Despite being a common hobby, many people have found ways to use social media like Youtube, Instagram, and Tiktok to their financial benefit. Whether through advertisement or other forms of merchandise, these people have figured out ways to earn a living by using these social media platforms.
These people are called Social Media Influencers. Over the years, they have risen in numbers and popularity as the platforms they produce content on have become increasingly more prominent and accessible to the public. However, as successful as they are, they are not exempt from paying taxes.
Taxes for social media influencers have a few things that are different compared to what we are familiar with as employed professionals. Their nature of work diverges from the traditional occupations that exist outside of social media. Thus, if you are an aspiring content creator who wants to earn a living through social media, you must be aware of the differences in filing taxes so that your finances are in order.
It is important to remember that social media influencers are self-employed and must follow tax obligations for self-employed professionals.
This article will provide you with information that you must know when getting your responsibilities in order as a social media influencer. We will discuss the tax forms that you should be using and filing, specifically the ones that are important to remember and different from the usual tax forms that an employed taxpayer uses.
As most of the money earned from being a social media influencer is through brand and product advertising, one might think that social media influencers are similar to employees. However, this is simply not the case as social media influencers are merely brand ambassadors. This, in accordance with the IRS, makes a social media influencer a contractor rather than an employee. And as per the IRS contractors are required to submit Form W-9, Request for Taxpayer Identification Number and Certification, to the companies they are working with to validate the legitimacy of their information as a taxpayer. This form is also what you will submit to the IRS when filing your tax returns.
While filling out Form W-9 is simple, it should not be easily forgotten as it is a vital document that validates your identity as a taxpayer.
When encountering people who speak about taxes and social media influencers, many people would say that you only have to file your taxes as a social media influencer when you have met a certain threshold amount. However, this assumption is simply untrue. You will need to report your income from your efforts as a social media influencer.
The assumption that you must only file your taxes when you reach $600 is misinterpreted. The only thing that changes in the situation is that your employer is not required to send you forms to fill out in order to report your income. However, reporting your income is still advised in order to keep your finances in order. This is where you can use Form 1099-MISC, Miscellaneous Information. This document is used to report any miscellaneous income that you earn. If you are given gifts and products as compensation for your efforts, then the value of these products is what you would use in filling out your 1099-MISC form.
While you might start out with small amounts of income, it is good to start the habit of reporting this income so that everything is accounted for. As you grow and earn more income, this process will come naturally to you and will prove to be a less difficult challenge.
While Form 1040-ES, Estimated Tax for Individuals, is a common tax form across all occupations, there is a difference when it comes to filing taxes as a contractor. Form 1040-ES is used to calculate and submit the estimated amount of tax that you will pay to the IRS.
This differs from the usual tax-paying process as contractors like social media influencers are required to send these and pay their taxes on a quarterly basis, in addition to the annual report that they submit to the IRS. Keep in mind that what you pay and calculate from your quarterly 1040-ES form are all estimations and usually, by the end of the fiscal year, you will have overpaid or underpaid your total tax for the year. In this situation, the IRS must compensate or remind you of this fact. If you have overpaid, then the IRS owes you the excess and must reimburse you the excess amount. Otherwise, if you have underpaid, then you must pay that amount to the IRS.
Calculating taxes is a tedious task. However, this activity is vital in understanding the income and expenses that you accumulate as a social media influencer. If you are familiar with Form 1040-ES then you will be aware of the importance of submitting it and paying the amount you have calculated. Having your finances well-accounted for can save you from misunderstandings in the tax you pay and can prevent any form of mistakes in paying, filing, and reporting these taxes.
These are the due dates for quarterly estimated taxes:
- 1st quarter (January 1 to March 31) — April 15
- 2nd quarter (April 1 to May 31) — June 15
- 3rd quarter (June 1 to August 31) — September 15
- 4th quarter (September 1 to December 31) — January 15 of the following year
In essence, when you aspire to earn through social media by being an influencer, you must be aware of the responsibilities that come with it. And as with any respectable occupation, one of these responsibilities is organizing and understanding your taxes. Being a social media influencer is a unique occupation and has some special cases and processes that must be taken into account when it comes to paying and filing taxes.
However, again, much like any occupation, taxes are something that we can practice and familiarize over time. Thus, it is advised to start studying how taxes, especially for your aspired line of work, should be handled.
It can be daunting at first as being an influencer is a field where little instructions on how to organize finances exist. However, if you put in the effort to learn the processes involved, then you can improve the way you handle your finances at the same time improve your content as a social media influencer.