Considered self-employed by the IRS, social media influencers must report the income that they earn through social media on their income tax returns. There are two types of income influencers earn- monetary and non-monetary. It doesn’t matter which one you earn or on which platform you are most active. You are entitled to file the taxes appropriately as long as you conduct business activities through social media. And hiring accountants or tax consultants might be a good idea so they can handle the taxes while you focus on your content.
Should all social media users report their income?
No. It depends on how much you earn. The CRA would expect an income return file if you garner a significant amount of profit through your business activities conducted on social media channels.
If you report non-monetary income, you need to use the fair market value of the product received. For instance, let’s say Angela is a social media influencer who received sunscreen as a gift from a brand that wanted her to market their products. Sunscreen is an example of non-monetary income. So, Angela has to include the fair value of the sunscreen in her income report for the year.
Does income include goods and near-cash?
Include the income that you receive via electronic and cash fund transfers or ETFs. You can also include near-cash such as gift cards.
Whether marketers pay you to promote their brand on your channel or you earn money through gigs, everything a social media content creator earns counts as taxable income.
It can be confusing to determine if you require to file an income tax return. You can seek the guidance of experienced tax consultants to know if you need to pay attention to the income tax arena.
What are the GST/HST implications?
You need to register for, gather and pay the GST/HST to the CRA if you expect the profit and total taxable supplies to be at least $30,000 across four calendar quarters.
Can you deduct eligible business expenses?
You can if the CRA considers the income you earn from social media channels as business income. Your income should be directly related to your business activities on social media channels. Every part of the expense should be invested in your business and not in your personal interests. The deductible amount differs based on whether the expense is categorized as a current year or capital expense. You can consult with tax consultants to know if you are eligible for deductible business expenses.
What expenses count as tax deductions?
You can lower your taxable income if you can correctly claim the business expenses against your earnings. As mentioned earlier, social media-based entrepreneurs are considered self-employed. So, you can include anything that your business needs to function as deductible expenses. The most common ones include car payments, cameras, home office square footage, gas, subscriptions to trade-specific publications, etc. You can also claim expenses related to domain & web hosting, hardware, software and internet service charges.
Where to report income and expenses?
Social media influencers need to report their business expenses and income on Form 1040. It consists of information from other forms, making it one of the most common tax return forms.
Self-employed individuals get Form 1099-MISC from the company they worked for if the payment was more than $600. The purpose of this form is to help them work out their overall income.
In the case of influencers, both self-employment and income tax are calculated on their individual income tax return. That means you have to file Form 1040 if the IRC considers you self-employed.
Also, influencers need to pay quarterly estimated tax payments on Form 1040-ES if they are considered individual contractors or freelancers. These categories do not get their tax deducted automatically from their income. This helps you determine the differences between the income from the current and previous year and the amount of money you may owe to the IRS.
So, if you are wondering what’s your tax year, it’s every quarter for influencers.
What are the filing deadlines?
Typically, the deadline for filing taxes is 30th April. If you are considered self-employed, you can file your taxes until 15th June. In Canada, this also includes your spouse.
How to make taxes easier and quicker?
If you need to file taxes as an influencer, chances are you are too busy to handle this aspect of your business. But, you cannot avoid it either. Can You?
This is where the role of tax consultants or accountants comes into play. They handle the financial aspects while you focus on your business on social media.
Next, you should keep your business and personal accounts separate. Create a separate account for all the money you receive through your business, whether it’s a vlog or brand promotion.
