It is no secret that social media influencers are becoming more and more popular. They can create a brand for themselves on social media, which leads to them selling their design products or promoting brands they represent.
However, there are certain things that all social media influencers must report on their taxes. This article will discuss some of those items to be sure your tax return doesn’t get rejected.
Brand Partnerships
The first item social media influencers must report on their taxes is brand partnerships. These items can be tricky because they are not taxable income but rather a business expense that needs to be deducted from your total income for the year. Typically these transactions will show up as “customer service fees” or commissions paid by companies such as Amazon and eBay.
The key here is to make sure you are reporting the correct income for your tax bracket since this can drastically affect how much money comes back in taxes owed. Deductions should be reported on a Schedule C form, which allows an influencer to deduct business expenses from their total annual earnings before determining the amount of taxable income.
Products
It is also important to note that if a social media influencer is paid for promoting products on their page, they must report the value of the product or service. If it’s not tangible, then there may be an issue with finding its worth which would require hiring an accountant who specializes in valuing online properties and intangibles.
It is also vital to report any mention of products in reviews, which are now considered endorsements. The influencer must disclose whether they were given the product free or at a reduced price for their review and how much the company that sent it was paid.
The Tax Cuts and Jobs Act (TCJA), signed into law on December 22nd, 2017, changes the rules for influencers who were previously considered employees of their sponsors. Unless they are an independent contractor, all social media influencers must now pay 15.30% on income earned from posts that contain endorsement or advertisement in 2018 and beyond (up from 39.60%)
This means unless you’re a business owner with access to your own EIN and can file a Schedule C, you’ll need to pay an accountant to help you with your taxes. It is also essential for social media influencers to keep track of any free products or services they may have received during the year. In general, if the value of a product or service exceeds $600, it must be reported as income, and there may even be additional taxes applied.
There are more items that social media influencers may be required to report in their taxes, depending on their country’s law on taxation. They include sponsored posts and ad revenue.