If there’s one thing that everyone around the world is doing, it is making their presence known on social media. In fact, the social media network has become so huge today that it has given birth to many new and fresh professions such as bloggers, vloggers, and of course, social media influencers!
Who Is A Social Media Influencer?
Nowadays, reputed brands are collaborating with common people on the social media who they think have the potential to advertise and market their product correctly. These people are known as ‘Social Media Influencers’ who are paid by brands to sell their products and services to the target customers. It is the new avatar of marketing that has taken over the social media by storm.
When it comes to tax filing and employment status, the IRS considers social media influencers as independent contractors and not employees of a brand since they endorse many different brands from time to time. Also, the nature of the work is mostly short-term. So, this obviously raises the question – If social media influencers are indeed independent contractors, then what are the tax filing norms for them?
When a social media influencer is paid around $600 or more by the brands he/she is collaborating with, usually, he/she will receive the Form 1099-MISC at the year-end. In case social media influencers are paid less than $600, they are still required to report the taxes on their income.
If you receive free merchandise from any brand/brands, the free products will be counted as income. The same goes for brand-sponsored trips. However, if you receive a sample product from a brand that is less than $100 for the purpose of reviewing it, it is not taken into consideration.
Apart from the Form 1099-MISC, you’ll also need to attach W2 forms provided that a significant portion of your income is generated from conventional means of employment. You must also provide all the proofs of income from any other sources. Also, you have to make sure that all the expense receipts are reported correctly.
What About Deductions?
Yes, social media influencers are also eligible for certain tax deductions. If, as a social media influencer, you have to bear some expenses to generate income for yourself, the IRS allows you to deduct both ‘ordinary and necessary’ business expenses. For instance, if you have to travel to another city to promote a product/service of a particular brand or to attend an event, you can deduct any expenses that you incur during such trips/events that are directly associated with your income like purchasing supplies or the cab fare to travel to photoshoot location.
You can claim your tax deductions on Schedule C.
Understand The Self-Employment Taxes
Every independent contractor must contribute to Medicare and Social Security. You can do it through self-employment taxes that appear on Schedule SE. These taxes are not withheld from bi-weekly paychecks and are to be submitted along with your tax return. Under Schedule C, only your net profit is calculated within the self-employment tax slab and other incomes like those from investments are excluded.
It is a good idea to start planning your taxes early instead of rushing at the last moment. You can calculate your tax obligations by filling out Form 1040-ES. Usually, if self-employed independent contractors expect to owe more than $1,000 as taxes, then it would be wise to make quarterly estimated tax payments according to the quarterly estimated tax deadlines. This will help you avoid mistakes as well as penalties.
Now that you know what are the tax norms for you and how to file your taxes, all you social media influencers out there can take measured steps and calculate your tax obligations carefully to avoid penalties.
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