Common Taxes Influencers Must Pay — And 3 Mistakes To Avoid

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As you watch TikTok celebrities and Instagram stars rake in the bucks via paid advertising (plus income, perks and freebies) from the brands they represent, you may be thinking they lead a charmed life. But, just like anyone else who works, influencers still have to pay their share of taxes. In fact, without the benefits of withholding taxes, influencers may get hit with a higher tax bill than they expect on April 15.

First, let’s understand that very few are earning millions per year — only a handful break six figures. According to ZipRecruiter, the average salary of an influencer is just $57,928 per year, while the top 10% in the field earn between $91,000 up to $103,000. And that’s taxable income.

Taxable Income for Influencers

Most social media influencers and content creators get paid as independent contractors. That means the clients they represent, as well as the social media platforms that pay them, send a 1099 form showing their earnings (if they exceed $600 for the tax year. When a company issues a 1099 form, that income is reported to the IRS.

Even if you don’t receive a 1099 form, though, you need to report any income, even if it’s under $600 from a single source.  

As independent contractors, influencers do not have FICA taxes deducted from their paycheck. That means influencers are responsible for paying the full amount of Social Security and Medicare taxes, in the form of self-employment taxes. They must pay 15.3% of their total income as self-employment tax, with 12.4% going to Social Security and 2.9% going to Medicare.

Of course, just like anyone else, influencers must pay federal income tax based on their tax bracket, and may have to pay state income tax, as well.

Influencers must pay taxes on pay generated from:

• Advertising
• Sponsored posts
• Brand partnerships

Influencers must also declare any perks or products they receive for free as income, too. They have to declare promotional items at their fair market value and pay taxes on them.

3 Big Tax Mistakes Influencers Make

Even though influencers have to pay self-employment tax, they have ways to reduce their tax bill. As an influencer, you want to make sure you aren’t making common mistakes that could lead to a higher tax bill. Don’t make these mistakes:

1. Failing to Take All the Deductions You Deserve

If you file taxes as an independent contractor, self-employed, you’ll want to itemize business deductions on a Schedule C. You might not be aware that you can offset much of your tax liability by deducting the tools you need to run your business. These include:

• Computer
• Phone
• Software and apps needed for content creation and marketing
• Half the self-employment tax you paid (which would normally be paid by an employer)
• Purchases related to content creation or product reviews
• Marketing costs / paid advertising
• Costs of tax preparation

2. Neglecting to Pay Quarterly Taxes

One reason independent contractors might face a larger tax bill in April is because they haven’t been paying taxes throughout the year. If you don’t pay at least 90% of the taxes owed for 2023 by the end of the year, you’ll need to file Form 2210 and pay a penalty, according to IRS.gov.

To avoid this penalty and a large tax bill in April, you can make quarterly estimated payments. Many contractors set aside 25% to 30% of their earnings for quarterly estimated tax payments. If you pay more than required, you will receive a tax refund when you file, just like an employee does.

3. Not Working with a Tax Professional Who Understands the Gig Economy

Understanding tax laws related to 1099 income can be complicated. You don’t want to deduct expenses that could raise red flags and lead to an IRS audit. But you also don’t want to leave money on the table by failing to write off legitimate business expenses.

Working with a tax expert who works with influencers like you and understands how to offset your income with tax deductions and credits can help you reduce your tax bill and save money.

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