The influencer industry was valued at a whopping 13.8 billion dollars in 2021, and it will only continue to grow as more brands turn to influencer marketing. Influencers, even ones with smaller followings, can make a ton of cash via YouTube, Instagram, TikTok, or blogging. It’s clear that, regardless of the medium, influencer accounting is something that these small business owners will need to pay attention to avoid paying hefty fines and fees. If you make money as an influencer, here’s what you should know about your influencer accounting needs.
Do Influencers and Bloggers Pay Taxes?
As a blogger or an influencer, one of the first questions you might have is, “Do influencers need to pay taxes?” The answer is yes. The following types of income may all be subjected to tax:
- Promotional ads and posts
- Product in exchange for reviews
- Self-employment tax
Small businesses frequently send out free gifts hoping influencers will post about the product. An agreement for gifts as a blogger or influencer can range from promoting a product online, talking about a product, or wearing or using the product.
Bloggers and influencers that receive gifts often don’t realize that they may have to pay taxes for these. The amount you’ll pay as a tax will be based on the market value of the product gifted to you.
You’ll pay taxes for products you review as a blogger or influencer unless the value of the product is less than $100.
You’ll also pay state taxes on your influencer income unless you live in one of the states that does not have an income tax.
Are Influencers Considered Self-Employed?
Influencers work as independent contractors, which means they’re self-employed workers. This means that companies that pay influencers will not pay the employer tax, but rather the influencer is responsible for both earned income tax and self-employment tax.
Influencers will need to allocate money to pay both taxes themselves, making influencer accounting a top priority.
When Do Influencers Start to Pay Taxes?
An influencer will start to pay taxes after they earn a certain threshold of income. Influencers should remember to track their expenses and income when first starting their business venture to avoid difficulties when paying taxes.
Influencers start to pay taxes when they earn at least $400 for their business. After you earn $400, you’ll include the amount on your tax return. You’ll pay these taxes as a self-employment tax, which is due quarterly.
If you’ve partnered with a brand that’s paid you $600 or more, you’ll receive Form 1099-NEC to pay your taxes. For payments less than $600, you won’t receive Form 1099-NEC. Instead, you’ll use Form 1040.
Tax Deductions for Bloggers and Influencers
Just like other small business owners and self-employed folks, influencers can qualify for several tax deductions. These deductions can help you when it’s time to pay taxes, but there are two things to know about tax deductions.
First, you can only claim a deduction if a business expense is both ordinary and necessary. An ordinary expense is those that are accepted and common in your business or trade. A necessary expense is appropriate and helpful for your business or work.
Due to how bloggers and influencers can partner with external companies or industries, you may have different expenses that qualify as ordinary and necessary. Some expenses you can claim as tax deductions are:
- Equipment used for work purposes, such as cameras, computers, or laptops
- Marketing campaigns and materials
- Office costs
There are additional tax deductions you may qualify for, especially if you’re a blogger. Some of the most common tax deductions for influencers include:
- Home office
- Subscriptions and supplies
- Travel expenses
Clothing is a major tax write-off for fashion influencers. However, before you plan your next shopping spree, you need to remember that you must be able to prove a piece of clothing’s necessity for accomplishing your job as an influencer.
You can write off expenses related to online courses and seminars if you use them to improve your blog business. If you’ve used subscriptions to online media for blogging, you can also claim these expenses as tax deductions.
Home Office Expenses
The third tax deduction you can claim is for your home office expenses. As a blogger or an influencer, home office expenses can quickly add up. You can qualify for deductions for multiple expenses based on your percentage of work usage:
- Business equipment, cameras, and digital memory cards
- Cell phone and landline usage dedicated to business
- Computer upgrades and computer equipment depreciation costs
- Copier toner and printer ink
- PC equipment used for blogging
Supplies and Professional Services
Fourth, you can receive tax deductions for supplies and professional service expenses. You can claim tax deductions for different aspects of your work:
- Business-related licensing and software fees
- Data storage fees, domain fees, and hosting fees
- Public internet access fees
- Stock photo purchases
- Website and graphic design fees
- Bookkeeping and accounting services (that’s us!)
Finally, you can also claim tax deductions for your travel expenses. This may include airline tickets and train tickets if used to travel for work-related activities. You can also claim tax deductions for different travel expenses, up to a certain amount in certain categories:
- Blog conferences fees and registration
- Entertainment (50% of the cost)
- Lodging (you can’t combine this with meals)
- Meals during conferences (50% of the cost, which you can’t combine with lodging)
- Transportation (car rental, flights, shuttles, taxis)
- Vehicle expenses
The line between business and personal can get a little murky when it comes to writing off expenses for influencers. If you’re unsure of whether or not something qualifies as a business expense, your best bet is to speak with an accountant.
1-800Accountant Services for Influencers and Bloggers
Working as an influencer could be an awesome side hustle—it might even completely replace your full-time income, someday! However, it’s critical that you keep your influencer accounting needs in mind so you avoid late fees and hefty tax bills.
If you’re a blogger or an influencer, one of the best things you can do for yourself is invest in a professional accounting service. The pros at 1-800Accountant are experts in small business taxes, including influencer taxes. We can handle your influencer accounting needs so you can focus on expanding your online presence and growing your business.