Tax Guide for Social Media Content Creators
Are you a social media content creator wondering about your tax obligations? In this article, you will learn about social media influencers’ tax liability, and their eligibility to claim tax deductions. But before we dive into that we need to know whether people like you who generate content for social media are categorized as an independent contractor or an employee for tax purposes.
Are social media influencers independent contractors?
To answer this question you need to ask yourselves how much control the person availing my services has over me. According to IRS.
“An individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done and how it will be done."
Let’s say you are offering your services on an online freelancing platform such as Upwork. You were hired as a social media content creator and your client instructs you to create a blog post and gives you a deadline. In this case, you are working as an independent contractor since the client has only dictated the results he required. You are at the liberty to use whichever method suits you best to achieve the target. You can work at your own hours. Your client will not pay for the SEO tools that you will use while working on the assigned task. And you only have a contract for that one project.
Now imagine you delivered your project and the client is very satisfied with your work. He offers you to join his team to work on multiple projects. He pays you a fixed amount monthly, weekly, or biweekly. Gives you a detailed job description and specifies your working hours. And you have signed an employment contract. In this instance, you are an employee and will be taxed accordingly.
Do social media influencers pay tax?
Yes, social media influencers, most of the time file their taxes as independent contractors. If you have ever been employed you must have seen your payslip. You don’t receive the exact amount of your salary in hand. That is because employers are required to deduct health insurance, social security, and some other taxes. Additionally, you were asked to fill W-4 form when you started working. And employers are responsible to work out your taxes.
On the contrary, if you are working as an independent contractor you will receive the full amount for the services you provide. No deduction will be applied by the client therefore you have to pay self-employed tax (SE tax), which comprises Social Security and Medicare. You are responsible to work out your own taxes. You will need to fill out Form W-9, which requires your information for tax purposes. It is noteworthy that an independent contractors’ tax will have to be paid on the earnings you received while working on any independent projects even if you take up a job somewhere as an employee.
Additionally, if you earn more than $600 from your client you will receive a form 1099-NEC from them. If the earnings are less than $600 then you need to report it in your income tax return. There is an added complexity for social media influencers who work for clients residing in a different state. If they are based outside your home state you will have to file multiple tax returns.
Furthermore, each quarter as an independent contractor taxpayer, you will be required to file 1040-ES, where you will have to estimate your taxes and pay them. At the end of the tax season, you will either receive a tax refund or will be liable to pay more depending on whether you over or underestimated your taxes.
What income should social media influencers keep track of?
Social media influencers’ taxes are calculated from the earnings they make through any one of these sources.
- YouTube and Facebook Ads: Once you monetize a video on YouTube or Facebook they will start generating income on their own through the viewership and the ads that run during the video. Your earnings will depend on the number of subscribers and followers you have.
- Branded Merchandise As you grow in popularity and your followers increase, you want them to connect by building a community sense. For this, you might wish to sell printed mugs, hats, or T-Shirts, etc.
- Sponsored Posts: Regardless of the social media platform you use, sponsored posts are the major source of income for a social media content creator. If you have tons of followers and your goal is aligned with a business, they might contact you to promote their brand of products and services.
This is certainly not an exhaustive list. It is still an evolving marketplace and you never know when there will be new earning opportunities.
Are there any influencer tax write-offs?
Yes, the tax authority offers social media influencer tax deductions to minimize your taxable income. Tax deductions are the expense that you can use to reduce your income and arrive at the amount that will be taxable. You can write them off if you
- Are a social media content creator and use creative and editing software
- Hire a creative assistant and pay her
- Own a website and pay plugins and hosting fees etc.
- Announce prizes for a giveaway as a reward to your followers
- Use any beauty products or wear clothing for creating a presentable look while interacting with your followers or doing a product review
- Purchased electronic items such as cell phones, keyboards, computers, laptops, etc.
- Take any courses to upgrade your skills or to simply keep up with the trends in the industry
- Work from home. A portion of your utility bills, rents, and property insurance are tax-deductible. Additionally, you can also write off your Wi-Fi bills completely along with the furniture you use for your work
- Are assigned to review events, restaurants and you need to drive. You are eligible to write off all auto and vehicle expenses or a portion of it
- Are a blogger and have to travel to review a location. You can deduct the expenses related to it
Tracking your income as well as your expenses will not only help you in filing your taxes but will also provide a shield against the tax audits by the IRS. Additionally, it keeps you updated on your profits and liquidity position and makes you better equipped to make informed business decisions.