As an influencer, creator, and/or blogger, tax time can be one of the most difficult times during the year. As an independent contractor, you have to manage tax time quite differently than if you worked for a company that would just send you our W-2 and you would just pull the information you needed from there to file. One document with all the numbers you needed and then you input with some other essential information and file. Even with an accountant, filing for taxes when you are an employee is a quicker process than when you file as an independent contractor. So you may be on this post wondering what are the things that you need to know about influencer tax write offs and filing your taxes during tax season.
When I was single and working as a creator, tax time was still difficult for me, but it’s not become a huge thing to overcome now that I am married, I have a child, I own property, and I maintain employees as an influencer. Over the years, I had a hard time determining how to handle my taxes and what I should do, but overtime, I found the ins-and-outs and learned how to effectively manage my taxes.
In this post, I’ll be sharing the key aspects that any influencer should know about understanding your finances as an influencer, managing those finances, and filing your taxes as an influencer during tax season.
INFLUENCER FINANCIALS:
MANAGING AND KNOWING INFLUENCER TAX WRITE-OFFS
Filing taxes as an influencer takes time, effort, and some knowledge to know what you’re doing not only during tax time but during the year. Even if you have an accountant that files your taxes for you, you’ll need to make sure that you are accounting for all of your income and expenses throughout the year, so that you can provide accurate reports and receipts when it comes time to filing your taxes. Below, I’m providing some guidelines and things to know to keep up today with your influencer financials to make it easy during tax season.
KNOWING YOUR BUSINESS ENTITY
When filing your taxes, you need to make sure that you understand what your business entity is as an influencer. This is something that you’ll be asked by the tax system you may use or any accountant. The reason why is that different entities receive different benefits that others do not, and taxes need to filed differently depending on what type of entity that you are. Most bloggers, influencers, and/or creators are one of the three below:
SOLE PROPRIETORSHIP
A sole-proprietor is a self-employed individual who is doing business under themselves. This individual owns and operations 100% of the business. Tis person hasn’t filed any additional paperwork to make them a corporation or business and when filling out taxes, the tax document is under that individual’s name. Because of this, sole proprietors file taxes under their social security number which combines all finances together including any owned property, personal expenses, and, if married, combines the finances of your partner.
One aspect that is always a downfall of running an influencer business under a sole proprietorship is that expenses and income get put together; therefore, if you’re also working a full time job, the income from that job is combined with the income from your influencer business.
LIMITED LIABILITY CORPORATION (LLC)
If you want to text that next step into growing your social media influencer business, I suggest forming a single-member LLC or Limited Liability Company. By creating this formal business entity, you not only look a lot more like a business, but you also receive additional tax benefits that sole proprietors often don’t receive. LLCs file their taxes differently and are taxed differently as well. To form an LLC, you’ll be required to file documentation with your state and pay a small fee depending on your state’s fees and processes.
WHAT ARE THE INFLUENCER TAX WRITE-OFFS YOU CAN CLAIM
As a small business, there are quite a lot of tax write off that you can file as an influencer. During tax season, accurate reporting of these expenses, will help to cut down your income tax bill and keep your year to year reporting up to date so that you stay in good standing with the IRS. Below is a list of some of the influencer tax write-offs that you should be tracking throughout the year.
OFFICE SUPPLIES
Office supplies tend to me the most commonly known influencer tax write-off. When you buy anything for your home office or to be used for your influencer business, you can write it off. These things include office supplies such as paper, notebooks, pencils/pens, printer ink, a printer, etc.
HOME OFFICE
You’re office space is a write off. Many people often forget to add this as a part of deductions during tax time. For any person who works from home, you are allowed to write off a percentage of your rent, mortgage interest, insurance for qualified mortgage premiums and home, and property taxes. In most cases, if you work from one single room in your home, an accountant will ask for the square footage of that room and look at the tax forms that tie into your insurance, mortgage interest, etc. and be able to calculate what deductions can be made on your business taxes.
Do note that there are some qualifications that must be met in order to claim home office deductions such as your home office need to be your primary place of business and a room used exclusively for work.
TRAINING/EDUCATION
Any training or education that is directly related to growing your skillset as an influencer is a tax write off. Say you’re ready to take your influencer business to the next level, and you enroll into my influencer course or decide to sign up for a influencer coaching session with me, the fee that you pay for the course or coaching is an influencer tax write off. So while you’re looking at courses that will benefit you and grow your work as an influencer but thinking about the fee, remember that it’s a business expense that you can write off.
ADVERTISING/MARKETING
As an influencer, there may be time where you are marketing or advertising your blog or social media channels. That includes when you boost a post for more media exposure or pay another someone else to promote your account. Additionally, if at any time, you create any ads on Facebook or Google to promote your account, services, or any products you may be selling, those also count as a business expense that can be written off.
TRAVEL EXPENSES
Travel expenses are write-offs, but I will say that you have to be careful of what you’re writing off. When writing off travel expenses, the travel must be directly business related. Whether you are taking a flight, paying for a rideshare, staying in a hotel, or other funds that support the business travel, you can write it off. The travel must be directly related with influencer work. For example, if you plan a trip on your own, but at some point you work with a hotel while you are at that location, the flight to that destination isn’t fully a tax write-off because you were taking that trip for leisure, but happen to be doing a collaboration. But if you are being required to pay for a flight to make it to a destination for a press trip or a conference that you are speaking at, that flight and any other travel expense become an expense that you can write off.
Additionally, if you use your car for the purpose of driving to business events, meetings, etc., you can write off the mileage, and depending on if you are a business entity, you can also write off additional expenses on your car. There are a few apps that you can download onto your phone that will help you to track your mileage. It makes it as easy as downloading the app and clicking a button that says start trip and it’ll start tracking your mileage while you’re driving.
UTILITIES
As influencers, we need our phones and we need internet. So though you’re phone and home internet are used for personal use as well, you can still write off a portion of your phone and internet bill since you use it for business purposes and you are dependent on it. If at any time you decide to purchase a cell phone and use it exclusively for content creation purposes, you can write the entire phone and it’s bill off, but I don’t know many influencers who do that.
Additionally, you can also write off a portion of some of your other utilities including the electricity since, when working from home, you are dependent upon the electricity to run your business.
MEALS AND ENTERTAINMENT
Meals and entertainment can be a tricky influencer tax write off as many influencers often try to write off meals that they aren’t supposed to or forget to write off ones that they can. When it comes to meals and entertainment (entertainment being show tickets or something similar), the meal and the entertainment has to be directly correlated to your business. Situations where you can write off a meal or entertainment include some of the following:
- You’re speaking at conference for your influencer business and you order food / grab a meal
- You’re meeting a client, vendor, or someone that has work related to your business for a meal or coffee
- You’re attending a press trip and you grab Starbucks at the airport
Just make sure for anything related to this category that you keep all receipts stored for, at least, up to five years just in case of auditing. It rarely happens, but you always want to be prepared.
WEBSITE COSTS
Running a website costs money. Between paying for a domain and hosting to close of plug-ins and everything in between, those costs can add up quickly. But the great thing is that every cost to maintain and run your business is a tax write off.
SOFTWARE / TOOLS
Along with running a business, there are some essential tools for influencer and bloggers that you may want to get or ones that you may already have. Some of these tools will most likely come at a cost to be able to fully use all of their capabilities, and you can write off those costs. If you’re looking to upgrade your SEO strategy and purchase an SEO tool, you can write off that expense. Or maybe, like many influencers, you have the Adobe Creative Suite that includes Lightroom and Photoshop – make sure that you’re writing that off. Even if you decide to file your taxes yourself, the tax software you use and pay for counts as a part of your business expenses. Also, any apps that you are using on your phone that you are paying for to create content, those fees can be written off so make sure you’re tracking those as well.
CAMERA AND VIDEO EQUIPMENT
Any camera or video equipment that you purchase for content creation is an influencer tax write off. But that still doesn’t include writing off your entire cell phone even if you’re using it to take photos and video for your content. What it includes is a DSLR camera, a drone, lenses, tripods, gimbals, and all of that in between, you can write all of that off. Below is a collection of some great influencer tools that you can invest in and write off on your taxes.
PRODUCTS FOR GIVEAWAYS
When hosting a giveaway that you are doing to grow your brand, you may end up purchasing products to giveaway. Those products that you purchased can be written of as it ties into marketing / advertising. Just keep in mind that if you are giving away products that were gifted to you, you can’t find the amount of those and add them to your expenses as an influencer tax write off.
PROFESSIONAL FEES
As you grow your influencer business, you may start growing your team and outsourcing some of your work to independent contractors. If you bring on a brand manager, the commission that you pay your manager is a tax write off. If you decide to work with a photographer to create content, that fee that you pay the photographer is something that you can write off. Or maybe you’ve brought on a content manager or virtual assistant, the fees that you pay that person is a tax write off.
LEGAL FEES / ACCOUNTANT FEES
I’m someone that always highly recommends having a lawyer in your phonebook that you can call when you need to, but most importantly, an accountant that can help you during tax time and throughout the year. The fees that come along with bringing in someone to help you when you decide to get an LLC, or someone that can file your taxes for you each year is also a tax write off. With tax rules and laws always fluctuating, paying someone to help you through these various tasks and paperwork is worth the fee for the fact that it gives you peace of mind.
BANK FEES
As someone who tells influencers that getting an LLC is in their best interest when starting off, I’m also one that suggests having a separate bank account and credit cards for your business instead of using one sole account for your personal and influencer business income and expenses. Even if you are a sole proprietor, having a separate bank account will help track all your financials. And with that separate bank account, any fees such as credit card fees, overdraft fees, account service fees, international transaction fees, etc. count as a write off. Also, if you are using PayPal or Stripe or another payment processing system to accept money or pay for anything, the fees that you accrue are also tax write offs.
CLOTHING & OTHER PRODUCTS
We, as influencers, buy a lot of clothes, beauty products, home décor, and a lot of other things in order to create content to put on our social channels and website. But it is very important to note that all of these products that you are buying aren’t products that all can be written off. There is a very gray area that has been created by influencers when it comes to writing off clothing and other products on taxes. The IRS has to take the time to actually fully develop what this means and what influencers can write off on their taxes when it comes to these products.
The rule with writing off any clothing, beauty, or other products on your taxes is that the clothing or other products have to be only used for sole purpose of working. For example, if you buy a dress to style for content and that dress is a piece of clothing that you can wear outside of working as an influencer, you technically aren’t supposed to be writing it off. But if you’re someone like nurse and you buy scrubs, that can be written off because it’s being bought for the sole purpose of working and it wouldn’t be used for any wear outside of work.
You’ll find that there is a lot of information out there that says the different aspects, but as noted on the IRS website, there is a specific rule on writing off clothing.
ACCOUNTING FOR YOUR INCOME
When it comes to tax time, you’ll need to make your your income is accounted for so that you can file your taxes for the previous years. Knowing what your income and expenses are is important not only for tax time but during the year to track any financial goals and to prepare yourself for saving, investing, or other aspects in between.
TRACKING YOUR EXPENSES & INCOME
One thing that you have to make sure that you’re doing to not only prepare and be ready for tax season, but also to maintain your business and account for your financials throughout the year is tracking your income and expenses. I recommend getting an accounting tool that works for you. Right now, I use Wave Apps, which is a great, free platform that allows you to track your income and expenses, create and send invoices, receive credit card payments, generates reports, and so much more. It even syncs with your bank accounts and credit cards to automatically track any income and/or expense noted on your account summary when using your business account.
GIFTING
A quick note on gifting that many influencers tend to forget about – gifts that you accept as a form of compensation is compensation that you can be taxed on. So if a brand reaches out to you and says that they will send you gifted product in exchange for specific deliverables, be wary because you technically need to log that into your income as taxable income. In comparison, if a brand reaches out to you and simply says that they would like to send you gifted product with no strings attached and no required posts, that is not taxable income even if you decide to post about it. So basically, in order to avoid paying taxes out of pocket on gifted products, reply to those brands saying you would be happy to take gifted product but cannot guarantee posting, and if they would like a guaranteed posts, that you’d be happy to send them your fees.
1099S
At the start of each year, any brand that you have worked with and provided tax information to will begin sending you 1099s. Collect and save all of those for filing your tax return. And as you receive begin cross referencing them with your account software to validate the amount shown on the 1099 to the amount that you were paid. If at any point in the year, you were paid through PayPal, you will need to pull your tax form from PayPal directly and cross reference it with the brands and/or partnerships that you worked on.
Note: Some brands, though they are supposed to, sometimes don’t send the 1099 or if it is under a certain amount, they are not required to. You still need to account for that income on your taxes. Just because you didn’t get a 1099 for it, doesn’t mean it’s not income that you need to pay taxes on.
FILING YOUR TAXES
When tax time arrives, you need to be ready to pay employment taxes. Bloggers, creators, and social media influencers pay an employment tax for themselves, because at the end of the day, even though you are running your own business, you are an employee of your business. After taking in all of the information for your income, legitimate business expenses, and other business financials, you’ll be ready to file your taxes.
YEARLY VS. QUARTERLY
For many influencers starting out, you tend to collect all of your tax information, documents, and accounting and file your taxes with a Schedule C on a yearly basis. Depending on how much you made in the previous year, this could lead to a large tax bill that you need to pay to pay on the income that you made. In order to avoid these larger tax bills at the beginning of the year, you can pay quarterly taxes.
Each quarter, you would use your accounting software to review any income and expenses for that quarter. You can then file estimated quarterly tax for that quarter and pay a smaller tax bill at that time. By paying estimated quarterly taxes, you may either end up paying more or paying a little under depending on how valid your filing and account is, but then when it comes around tax time, you may either get a refund or only have to pay a smaller tax bill than you would have to pay if you didn’t file quarterly estimated taxes.
FEDERAL & LOCAL
Everyone pays quarterly taxes and maintains the same rate, but a recommendation that I give to influencers, content creators, and bloggers around tax time is to make sure you know your local and state tax protocols. For many you can file quarterly taxes in your state and township to avoid a large bill each year, while in some states, there aren’t options to pay quarterly taxes. Check with your state and local township to find out what the steps and requirements are for taxes in your area to be best prepared.
