If you are an influencer on YouTube, TikTok and other social media platforms this article is for you. You need to understand how your income you earn as an influencer is taxed. The problem is, that although the influencer market is big and continues to grow exponentially, the IRS has not yet issued substantial guidance when it comes to the unique tax issues the influencers face.
Activities Generating Income
Let’s analyze some of the activities generating your income. Products you receive to promote, even if unsolicited, might be considered income or not.
If you promote these products, the fair market value of these products would be considered taxable income under the barter transaction rules. Although there is no IRS specific guidance in this area, these promoted products are similar to the high value gift bags and goody bags that celebrities appearing to an awards show might receive to create brand awareness and promote products. The IRS’ position on celebrity gift bags is that these represent taxable income. You can see the IRS’ frequently asked questions about this subject on this link.
If you receive these unsolicited products and you do not promote them, they could be considered a gift that can be excluded from income. The condition for a contribution to be considered a gift that is excluded from gross income is that:
- it has to be a result of the contributor’s detached; and
- disinterested generosity; and
- without the contributor receiving or expecting to receive anything in return.
Otherwise, the item may result in income equal to the fair market value of the item. Because it is hard to determine the intent of the contributor when it comes to influencers and because the tax treatment of unsolicited products that are not promoted is an ambiguous area, it would be best to return unsolicited items that you receive and you do not promote.
To make things easier:
- you can indicate on your social media platform that you do not accept unsolicited gifts for promotion; and
- for the items that you do promote, it is best to have a contract in place regarding your promoting services.
Exclusion Rule
There is an exclusion rule when it comes to low-cost products or services that lets you exclude them from income under the de minimis fringe benefit income exclusion. These are items for which the accounting would be impractical or unreasonable. But keep in mind that the frequency with which you receive these low-cost products matters. If you receive de minimis value items frequently from the same business then you would need to recognize income for these items. Check out the link in the description from our YouTube video for more info on fringe benefits rules.
Other Activities
Other activities you do as an influencer generate taxable income as well, such as:
- if you have sponsored videos,
- sponsorship by a brand for a podcast or
- income you receive related to ads on your videos.
You can check our YouTube channel for more subjects that you might find useful. If you are in need of a good CPA firm contact us!
Please note that this blog post is for informational purposes only and does not constitute tax, legal or accounting advice.