You’ve heard of “get ready with me” videos. Now get ready for…“get ready to do taxes with me.”
Recently, conversations have been brewing online around influencers and taxes. Specifically, what they should—and shouldn’t—write off, and the potential risks associated with not filing correctly.
Garrett Alexander is a CPA and co-founder of accounting firm Orsini & Associates, which has started to work with content creators and influencers in the past few years. He told us that 1) accountants in the space are in short supply and 2) misconceptions around how influencers should approach taxes are plentiful because of social media.
Alexander shared a few financial points that are worth keeping in mind for influencers, not just ahead of tax season, but year-round.
1. Set money aside
“When your money is coming in as an influencer, 95%–99% of the time, it’s going to be contract labor. And what that means is, you’re not going to have withholdings on it like you do a normal W-2 job,” Alexander said.
For that reason, he said setting aside 20%–25% of income for federal tax is a “great start.” For those in “high income tax states” like New York or California, he said he recommends bumping that up by an additional 5%–10% for state taxes.
2. Speaking of deductions…
So for influencers who classify their work as a business, what can they write off? Despite some people on TikTok saying that they’ve seen influencers claim to deduct things like coffee and vacations, it doesn’t seem to be that simple.
“For the IRS standards…you get to deduct it if it’s ordinary and necessary to your business,” Alexander said.
He cited a camera or phone as examples, since they’re used to record and post content. In most cases, he said, influencers shouldn’t deduct things like meals. While they may claim they were eating while working, he said, “Everybody is eating throughout the day. You don’t get to deduct it just because you’re a content creator and a TikTokker told you you could.”
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Alexander said a lot of influencers want to deduct “every piece of clothing that they bought,” which he said the IRS could argue is “mostly personal,” even if it’s featured in a video.
“Yes, you’ve recorded yourself in a video with that particular shirt on, but you probably didn’t just wear that shirt one time as a uniform for that specific video and then take it off.”
Influencers who do reviews, he said, should “use their discretion,” since “you’re quite literally testing [the product] on yourself for educational purposes for your audience.” If the product is not used afterward for personal reasons, he said, it’s more likely to be a deduction.
3. You probably need to track what you’re sent
Alexander said influencers should consider whether something qualifies as a business gift, and to note the value in case it qualifies for taxes. But if an influencer is posting in exchange for free products, he said, that’s a different story.
“Anything where you’re basically trading services or products…that’s gonna be taxable,” he said.
4. When in doubt, consult a professional
According to Alexander, there is generally a three-year statute of limitations to audit someone’s taxes. If there is an audit and the IRS identifies errors, he said, the penalty is often the difference in taxes plus any interest or penalties.
To avoid potential repercussions, he said he recommends using “professional skepticism,” and being aware that if a tax tip sounds too good to be true, it probably is.
“I tell clients a lot of times, ‘You need to get off TikTok,’” he said. “Like push content, keep doing what you do, but quit scrolling at night…That’s gonna get us in trouble.”