Tips for Influencers This Tax Season
How to Save Yourself Time and Money
It's tax time, you're behind on your upload schedule, and you have no clue where to start. Don't turn to Instagram for help, I'm here to guide you through the ins and outs of making your April less of a living hell and into more of an organized purgatory. Here are some tips for you influencers for the upcoming tax season, and for the next few years to follow.
1. Consider Yourself a Business
Though it may seem bit silly to dub your full-time YouTube career a business, it will absolutely benefit you to do so come Tax Season. Why? Because all that ad-revenue is classified by the Tax Office as taxable income. It makes sense: What you do makes money, just like a business. When 'Adpocalypse' hit you struggled with cash-flow, just like a business. These ups and downs are a part of any money-making vocation, and accepting this simple fact will mean alleviating the headaches come April. So suit up (emotionally), you’re a big kid now.
If you're a smaller influencer, be wary, the IRS may consider your social media pursuits a hobby, rather than a full fledged business. A good way to make the distinction in what you do being a business or a hobby is to ask yourself if this pursuit is one "in which you aim to draw a profit." Still too vague? Are you relying on brand deals and ad streams to pay rent? You're a business. Are you uploading Instagram skits for fun on the weekend while not at your 9 to 5? You have a hobby. Don't worry, hobby expenses can still be deducted, however, don't plan on deducting more than your hobby made in a single year, because the IRS won't let this slide.
Now, let's get to deductions.
2. Deduct, Deduct, Deduct.
The financial burden of running a successful YouTube channel can seem overwhelmingly burdensome, especially with YouTube taking such a large portion of your earnings. There is good news however. The phone bill, internet, that new camera and lens, your overpriced MacBook Air, are all deductible. Simply put, these are all expenses essential to your business and contribute directly to your income. Tax code stresses that these expenses must be "ordinary and necessary," so don't go crazy.
Online filing services like Turbotax make deductions a breeze, which means you have zero excuses when it comes to saving yourself some money. Be smart about the way you file though; keep receipts, check your expenses in your bank statements, be accurate and use your best judgement when it comes to reporting. I recommend apps like Genius Scan that save a digital copy of your receipts straight to your phone, making it easy to reference any expenses throughout the year.
3. Prepare for the Coming Year
Writing that dreaded payment check after filing can be a big blow to all that brand deal money you've worked so hard to earn. Let this be a lesson to you, you can file quarterly and save yourself the palpitations down the road. In addition, the IRS has an Electronic Federal Tax Payment System(EFTPS) that allows tax-payers a less burdensome option throughout the year (check out the Form 1040-ES on their website). Don't panic when that total amount due shows up, you have options.
And of course, you can file with Turbotax and H&R Block quarterly. Estimate your yearly income for the following year, then plan on saving 15-20% of that amount by deducting micro-amounts from your monthly Ad-Rev payments. Putting a little aside monthly will help when it comes time to tackle those quarterly payments.
4. Don't Be Afraid to Ask for Help
We get it, taxes are terrifying, that's why there are businesses to help. If you're in a major city, chances are there are dozens of tax professionals in the area that would love your business. If you get lost in the mess that is tax-filing, consult a professional. Most will file you away and keep you audit-free for $75-$150. It's worth it. An audit is no fun, and will end up costing you more in the long run.
That's it! Keep these tips in mind and you'll keep the IRS happy, however unsatisfying that sounds.