Influencer Taxes: Everything You Need to Know to Navigate Tax Season

Influencers are tastemakers who shape what their dedicated audiences will embrace or avoid. In some industries, an influencer's word can mean much more than a celebrity spokesperson or a famous athlete, which isn't lost on companies engaged in a tight battle for consumer dollars.

The influx of money, access, and power to this emerging industry has turned hobbyists into professionals overnight. Whether it's what they signed up for or not, influencing can be a real business that comes with real responsibilities. And if you shirk those responsibilities related to your income or aren't proactive about it, IRS penalties and scrutiny could follow.

Whether you're an established influencer or a hobbyist aspiring to become one, use this guide for influencer taxes to help you with filing taxes as an influencer during the upcoming tax season. 

Do Influencers Pay Taxes?

If you're earning money from your efforts as an influencer, you must pay taxes on that income. 
Like other professions, the amount of money you make will dictate how you file with the IRS.

Influencers typically work for themselves, so they are subject to a self-employment tax (SE tax) and an income tax. If you're an influencer making more than $600 per year, you must file Form 1099-NEC with the IRS. If you're making below that amount, you can file a Form 1040 with the IRS on your income tax return. 

Remember that this is related to the money you bring in, not gifts or product samples you might receive. However, there are instances where you might have to report gifts and samples to the IRS.

Do Influencers Pay Taxes on Gifts?

Influencers regularly receive product samples and review materials from companies that wish to make inroads with a particular audience. The IRS views these materials as "gifts" on which you might have to pay taxes.

When a brand gifts a product and the value exceeds $100, you must include that in your tax filing to the IRS. If the total value of the product is less than $100, you do not need to declare this when filing your taxes.

It's important that influencers keep detailed records of every gift received and its value to avoid, this will help avoid stress during tax season. Remember brands often do not disclose the value of their gifts, and it's up to the influencer to declare during tax season.

Do Influencers Need an LLC?

Whether you need an LLC or not depends on timing. If you're starting and haven't cleared the $600 income threshold yet, it's best to wait.

But if the income from your influencer business is growing, it might be time to seriously consider making your business official by forming an LLC. But there are several different business entities for influencers to consider. 

What are the Different Influencer Business Entities?

There are three main business entities influencers should consider forming as:

• Sole proprietorship
• Independent contractor
• LLC

Sole Proprietorship

A sole proprietor is a self-employed individual who owns and operates a business. Influencers who form a sole proprietorship file their taxes using their personal income tax return and social security number. 

Influencers will use Form 1040 and the Schedule C supplement to disclose income and losses from their businesses.

Independent Contractor

There are similarities between sole proprietorships and independent contractors, with an important distinction. Independent contractors work for others on a contractual basis. Doctors and lawyers often operate as independent contractors, and influencers certainly can too.

The businesses influencers collaborate with will send a Form 1099 at the end of the fiscal year. This form will illustrate the exact amount of money you made that year working with that business or brand. 

LLC

Forming as an LLC introduces influencers to a more formal business entity registered with their state. 

Influencers who form an LLC enjoy simplicity and flexibility in taxing and protecting their personal assets, shielding them from business liabilities.

Once they form an LLC, Influencers will have 75 days to select a different business structure for their new company, such as an S corporation. They can also opt to stay as an LLC.  

Top five influencer tax write-offs

There are several tax deductions influencers may be able to utilize. Some of the most popular deductions for influencers include: 

Work Phone

Your phone bill is partially deductible if you're using it for work activities. Itemize work calls on your bill and provide a brief explanation of each charge. 

Office Supplies

Stationery, photocopies, monitors, and more are tax deductible if used for business-related purposes. 

Business Website

Your business's website hosting fee and associated assets, such as stock photos or a web theme, are tax-deductible.

Advertising

Your budget for ads, such as those found on social media and in search results, is tax-deductible for your business.

Internet Access

Accessing the internet is essential to most influencers' jobs, and you can write that recurring bill off. 

Work with experts that specialize in influencer taxes.

Influencer accounting can be complicated, and choosing the right path to keep the most money in your pocket can be agonizing. That's why so many influencers decide to work with 1-800Accountant, America's leading virtual accounting firm for small business owners just like you. Our team of experts who specialize in working with influencers in your state will provide periodic advisory and a year-round strategy to maximize your tax savings. Working with 1-800Accoutant allows you to continue influencing while we handle the rest. All it takes is a quick call to get started!