As a result of the evolving global social landscape, a large number of businesses should understand the power of social media influencers. Therefore, the influencer market has exploded recently. If you are considering starting a business as a Facebook influencer or if you already are earning income this way, you may have some questions about Facebook influencer tax planning and accounting.
1. How Do Facebook Influencers Make Money?
As a Facebook influencer, there are four primary ways that you may make money, here's the list:
- Sponsor Posting Blogs – This is the most common way influencers earn money and a brand may ask you to create content featuring the brand and then share this content with others
- Digital Products – These would include e-books, promotional flyers, and other digital material and you may get paid by the brand sponsor for each download or click
- Selling Ads or Editorial Space – A brand might use your page to promote an item using a click-through advertisement, or you might publish an advertorial article
- Online Seminars, Webinars, and Podcast – A brand might charge customers to get access to premium content or you might work with a brand to create specialized content for their audience
2. Are Facebook Influencers Employees or Contractors?
This is an important distinction to make because it plays a role in Facebook influencer tax planning. In most cases, Facebook influencers are not employees. They are usually independent contractors. They would receive the 1099 MISC from clients if they earn over $600 from that client.
If a Facebook influencer earns less than $600 from a client, they may not receive a 1099- MISC, but their Facebook influencer CPA should still report the income on their tax forms. If an influencer is given products as opposed to cash, the value of the product would be recorded as income.
3. Is Being a Facebook Influencer a Hobby or Business?
Two words that may help answer this question are “profit intent.” If your influencer activity is conducted with a “for-profit motive,” it is not a hobby. We recommend consulting with an experienced entertainment industry financial adviser to better understand how the IRC Section 183 may apply to your situation. Generally, hobbies are done for recreation or sport, not profit.
So, if you are making money as a Facebook influencer as a hobby, now may be a good time to speak to your additional assistance from an expert regarding structuring your activities more clearly to show profit intent. Expenses incurred from a for-profit activity are usually deductible and may reduce your ordinary income. Under the Tax Cuts and Jobs Act, expenses incurred for a hobby are no longer deductible.
4. What Expenses Can a Facebook Influencer Deduct?
Business expenses must be necessary and ordinary. Ordinary means expenses that are usually associated with a specific industry.
You may be able to deduct:
props for videos
cameras, computers, recording equipment, and some
Our small business entertainment industry accountants also recommend consulting with an accountant about the pros and cons of contributing to the Simplified Employee Pension Individual Retirement Account. This may help you save for retirement and could reduce your taxable income.
5. What Should Facebook Influencer Bookkeeping Include?
The purpose of bookkeeping for a Facebook influencer is to keep track of the movement of money in and out of your business. This may help you make good decisions about what clients to accept and what expenses to make.
Some tips you should remember for Facebook influencer bookkeeping include:
- Start planning for taxes early. For you, tax season may every season
- Track your expenses
- Avoid falling into the trap of only recording income
- Keep things organized – the great organization is normally the key to finding valuable information efficiently and quickly
- Keep copies of everything, this includes income and expense
- You should keep unquestionable proof of everything if you have invoices, receipts, and checks.
- You may never know when you may need evidence of an action.
Grow Smarter: Guidance for Facebook Influencers
Here at Fusion CPA, we understand the unique accounting needs of social media influencers. We work with entertainment industry professionals who work as social media influencers, whether they are owners of small to mid-sized business or independent contractors Our goal is partnering with each client to help create individualized tax strategies designed to maximize deductions and minimize tax liability. As a Facebook influencer, your time may be better spent creating content for your clients. So, our entertainment industry accountants offer bookkeeping, accounting, tax planning, and financial advisory to partner with you and assist with helping reach your short-term and long-term financial goals. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.