Last year, the influencer industry was valued at $13.8 billion! It’s expected to stay in a constant state of growth as more brands use influencer marketing. Influencers from small to large create income by using blogging, TikTok, Instagram, or YouTube. No matter which platform(s) they choose, ignoring the accounting aspect can cost them a lot in terms of large fines and fees. Anyone who makes money as an influencer needs to know about influencer accounting needs.
Are bloggers and influencers supposed to pay taxes?
If you make money, you need to pay taxes. This includes bloggers and influencers. These types of income are usually subject to taxes:
- Self-employment tax
- Products in exchange for reviews
- Promotional ads or posts
Small businesses often send influencers free gifts hoping to be mentioned in a blog or post. Bloggers and influencers often promote the product directly, mention the product, or wear or use the product in agreement for gifts. Most bloggers and influencers don’t know that they are supposed to pay taxes on gifts. The taxable amount is based on the market value of the product given. However, if the product’s value is less than $100 you don’t have to pay taxes. Unless you live in a state that doesn’t have an income tax, you do have to pay taxes on blogging or influencer income.
Is an influencer self-employed?
Since influencers work as independent contractors, they are self-employed. Companies that pay influencers are not required to pay employer taxes. Instead, the influencer pays for their own earned income tax as well as self-employment taxes. Influencers must allocate money to pay taxes which is why influencer accounting becomes a priority.
When do influencers need to start paying taxes?
Once influencers reach a certain income threshold, they need to start paying taxes. Tracking business income and expenses starts when you first start your business venture. This helps avoid difficulties during tax time. Once influencers earn $400 in their business, they will start paying taxes. Everything they earn starting at $400 is to be included on their next tax return. Self-employment tax is due quarterly. If an influencer partners with a brand and earns $600 or more, they will receive a Form 1099-NEC for their taxes. If the payment is less than $600, influencers won’t receive a Form 1099-NEC. Instead, report it on Form 1040.
Do bloggers and influencers get any tax deductions?
Influencers and bloggers are just like other small business owners and self-employed individuals. They qualify for a number of tax deductions. Deductions help when it’s time to calculate the year’s taxes. There are two important things to know about tax deductions. However, you can only claim a deduction if the business expense is necessary and ordinary. This means it is common and acceptable in the trade or business. Some common claimable business deductions for influencers include:
- Equipment used for work
- Marketing materials
- Office costs
Bloggers may be able to claim a few other tax deductions. Some common influencer tax deductions include:
- Clothing used for work purposes. You must prove that a piece of clothing is necessary for doing your job as an influencer.
- Education costs used for seminars or online courses as long as they improve the business.
- Home office expenses add up quickly. Some items used for work may include printer, ink, paper, digital memory cards, PC equipment used for blogging.
- Travel expenses include work-related airline, bus, or train tickets. You may also be able to include lodging, meals during conferences, and conference registration fees.
- Supplies and professional services that may be deductible include business-related licensing, software fees, bookkeeping and accounting services, website or graphic design fees, stock photo purchases, internet access fees, domain and hosting fees.
Do influencers and bloggers need accounting services?
Some start blogging or working as an influencer as a side hustle. For many, it grows until it becomes a full-time income. Influencers can avoid late fees and huge tax bills by maintaining good accounting habits. Hiring a professional accounting service can be beneficial for influencers. Having a professional handle tax and accounting tasks can set you up for success and let you focus on growing your business.