Fortunes can ebb and flow substantially on social media platforms, with content creators reaping riches from viral videos one month — and making little the next. Influencers may also receive lavish gifts, one-off checks and direct tips from loyal viewers.
In the eyes of the Internal Revenue Service, they owe taxes on all of it. For some creators, especially those filing freelance taxes for the first time, tax season can feel a bit daunting.
Carolina Paniagua made a few hundred dollars through the Instagram Reels Play Bonus Program by posting about books last year. Mx. Paniagua, 25, who uses they and them pronouns, works full time as a domestic violence educator in Chicago but understood that there would be tax implications for their side income.
“I’m walking through a minefield, figuring out what I’m supposed to do,” they said. “I only have around 7,000 followers, and I don’t make a ton of income through Instagram. But if you make money, you have to report it.”
They have watched a lot of TikTok videos offering tax advice (the #taxtok hashtag has been used more than half a billion times) but are skeptical about much of the information they encounter. And they have questions about whether a certified public accountant will know how to handle their income from Instagram reels and whether they should file W2 and 1099 taxes together.
Many content creators see fluctuations in income each month, and their taxes can quickly become complicated. The expenses that they incur as content makers — from ring lights to eye shadow kits — may be unfamiliar to traditional accountants. As small-business owners, many creators are also on the hook for estimated quarterly taxes.
Laura N. Collazo Perez, 24, has posted about her taxes on TikTok. “People shouldn’t give legal advice or financial advice, but social media is about sharing experience,” she said. So it makes sense to her that creators are opening up about this aspect of their lives, too.
When Ms. Collazo Perez started generating an income as a freelance social media strategist and content creator in July, she began tracking taxable income and expenses in a spreadsheet. She said she had told herself, “This is an adulting task that needs to get done.” She made about $25,000 in the second half of last year, she said.
Ms. Collazo Perez noted how easy it is for creators to start generating taxable income on social media. “When aspiring influencers or creators get into the industry — which is as easy as a gifted collaboration — you could be on the radar of the I.R.S.,” she said, referring to brands giving creators products to post. She added, “I respect the I.R.S.”
The I.R.S. maintains a gig economy tax center, which offers resources and guidance, including on 1099-K forms for those making money from online platforms.
And TurboTax introduced a resource offering TikTok-style video tutorials about how to file taxes. Lisa Greene-Lewis, a C.P.A. who works with TurboTax, said the company saw a 207 percent increase in users saying they are creators or influencers between 2018 and 2020.
Ms. Greene-Lewis said creators often got confused about how to handle taxes on items that brands sent them. “Gifts would be taxable at the fair market value,” she said. “If it’s something they’re being paid to promote, that wouldn’t be taxable.”
A new cottage industry of accountants and experts has popped up to help creators file taxes. Fluent in the quirks of direct tipping and the peculiarities of creator write-offs, these specialized accountants often market themselves on social media.
Tony Hoong, a C.P.A. who posts on TikTok using the handle @thecpadude, helps creators get set up with a quarterly or biannual tax filing. “There’s folks that know the tax is there but don’t want to do it at all,” he said. Some clients, accustomed to employers withholding funds for them, “are just blown away by the amount of the tax bill,” he added. Ms. Collazo Perez is among his clients.
Katherine Studley, a tax accountant, posts on social media as The Only Consultant and helps a roster of OnlyFans creators with their taxes. “These are complex returns — not standard Schedule C,” she said of her clients’ filings, adding that some need to consider items like S corporations, payroll and assistants.
The needs of these creators vary — and fortunes can change quickly. “If you go viral, you might make $80,000 in one month,” Ms. Studley said. “Some clients are 19 and haven’t heard of a 1099.” Others, she said, may need to issue 1099 forms to their own contractors.
She recommends that creators make professional bank accounts. “Have all of your spicy income deposited into that account,” she said she advised her clients.
Eric Wei, a co-founder of Karat, a financial services company for creators, said some people suddenly earning online might panic and “ask their mom’s friend’s uncle’s fraternity brother” for help with accounting. “Many times that person who comes from a more traditional tax background has no idea how a YouTuber actually makes money,” he said.
Major creators often have varied income streams, he said, including ad revenue from YouTube, subscriptions from Patreon, affiliate links and partnerships with brands. “A lot of creators are keeping $50,000 in their PayPal or Venmo or Cashapp, because that’s what they’re getting paid for brand deals,” Mr. Wei said.
Beyond that, creators making content in niches — like magic, games or makeup — may be able to write off expenses that directly relate to their content. Many creators, he said, “are missing out on a ton of write-offs.”
Most people who watch a video of a band practicing in a studio may first notice epic guitar riffs or eye-popping style. When Michael Mincieli, the head of tax for Patreon, watched one of these videos recently, he saw tax write-off after tax write-off.
“I will look at videos and think to myself — all the recording stuff in the background? That’s deductible,” he said. Mr. Mincieli continued: “Microphones? Deductible. The lighting for the set, that’s all deductible. Producing software? That’s deductible.”
The name of the band in the video he watched? The Taxpayers.
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