Social media influencers and solopreneurs are relatively new professions in today’s world. But the nuances of tax payments and tax liabilities can be confusing for many, leaving room for you to pay more taxes than you need to!
So in this blog post, I’ve brought you 6 expert tax tips for influencers from a CFO focused on aiding creators and influencers with premium accounting services. I’ve also answered some common tax questions for influencers.
Here are the 6 tax tips you’ll want to remember if you’re an influencer!
Know your influencer tax write-offs
Influencers can deduct many expenses from their business via tax write-offs. A tax write-off is a legitimate expense that can be claimed as a deduction and lower your taxable income. There are over 40 tax deductions that can be linked as you pay your quarterly taxes, including:
- Office supplies,
- Business travel, meals, and accommodation,
- House repairs,
- Phone bills,
- Shopping,
- and many more!
Knowing what to write off can help you pay fewer taxes throughout the year. In other words, keep more in your pocket!
Track your influencer income accurately
The first step to knowing how much you owe in business tax is to know your income as an influencer.
The way you earn income can vary in more ways than one. Here’s a quick breakdown of the type of income you might be earning:
- Subscriptions,
- Virtual gifts,
- PR packages,
- Crowdfunding, and more!
So it’s absolutely important to track your business income accurately. Record every transaction and maintain a business bank account to know the amount of tax you’ll owe at year-end!
Tip: If your income is disproportionately smaller than your tax deductibles, it may trigger an IRS audit, so keep your records as authentic as possible.
Keep updated financial records
If you want to learn about your financial health and how to improve it, the first step is to maintain financial records. These can be in the form of:
- Profit or loss statements,
- Mileage logs and travel expenses,
- Work-related purchase receipts.
Having updated financial records come in handy during tax time when you have all your transactions organized in one place. It certainly helps you estimate the tax bracket you qualify for and the return you might get.
One of the best ways to keep updated financial records is to consult a tax professional or accountant. Tax accountants can help you take advantage of tax benefits, provide personalized advice on taxes and ensure you’re paying accurate tax on any income.
Use a business bank account to separate finances
Many influencers, especially the blooming ones, will believe it’s okay to add their influencer income to their personal bank accounts. It’s the biggest accounting mistake you might be making so far!
When you need to file taxes, mixed accounts will destroy any clarity of your income, tax deductibles, or business expenses. It also gives a valid argument to the IRS to doubt your income on your tax returns.
In the end, not only would it lead to filing for higher taxes quarterly, but will also worsen your financial standing and credit score.
Invest heavily in a retirement plan
Retirement plans like a 401(k) or IRA are a great way to save for your future and reduce your taxable income. If you can reach the maximum contribution amount, you can remove that chunk of income from your tax forms and reduce your estimated tax for the year!
Record your business losses
Recording your losses related to your business can be the best thing you can do sometimes. According to the IRS, if your social media marketing business doesn’t incur a profit, it classifies as a hobby and hence, isn’t taxed!
On the other hand, influencers may carry over their losses to the next year. For example, if you incurred a loss of $500, you won’t have to pay taxes this year, and next year, you’ll get $500 off the total amount you owe to the IRS as a balance-off!
FAQ for Social Media Influencers
Got a few more unanswered questions? Here are some of the most common FAQs for influencers:
What type of employment is for influencers?
The IRS classifies influencers, content creators, and small business owners as self-employed individuals. That way, you’re eligible for self-employment tax and similar tax return rules.
Do influencers pay taxes on gifts?
Yes, influencers have to pay taxes on gifts if the value of the gift is over $100. But if the gift is valued at less than that amount, there is no tax levied on it.
Who pays my Social Security and Medicare taxes?
As an influencer, you must pay self-employment taxes that ultimately cover your Social Security and Medicare taxes. This is because the IRS considers you an independent contractor. Self-employment taxes are separate from income tax and are deducted from your business profits.
What counts as income for influencers?
Income can look like many different things in the influencer business. It can be sponsorships, ad revenue, paid acting gigs, PR, and gifts along with subscriptions from different platforms!
Keep in mind that filing taxes is critical if your income exceeds $600 and your employer must send you a Form 1099 if they’ve paid over that value.
Boost Your Professional Life With These Tax Tips
Filing taxes can be a headache to go through on your own. But that’s certainly not the case when you’re organized, tax-smart and have a complete recording of your business expenses and income.
That’s why I wrote this blog post to help you smartly pay estimated taxes for your legitimate business. Not only do these tips help you file your taxes accurately, but they also avoid any unforeseen run-ins with the IRS! With these tax tips for influencers, make the most of your fluctuating income this tax season!
Destress Financially With Stanton Financial Co.
If you want to dive head over heels into being the creative mastermind of your brand, Stanton Financial Co. can help you.
Stanton Financial Co. is a premium bookkeeping and CFO service that brings big business strategies to small businesses, solopreneurs, influencers, and content creators.
Unlike most bookkeeping services, we make it easy for you to profitably manage your fluctuating income. Collaborate with brands and focus on doing what you do best– we’ll take care of everything else!
