When Should Influencers and Content Creators Think About Taxes?

Many influencers and social media content creators are self employed. While this can be a source of freedom, it also brings with it the need to manage a complicated tax situation. It is possible for these creators to track their income and expenses on their own, but many would benefit from hiring a sophisticated tax professional.

 

Influencers and content creators often don’t begin their careers with tax issues in mind. Their main focus, frequently, is making the best content that they possibly can. But H&R Block’s Chief Tax Officer, Kathy Pickering, thinks creators should seriously consider tax issues early on.

 

“Social media influencers, oftentimes, are just getting started and they might not really even understand that they are starting a business and that they are self-employed and with that comes a whole set of rules that they need to be aware of,” she told Business Insider.

 

The rules of self employment can be somewhat complex. Similar to any small business owner, a content creator is responsible for tracking business expenses and income, and making sure they set aside enough money for taxes at the end of the year.

 

If you’re running a business as a self-employed content creator, you might want to consider getting professional tax help.

 

Once you’re trying to make money online, you have a business

Mike Slack, manager and tax attorney at H&R Block, says being a business starts at the $400 income threshold . “Once you hit that $400 threshold, you have to include it on your tax return for self-employed activity in what is called a self-employment tax,” he told Business Insider.

 

Because the $400 is a relatively low threshold, he suggests for content creators to start considering self-employment status once they move on from their social media work being “just a hobby to being actually engaged in an activity to gain profit.”

 

One of the main indicators that a content creator’s social media activities have transitioned from a hobby to a full fledged business is interest from brands and sponsors . Pickering says that if a company wants to start a business relationship with an influencer, “that’s a good signal that they’re going to want to make sure that they’ve got their ducks in a row because at that point they will be making money.”

 

And once you’re a business owner, you have to start being organized with your record keeping: using a business bank account and credit card for business expenses, and tracking income and any money spent on maintaining the business. You don’t need an elaborate system to do this, says Pickering it can be “as simple as when you buy something, take a picture of the receipt and stash it in a folder.”

 

If brands are interested in sponsoring you, it’s time to see a tax professional.

The best time to meet with a tax expert, Pickering says, is when brands and companies express interest in paying an influencer for work.

 

“What I would really recommend, as somebody is getting started, that they do spend a little time talking with a professional,” Pickering said. “Because when you’re first working with a sponsor or an advertiser you’re going to want to know what questions to ask them as you’re starting a contract.”

 

In addition, things such as brand-provided trips are considered taxable income. The value of any flights, hotels, and compensation that’s provided by a sponsor should be considered earnings.

 

Influencers should consider themselves small business owners, and act accordingly by seeking professional tax guidance.