Being an influencer can be a full-time job. You need to constantly create content, engage with your audience, and grow your platform. But as your influence grows, so does your responsibility to stay compliant with the law, especially regarding taxes. Tax compliance is a complex and ever-changing area, but there are some basic principles that all influencers should understand.
The first step in staying compliant is to be aware of your tax obligations. This means understanding the influencers’ tax compliance requirements and when they are due. The most common type of tax for influencers is income tax, which is paid quarterly. Other taxes may include self-employment tax, sales tax, and property tax.
For influencers, taxable income includes any money you earn from sponsorships, product endorsements, affiliate marketing, and your YouTube or Instagram earnings. It’s important to note that this still counts as taxable income even if you are paid in gifts or services.
So if you receive free products from a brand in exchange for a review on your blog, you will need to report the value of those products as income on your taxes.
The most common way to lose money with any business is through inventory shrink. This is especially important for influencers who only count on income from sponsored posts. Lack of accurate inventory tracking can lead to significant penalties and fines from tax authorities.
A good rule of thumb is to keep detailed records for 60 days for tax purposes. If you keep these records for longer, you are highly encouraged. Inventory tracking involves scanning each product you use to create your posts.
You can then make sure you are only using products you have already scanned. You should then track each purchase you make and the date you make the purchase. This will give you a better idea of how much inventory you have left.
Many people are under the impression that if they don’t receive a W-2 or 1099 tax form from an employer, they don’t have to report their income to the IRS. This is simply not true. The IRS requires that everyone report all their income on their tax return, whether or not they receive a tax form.
So how do you go about reporting your income if you’re an influencer?
The first step is to determine what your “income” is. For influencers, this includes any money you receive in exchange for promoting a product or service, either through social media posts, videos, or other means. It also includes any gifts or freebies you receive from businesses in exchange for promotion. Once you have a total figure for your income, you’ll need to report it on your tax return. Receive from businesses in exchange for promotion
If you’re not sure where to report your income, don’t worry – the IRS has a specific section for influencers. Simply list your total income under the “Other Income” section, and include any relevant information such as the name of the company you promoted and the dates of your promotion.
For tax purposes, five common deductions are often taken by influencers.
Travel and transportation expenses
Charitable donations If you are self-employed, you may deduct certain expenses, such as the cost of travel and your business expenses.
While there are many deductions that you may take, keep in mind that there are also certain limitations. For example, you cannot claim deductions specific to your situation, such as travel expenses related to concerts attended by your family.
Likewise, you cannot deduct expenses unrelated to your business. For example, you cannot deduct the cost of your new wardrobe simply because you need it for work.
While federal taxes are the same for everyone in the United States, state taxes can vary significantly. For example, some states have no income tax while others have very high-income taxes.
As an influencer, it’s important to be aware of the tax laws in your state so that you can comply with them. The best way to do this is to speak with a tax professional who can help you determine what you need to do.