However, that’s not true for all of them. It’s important to understand that only those expenses directly related to maintaining or operating your business can be written off on your taxes. Personal expenses cannot be.
What does this mean? Here’s an example. Let’s say you purchase a piece of clothing solely for use for a series of posts, that you’ll rarely use for personal needs. This expense is tax deductible. However, if that same piece of clothing is mentioned in a post and you use it in everyday use, it wouldn’t be tax deductible.
We can take this example in other directions, too. Suppose you went on a trip to Spain. It is likely that not 100% of the trip was for business, but rather for personal pleasure as well. You can only deduct the portion of the trip that was related to business purposes.
The rule of thumb is simple: if it’s for business needs, it is probably at least partially tax deductible. If it’s for personal use, it is not deductible on your business taxes.
This myth is technically true. You can avoid taxes by not reporting your influencer income. However, that’s illegal. It’s tax evasion and in a best-case scenario, it would mean paying fines and penalties. In more serious situations, it could mean facing criminal charges. The law is clear –– you must report all qualifying income and if you earn $400 a year or more as an influencer, you’ll need to file as a self-employed professional.
Hiring an accountant is an unnecessary expense only if you have the same level of financial experience and expertise. Even then, most ex-accountants would hire a professional to handle their finances so that they could focus on what they do best. It’s always worthwhile to hire an experienced professional to help you build a strong financial foundation.
And the return on investment doesn’t just include saving time or hassle, either. It helps ensure that you calculate the tax due correctly, avoid missing filing deadlines, improve the accuracy of your tax filings, and ensure that you get all the deductions you’re due.
Influencers need to understand that income is taxable once the platform or brand pays you and not when you use it or transfer it to your personal account. As soon as you’ve been paid, that money is counted as income. It doesn’t matter how long it stays outside your personal account. You must ensure all your income is reported on time, whether it’s in your account or still waiting to be transferred.
Not necessarily. The primary purpose of your trip should be business-related. Merely documenting a personal vacation doesn’t automatically make it a business expense.
It depends on the arrangement. If it’s compensation for services provided, it might be considered taxable income. Always consult with an expert for specific situations.
Regularly review your deductions, keep comprehensive records, and work with a tax professional familiar with the influencer industry.
Influencers can enjoy lucrative careers. However, it’s important to understand your requirements when it comes to taxes. Be proactive and learn what’s required of you as soon as possible. Consult with an experienced professional to ensure that you comply and to improve your overall financial well-being.
It’s important for influencers to have a solid education in taxes and to stay up to date with ever-changing tax laws. It’s just as important to work with an experienced professional to help you navigate the intricate world of influencer taxation.