You’ve worked hard on your content. You’ve steadily grown your following. And now you’re ready to take the plunge. You’ve officially joined the ranks of social media influencers everywhere.
Congratulations! It takes a lot more work to create an income on social media than most people realize. Between brainstorming, production, and sustaining a regular posting schedule, a successful influencer has their time cut out for them. But the rewards are well worth the time. You can connect and share your story with thousands—or millions!—of people. You can meet new people you might have never met otherwise. And on top of everything else, you can earn a sustainable income! Or maybe even more.
However, a new income can bring new questions about your finances. Whether you used to work at an office or a coffee shop, there’s a good chance that your transition to influencer income will cause some changes to your finances. And you’ll need to adjust accordingly.
As a full-service tax representation firm, we’re not exaggerating when we say we’ve seen it all. Literally. We’ve filed taxes for almost every type of business out there, and we’ve helped taxpayers from all walks of life. And trust us when we say that taxes get a whole lot easier when you do them 24-7. In our view, taxes don’t have to be the worst. With the right knowledge in hand, you can transform them into an incredible financial opportunity. You can save time and money, all while pursuing your passion.
So we decided to write the ultimate tax guide for social media influencers. We’ll walk you through the main differences between influencer taxes and taxes from other types of employment. Then, we’ll explain the major types of income you’ll likely run into as a social media influencer. We’ll offer up some tips to filing your taxes, and dive into some other tips and social media influencer FAQs.
The term “income” can refer to many different things. For example, you’ve got your 9-5 positions, tipped wages from part-time jobs, or contract work. But it can also refer to income earned on stock investments or Social Security, even unemployment benefits! For our purposes, though, let’s stick to the income that’s more like the first two.
The ways in which you’re taxed differ somewhat depending on how your employer categorizes your work. Essentially, you need to know the answer to the following question: Are you an employee or not?
Employees typically work regular tasks and at regular hours. Whether or not you have health benefits or not is beside the point, but it does get to a good delineation. Here’s how the IRS describes the difference:
“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.”
The type and degree of instruction, how an employee is evaluated, and job training all can play a major impact. A contractor may have the chance to offer their services elsewhere, but they also may receive less consistent payment. Generally, your contract will dictate whether you’re an employee or a contractor.
Most full-time and part-time work falls into the “employee” category, while most income you’ll receive as a social media influencer falls into contract work.
Two major differences come into play depending on whether the IRS categorizes you as an employee or a contractor. The forms you use and who pays the IRS your taxes.
When you start a new job, typically you’ll fill out a W-4. On Form W-4, you share with your new employer all your basic info—total dependents, filing status, certain deductions you may plan to take, etc. This allows your employer to withhold your estimated taxes.
Whether you work a full-time job or a part-time job, if you fall under the category of an employee, your employer will withhold your taxes from your income and pay them directly to the IRS. If you discover when filling your tax return that you directed too much to be withheld from your income, you’ll receive a tax return. If you owe the IRS more, you’ll need to pay.
When you work as a contractor, you’ll instead fill out a W-9. A Form W-9 is pretty similar to the W-4. You fill out your basic tax information for the business you’ll perform work or services. However, when it comes time to invoice for your services, the organization will send you the full amount. No taxes will be withheld.
That’s because the IRS doesn’t categorize you as an employee. Only employees have their taxes withheld on their behalf and paid to the IRS. When you work for yourself, you have to withhold your taxes yourself. And then you have to pay them to the IRS.
An added tax step for those performing contract work: estimated tax payments. Quarterly, the IRS requires you to file a 1040-ES, which you’ll use to estimate your taxes for each quarter—and pay them. At the end of the year (read: tax season), you’ll still receive a tax form from the business you’ve been working for. And just like with employees, if you overestimated your taxes, the IRS will owe you a refund. If you underestimated, you’ll owe them.
Just because you’ll likely fall into the category of “contractor” work on your taxes, that doesn’t necessarily mean all your income will look the same. We’ll walk you through a few ways you might be able to make your money as an influencer.
Probably the most well known—and common—of all social media influencer income streams. It doesn’t matter whether you put out content on Instagram, TikTok, YouTube, or anywhere else. Sponsored posts typically serve as a main income stream for social media influencers, especially starting out.
Through sponsored posts, you will partner with a brand to put out ads on their behalf. Oftentimes, businesses will reach out because your brand and followers align with their product or mission. They may ask you to feature or review a product, or simply to give them a shoutout. In either case, they’ll typically pay on a per post basis. Or they may pay for a short campaign of posts that feature their product, name, or brand.
Depending on your preferred social platform, you can potentially earn some serious revenue through advertisements you don’t have anything to do with. By monetizing a video on YouTube and Facebook, you can earn money with every single view—and potentially through ads that play during the video as well.
The money you can earn from ads really depends on your subscribers or followers and the number of people watching your videos. Typically, the amount you earn per view sits at a fraction of a penny. But as you grow your audience over time, so too will your income.
As you grow your fanbase, you may consider adding in a merchandise line. T-shirts, hats, stickers, and other branded items can build a sense of community, reference fun lines or recurring bits in your videos, and generally just bring a lot of joy to everyone involved. As a plus side, they can also bring in some additional income.
You don’t have to get to the level of Liza Koshy and have your own line of athleisure clothing. You could simply print a mug with your podcast logo on it. Or make a set of bookmarks themed like each of your monthly YouTube book reviews! The options are limitless. And plenty of services can help you track eCommerce sales to help make reporting that income easy.
Unlike pre and mid-roll ads on platforms like YouTube and Facebook, other advertising takes place within the content itself. We think it’s important to distinguish this somewhat from sponsored posts. Because while they obviously hold many similarities, they also have some important distinctions. Rather than, say, making a YouTube video or TikTok reviewing the latest Fenty box or workout supplement, you might have a presenting sponsor or sponsors for a video or podcast.
Most large podcasts have some level of advertising. The host reads or improvises along with a script provided by a specific brand, and in turn, that company pays the podcast or host. And big video channels like Rhett & Link work in the same way. Much of their ongoing income comes in from their videos, where on top of YouTube ads, they’ll also often throw in some presenting sponsors.
The landscape is certainly changing. And one interesting development in how social media influencers can earn money has come with platforms like Twitch and Patreon. The two sites may have a lot of differences between them, but in revenue terms, they both boil down to direct fan support. On both platforms, the connection you build with your subscribers can give them an opportunity to financially contribute to the content you put out.
On Twitch and some other streaming platforms, you can go live while singing, playing video games, watching videos, telling jokes—you name it. And many of these sites have payment features that allow fans to serve up tips. Beat a super hard level on Resident Evil all while saying the ABCs backwards? To a specific subscriber, that could be the best thing they’ve seen all week! And maybe they think it’s worth throwing a couple bucks your way.
On Patreon, fans of your work can get exclusive access and perks with a one-time or recurring donation. Some YouTubers utilize Patreon as an inner circle, of sorts. Fans who think that an extra daily video is worth $5 a month can get access to content they wouldn’t have otherwise! Podcasters use Patreon to post extended interviews and extra audio content. And published writers even use the site to stabilize their freelance writing work, doing deep dives into films or posting more of their creative process.
When you can connect directly with your fans, you have the opportunity to build a deep and long lasting relationship with them. And in turn, they may sometimes throw a few bucks your way just to remind you, “Hey! I think you’re cool. Keep it up.”
So, you’ve finally taken the leap, you’ve made some content, and you’ve built up some income in one or more ways. Now for probably the least fun part of the process: Filing taxes. (Not for us, personally. You create content, we file people’s taxes. And we love doing it!)
When you first start building a non-traditional career, sometimes tax season brings some unique surprises and some unexpected headaches. We don’t think you deserve that kind of a rude surprise, so we’ll give you a few tips to filing taxes for social media influencers.
Taxes can seem complicated, but at their core, they boil down to a relatively simple equation: Income minus expenses.
When you run just about any kind of business, you’ll incur some general operating costs. On the merchandising end, you’ll need to pay for the mugs and the printing before you can sell them. Perhaps you rented out a studio to take some promo shots for Instagram. That microphone you use to record your podcast wasn’t free.
Assuming you earned money associated with these purchases, you can probably deduct them on your taxes. However, that means keeping thorough track of your expenses throughout the year. And yes, that means holding onto your receipts. Try keeping a journal or a spreadsheet where you track your income and expenses associated with your social media influencer work. A good tax professional can help you ensure everything you’ve deducted actually counts—and that you haven’t missed anything, either.
A big reminder about the difference between employed work and contract work. Because it can come back to bite you in the rear later on if you aren’t careful. When nobody is withholding your taxes and paying them to the IRS for you, you need to do it yourself.
Early on, you might not even earn enough money for this to come into play. But many self-employed people run into problems when they forget to set aside their taxes. Instead, they take their whole, say, $1000 check and put it in the bank. Then later on, when they file their tax return, they don’t have the $200-300 that they owe the IRS. Unfortunately, that’s a pretty common tax debt “origin story.”
If you can, try setting up an additional savings account (or a separate account just for your influencer expenses and income). When you earn money, drop an estimated portion in there. The exact amount you should set aside differs from state to state, but it can’t hurt to estimate in the 25%-30% range to be safe. Then, remember to make your estimated quarterly tax payments!
Especially when you start out, the income you might make from a specific brand or sponsor probably won’t be too much. Depending on the niche, micro-influencers might make $50-100 a post or get some portion of revenue sharing with a certain code. In either case, your first income as a social media influencer might not be the same as someone from the Vlog Squad’s.
When filing your taxes, you might hear the total $600 tossed around. Some might even say you don’t need to pay taxes on any income you receive lower than $600. And that’s not true! Regardless of whether a company pays you $25 or $550, all it means is that the company doesn’t need to provide you with a 1099 tax form. The money is still accounted for in their records and in your income. But rather than potentially receiving a tax form as a contractor (which may or may not happen, depending on your specific partnership), you’re on your own. Even more reason to keep diligent records throughout the year!
The devil is in the details, and so can it be in your contracts. Some smaller sponsors may not provide more than a simple, boiler plate form for you to fill out. And others may operate through Instagram DMs and PayPal or Venmo, asking you if you’d be up to sharing their content and asking for your payment info to close the deal.
However, the bigger you grow and the bigger the companies you work with, the more important it’s going to be to read the fine print. (Though we’ll say: You should always read the fine print, whether you’re forging a social media partnership with Ford or filing your taxes.) The details of your income and how the company wants to classify your working relationship will lie in the contract. If you have a manager to help negotiate the best deal on your behalf, incredible. But if you don’t, you may want to consider getting a savvy friend or attorney on your team to work through the details.
Like in most new endeavors, you probably don’t need a manager right from the jump. After all, the first (and most important) relationship you need to develop is the one between you, your content, and your followers.
However, once you’ve nudged that ball far enough and it starts picking up speed, you should consider enlisting additional help as you continue to grow your profile. Not only can external voices provide personal and professional guidance, but they’ll also help you navigate the pricklier parts of life as a social media influencer. Especially as many of these individuals only work on a percentage, they have incentive to work hard and help your career grow.
It never hurts to seek out a respectable manager, attorney, and CPA or tax team. Fundamentally, they can use their expertise to help make life a little bit easier for you. And at the same time, each and every one of them can help you earn more money or save more money. And in the case of your taxes, an expert tax professional can even help you maximize your tax refund.
Before we wrap up, let’s talk LLCs. All sorts of influencers, personalities, and celebrities establish LLCs, or limited liability companies, for their businesses. In fact, it’s not uncommon for major movie stars to have payment directed to their LLC or production company rather than themselves. There are a number of legal and tax advantages to this strategy. If you’ve heard of it before, it’s naturally a bit enticing!
It’s probably not a bad idea to consider looking into establishing an LLC around your name or social media influencer work, but you really don’t need to rush the process. LLCs bring some advantages, but probably the most immediate one comes with some legal protection. For example, if you ever got into a legal dispute with a company or if someone were to sue you, establishing a limited liability company can offer you some legal protection. If you ever needed to pay someone, your personal savings might have more protection than they would without one.
But let’s be real. Is that likely to happen any time soon? No way! Depending on your state, LLCs bring certain tax advantages too. But in the near term, it’s probably going to be totally unnecessary. And hey, maybe once you’ve gotten a year or two into content creation, you determine that being an influencer isn’t for you! Maybe you’d rather consult or start a new endeavor. It seems silly to spend a few hundred dollars setting up a LLC right at the start, when you likely wouldn’t even experience any of the LLC upsides until potentially a few years down the road.
When you’re starting out as a social media influencer, stick with the basics and focus on what matters. You get to have fun, make creative content, and share it with your friends, family, and the world. Start there and see where it takes you.
Earning your first money as a social media influencer—what a feeling! That’s a pretty nice affirmation of the hard work you do to put yourself out there and create content. Working as an influencer requires a lot of hard work, creativity, and commitment—it’s not as easy as “record and post.”
But now that you’ve earned that money, the IRS is going to want a piece of it. And that means you need to understand the taxes associated with your influencer work. We hope you’ve found this tax guide useful, because the last thing we want you to feel during your influencer journey is stress.
But if you have any tax-related questions, give us a call. We’re pretty darn good at taking your taxes off your hands and getting you the biggest refund possible. That way, you can focus on doing what you do best: Bringing joy to your fans.