Make money with social media? Don’t forget your taxes.
Key Points Social media influencers can make a lot of money on platforms like YouTube, Instagram, and TikTok. Influencers are considered self-employed and are responsible for paying their own self-employment and income taxes. If your tax liability is over $1,000, then the IRS recommends quarterly estimated payments.
Do you think you have what it takes to become a social media influencer? Here’s what it takes to make $100,000 a year on these popular platforms, according to a new Social Income Calculator:
YouTube: At least 1,000 subscribers and 24,000,000 views per yearInstagram: At least 5,000 subscribers and 308 sponsored posts per yearTikTok: At least 10,000 subscribers and 270,000,000 views per year
Being a social media influencer can be a lucrative career, but it also comes with its own set of tax rules. With the emergence of new ways to make money online, it’s important for influencers to understand how taxes work. They also need to stay abreast of legislative changes that could affect their bottom line. That’s why we put together this guide on how social media influencers pay taxes.
Since influencers work for themselves, the first step is to understand the basics of filing taxes as an independent contractor. Social media income is generally subject to self-employment tax and both federal and state income taxes. Influencers are typically required to file an annual return and pay estimated taxes each quarter. The IRS recommends self-employed people make quarterly payments if their tax liability is $1,000 or more. If you pay too little tax throughout the year, you may have to face a penalty for underpayment.
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In general, all income generated must be reported, even if it is “passive” or “unearned” income (e.g. brand deals or sponsored posts). Since taxes are not automatically withheld from the wages of the self-employed, they are responsible for paying the tax themselves. They receive a Form 1099-NEC for any payment over $600 they receive from any platform or brand. It’s also important for self-employed people to keep track of all business-related expenses and include them on their tax returns to take advantage of deductions and credits. The self-employed can also open their own pension accounts.
The self-employed tax rate is 15.3%, which is made up of 12.4% for Social Security and 2.9% for Medicare. This is similar to the payroll taxes that W2 workers pay. Income taxes are based on the tax bracket you are in. Both taxes are based on “net income”, which is your gross income less your business expenses. If you lose money, you usually don’t have to pay taxes.
If you make money from social media and expect to owe $1,000 or more in taxes when your tax return is filed, you can use Form 1040-ES to submit estimated quarterly tax payments by mail, online, by phone, or from your mobile device send with the IRS2Go app. You must also submit a Schedule SE form (Form 1040 or 1040-SR) for any payment over $400 that you receive from any platform or brand.
Your annual return will depend on the type of business unit you use. If you are a sole trader, you must use Appendix C to file your annual tax return to report your income or loss. If you use another company, contact a tax professional to help you file your tax return correctly. Penalties for not paying your taxes can range from fines to charges of tax evasion. It is important to keep track of your accounting so that you are aware of any liabilities you may have.
Filing taxes as a social media influencer can feel overwhelming at first, but knowing the basics can make the process a lot easier. Staying organized and up to date with the latest tax regulations will ensure you never miss deductions or face hefty penalties for incorrect filing. With these tips, paying taxes as an influencer gets easier every year!
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