6 Tax Tips for Professional Influencers

f you earn income as an influencer promoting products or services on platforms such as Instagram, TikTok, and Facebook, then you need to understand your tax obligations in order to keep in good standing with the IRS,” says Jonathan Medows, a Manhattan-based CPA. 

As the founder of CPA for Freelancers, Jonathan has spent countless hours working with clients who have side-gigs or work full-time as influencers. He says, “although there may be a special allure and celebrity aura around this type of work, the tax implications for these individuals are really the same as for any small business owner!” 

Jonathan says knowing which tax write-offs influencers can claim will help reduce your tax bill. While the IRS offers guidance for gig workers, influencers often have nuanced financial situations.

“If your influencer income is in addition to a regular full-time job, you will need to report all of your income stated on your W-2 and 1099 forms, plus any income not stated on these forms. Tax deductions may also be available to reduce your taxable income so you can avoid paying more taxes than necessary,” he says.  

What are the other tax considerations for influencers? We asked Jonathan what tax questions he hears the most often.

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1. Do influencers need to pay taxes on gifts?

“One particularly gray area for influencers on their tax returns may be claiming gifts they receive from brand sponsors. These must be treated as income,” explains Jonathan.

The term “gift” applies to any item sent by a brand, solicited or not, for an influencer to use or promote. In other words, if you receive products in exchange for work, the product must be treated as income.

“Most companies will write the cost of these products off on their own taxes, which means the IRS has a trail to follow to those people who received the gifts. So it is always the best strategy to be honest about your earnings to avoid audits and fines,” he said. 

Here are some reminders on how to handle gifts: 

• As an influencer, you will need to pay taxes on any gifts you receive valued at or above $100. You will need to include this as income on your tax return
• Not sure of the value of a gift you receive? The onus is on you to do your homework!
• If you do receive gifts or reimbursement (trips, entertainment tickets, etc. – all qualify as income) from a brand you work with, be sure to ask for a receipt and keep that with your tax documentation, too. 

When it comes to gifting, Jonathan reminds his clients, “If the item is something you use in the course of running your business, you may be able to write the item’s value off as an expense. This could apply, for example, to a camera or other item that you use to take pictures for your work as an influencer.”

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2. What gets an influencer flagged for an IRS audit? 

Being a self-employed influencer can be exciting, but it may also make you more likely to be audited, especially if your deductions are disproportionately large compared to your income.

“Taking a lot of high-ticket expenses such as travel and lavish meals as deductions may trigger a red flag for the IRS,” Medows said. “The keys are to be honest about your income versus deductions ratio.”

Make sure you separate your personal expenses (such as clothing purchased for a video shoot) from your business expenses. You should also keep all receipts and record your income and expenses in accounting software accurately. That way, if you are audited, your records will be ready to serve as back up.

Here is a list of things you should keep track of:

• Tax payments: A listing of the estimated tax payments you made to the IRS and other state and local entities (list out the entity which paid, the date paid, and the amount paid.)
• Taxes and filing fees: A record of any taxes or filing fees you either paid or owed at the federal, state, or city level. 
• Statements: Statements for any qualified retirement contributions you made into a SEP IRA or other pre-tax retirement investment vehicles.
• 1099 Forms: If you received at least $600 in payments from any client in the calendar year, your clients should send you a Form 1099. Keep a tally of the payments you received throughout the year. Be aware that your clients may include the value of products as payment.

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3. Can influencers deduct their travel expenses? 

Travel expenses can include everything from the cost of airline tickets and hotels, to the costs of insuring and maintaining your car – if you can show that this travel was related to your business. If, for example, you are traveling to photo shoots, meetings, or networking events, or you’re picking up or dropping off products to review, the travel expenses are deductible.

Here are the standard mileage deductions for influencers:

• For your 2022 taxes, the standard mileage rate was 58.5 cents per mile for January through June. The rate was increased to 62.5 cents per mile for the remainder of the year. 
• In 2023, the per-mile deduction is 65.5 cents.

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4. Can an influencer deduct meals and entertainment? 

In 2023, business meals and beverages are 50% deductible. Here are some influencer-specific examples:

• If you take your team out for a meal or drinks and you have a substantive discussion about business, then you can write off 50% of the cost as a business deduction (you must be present for this to be the case).
• Takeout and delivery meals are 50% deductible as long as the expenses are reasonable and related to your business. 
• If you are treated to a meal by a client while working, that is not a deduction for you or considered a form of taxable compensation. 

If you plan to expense a meal, retain your receipt and be sure to record:

• The date
• The time
• The place
• Who you were with
• The nature of the business you discussed 

With regard to entertainment, Jonathan says, “if you are the one paying for the experience, deductions are not allowed for client or team entertainment in the eyes of the IRS.” If, however, you receive tickets to a game or other entertainment experience as part of your compensation, then you should claim the value of them as income just like you would a gift of any other kind.

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5. Can I set up an IRA or 401(k) as an influencer? 

Jonathan says, “If you are a content creator, now’s a good time to consider setting up a qualified retirement account such as a SEP-IRA. In this type of account, you can contribute up to 25% of your self-employment earnings, with a maximum contribution of $66,000 for 2023 – all of which is tax deductible.”

Other small business retirement plan options include 401(k) plans (which can be set up for just one person), defined benefit pension plans, and SIMPLE-IRA plans. Depending on your circumstances, these other types of plans may allow bigger deductible contributions.

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6. Do influencers need to make estimated tax payments throughout the year?

If being an influencer is your full-time job, you will need to pay estimated taxes quarterly throughout the year. Failure to do so can result in late fees and fines, so make it a point to take at least one-third of all of your freelance income and put it in a separate account for tax payments. 

When are estimated tax payments due:

• January 
• April
• June
• September

Jonathan also cautions influencers, “Be sure to check if you owe additional state or local taxes too, and make those payments to avoid additional penalties.”

If you have other income besides what you make as an influencer, you'll want to account for all income sources when you calculate your estimated tax payments and/or tax withholdings. If, for example, you have a full-time job in addition to influencing, you will likely need to adjust the number of allowances on your W-4. This form determines how much your full-time employer withholds from your paycheck for taxes throughout the year. This is where it might be especially helpful to consult a tax professional.

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Takeaways

“Keeping on top of your income and deductions as an influencer is important to make sure you stay in the good graces of the IRS. If you are unsure of how the rules apply to  you, check in with a tax specialist,”Jonathan says.

As for other deductions content creators may be eligible for, Jonathan reminds clients to inquire about:

• Advertising, which includes all website expenses – including design
• Work space, which can include rent, utilities, and even homeowners insurance premiums
• Contract labor such as personal assistants, photographers, editors, or stylists
• Equipment purchased during the year, such as computers, monitors, or ring lights

He said, “It can be easy to overlook deductions and your obligations when you are busy, and some of the regulations can be misinterpreted relatively easily. Getting your influencer taxes set up properly when you first start out goes a long way toward helping your work as an influencer remain rewarding and profitable.” 

Jonathan Medows is a New York City-based CPA who specializes in taxes and business issues for freelancers and self-employed individuals across the country.

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