Not everyone can make a living with TikTok, but anyone can try. There’s never been a better time for young, media-savvy influencers to try to build a following and a career on social media platforms like TikTok and Instagram.
Some influencers set out from the beginning hoping to make it big, while others start out casually. Later, once they realize they’ve established an audience, they discover they have the opportunity to generate income through the platform they’ve built for themselves.
Wherever you are on the track to social media success, there are a couple of things you should know about the financial side of being an influencer. As soon as you earn your first dollar, whether it’s through advertising, sponsorships, or even gifts, that means you’re earning income.
If you’re earning income, it likely means you are operating your own independent small business, whether or not you realize it. Plan for the future and take care of your finances by treating your influencer platform like the business it is.
Do TikTokers Have to Pay Taxes?
All money that you earn from TikTok, Instagram, or any streaming platform is considered income. All income is subject to taxation, although you are unlikely to owe any money for it if you’re not earning more than a few hundred dollars a year.
If being an influencer is your job or otherwise provides you with a steady stream of income, then that income is fully subject to taxes. And that doesn’t just mean submitting a tax return each year.
Income taxes are organized on a pay-as-you-go system, which means you will owe taxes on your social media income throughout the year. If you receive most of your income through an employer who withholds a portion of your income for federal taxes, then you should be fine. You should consider using your IRS form W-4 to ask your employer to withhold an additional portion of income to balance the extra amount you earn through TikTok.
If you earn all or the majority of your income as an independent person through social media or streaming, then you will need to pay quarterly estimated taxes. Four times a year you should make a payment estimated to be a fourth of the full amount of taxes you will owe. These are the due dates for the four estimated tax payments each year:
- First quarter deadline: April 15
- Second quarter deadline: June 15
- Third quarter deadline: September 15
- Fourth quarter deadline: January 15
Are TikTok Accounts Considered Business Owners?
If you are earning significant income through the use of your TikTok, then you’re considered a business owner, and your TikTok account is part of that. Legally speaking, every freelancer or self-employed person is considered to be operating their own sole proprietorship. You are the owner and sole representative of your business, and your name is the legal name of that operation.
The Benefits of Business Registration
You’re a business owner, whether you like it or not, so you should think carefully about how you want to operate. The automatic sole proprietorship option is not always the optimal choice.
However, you always have the option to register and organize your business with the proper authorities. There are a number of benefits that come from this official step:
- You can set a legal title for your company other than your own given name
- You can organize your business as an LLC, partnership, S-corporation, or some other option, shielding yourself from liability and creating other opportunities
- Being a registered business allows you to open a business bank account and apply for loans more easily
- You can hire employees to work for you
- Taxes and other government compliance-related tasks can be streamlined
Self-Employment Taxes for TikTokers
Unfortunately, there are a number of taxes you’re responsible for as a business owner. When you’re an employee working for a larger company, the company is required to pay Social Security and Medicare taxes on your behalf. Half of the taxes they pay with withheld income, while the other half they pay as the employer.
When you’re self-employed, you have to pay both halves yourself. That adds up to 15.3% of your income to go into FICA. This is called the self-employment tax.
Can TikTokers Write Off Business Expenses?
The good news is that if your TikTok is providing you with business income, then you’re also eligible to write off eligible expenses related to that business. Essentially, you can take revenue out of your taxable income if it was spent on upkeep or regular business operations. Tax deductions work by claiming and submitting those eligible expenses.
There are many different tax deductions available you can use to write off expenses. This will help you reduce the taxes you owe overall and can mean tremendous savings on your final bill this tax season.
Here are some important tax deduction opportunities for freelancers and small business owners:
- Health insurance premiums
- Half of your self-employment taxes are themselves deductible
- Retirement savings contributions
- Home office expenses
- Equipment or supplies used exclusively for your business
- Travel expenses for business purposes
Turn to 1-800Accountant for TikTok Tax Advice
There’s a lot at stake for you in your work as an influencer, just as much as with any other job or business. You put yourself at risk if you disregard your tax responsibilities or don’t consider your obligations as a business owner.
Before you take any further steps in developing your business, consider speaking with a professional to get guidance for your specific situation. An accountant can help you consider your plans and goals so that you can figure out the best path for your work.
Let 1-800Accountant help you through the process of entity formation. Working with an expert will give you the best information and all the advice you need to figure out what business structure is best and to make the registration process smooth and easy.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.