Influencer Taxes: All the Information You Need
Influencers set trends that their devoted audiences will either embrace or avoid. Companies engaged in fierce competition for consumer money are well aware that an influencer’s endorsement can carry considerably more weight in particular industries than that of a celebrity spokesperson or a well-known athlete. Due to the sudden influx of resources into this young industry, amateurs have suddenly become experts. Whether or whether it’s what they agreed to, influence can be a legitimate business with real obligations. IRS fines and scrutiny may result if you neglect these obligations relating to your income or are not proactive about them. Use this guide for influencer taxes to assist you with filing taxes as an influencer during the upcoming tax season. Whether you are an established influencer or a hobbyist hoping to become one.
Influencers: Do They Pay Taxes?
You must pay taxes on any revenue you get as a result of your influencer activities.
Like other occupations, how you file your taxes with the IRS will depend on how much money you make.
Since most influencers are independent contractors, they must pay income tax as well as a self-employment tax (SE tax). Influencers who earn more than $600 annually must submit Form 1099-NEC to the IRS. If your income falls below that threshold, you can submit a Form 1040 with your income tax return to the IRS.
Keep in mind that this only pertains to the revenue you generate, not any freebies or product samples you may receive. The IRS may require you to record gifts and samples in some circumstances, though.
Are Influencers Subject to Gift Taxes?
Companies that want to reach a certain audience often send product samples and review materials to influencers. These items are viewed by the IRS as “gifts” for which you may be required to pay taxes.
You must mention the product value in your filing with the IRS if it is greater than $100. You don’t have to include a product in your submission if the sum of its values is less than $100.
Influencers should maintain thorough records of each gift they receive, including its value, to prevent stress and a squeeze around tax season.
Influencers: Do They Need an LLC?
The timing will determine whether you require an LLC or not. It is preferable to wait if you are just starting and haven’t met the $600 income requirement yet.
However, if the revenue from your influencer marketing firm is increasing, it may be time to consider registering your company as an LLC. But influencers should take into account a variety of corporate entities.
What Kinds of Business Entities Are Influencers?
Influencers should think about establishing the following three types of business entities:
- Single-person business
- LLC for independent contractors
- Solo Entrepreneurship
A self-employed person who owns and manages a firm is known as a lone proprietor. Influencers who establish a sole proprietorship file their taxes using their social security number and income tax return.
Influencers will report their company profits and losses on Form 1040 and the Schedule C supplement.
Independent contractors and sole proprietorships share some similarities, but there is a key difference. On a contractual basis, independent contractors perform work for others. Influencers can undoubtedly work as independent contractors, just like doctors and lawyers frequently do.
After the fiscal year ends, the companies influencers work with will submit a Form 1099. This form will show you how much money you made that year from working with that company or brand.
Influencers are introduced to a more official business entity that is registered with their state by forming an LLC.
Influencers who create an LLC benefit from the ease of taxation, flexibility in asset protection, and protection from company responsibilities.
Influencers have 75 days after forming an LLC to choose another corporate structure for their new organization, such as an S corporation. They can decide to continue as an LLC as well.
Work With Authorities Who Are Knowledgeable on Taxes
It can be difficult to choose the best course of action to keep the most money in your pocket when dealing with influencer accountancy. We are professionals working with influencers in your state. Working with Your Part Time Accountant enables you to keep making an impact while we take care of the rest. To get going, just give us a call right away!