Understanding Tax On Freebies For Bloggers & Social Media Influencers
Influencers are starting to reject brand gifts and freebies because of the tax implications. For example, when a brand gives you a product in exchange for a post or a mention on your page, the federal government considers it an income, and you must include it in your tax returns.
Because freebies do not reflect on your bank balance, you may be curious about your tax obligations as an influencer and whether you can get away with not filing freebies in your tax returns.
Keep reading to learn more about the tax implications of freebies for bloggers and social media influencers, including which form to file and what you can write off:
The federal government’s take on influencer marketing freebies
The first and most important thing to note is that you CAN NOT get away with leaving freebies off your tax returns as an influencer because if you do, the IRS will know about it and may prosecute you.
When a company sends out a brand gift, they consider it a marketing expense in the influencer marketing category and write it off in their tax returns. In turn, the IRS tracks this product to the recipient, you, the influencer. If it is undeclared in your taxes, the IRS can charge you with tax fraud/evasion.
Influencers’ tax obligation forms
Fundamentally, if influencer marketing is your only gig, you should file form 1099, the tax form for independent contractors. However, if influencer marketing is just a side hustle, and you have another “more traditional job,” you should declare your taxes using forms 1099 and W2.
Fortunately, no matter which tax form you need to file, there are clear guidelines on filing 1099 and W2 in the same year. Thus, declaring influencer marketing freebies should be pretty straightforward.
Tax laws for Freebies
As a content creator, the IRS expects you to declare gifts valued above $100; you do not need to declare gifts below this value.
Unfortunately, most brands don’t disclose how much their gifts are worth on their tax returns. Thus, it is your responsibility to research the market value of the freebie and then use that to declare your taxes.
Tax write-offs for influencers
Any expenses incurred in your line of work are technically tax deductibles, including the gifts sent to you as an influencer. The main idea here is to prove how that gift contributed to your income generation, which is why you need to keep clear and detailed records.
For example, if a brand gives you a camera, you can easily deduct that from your taxes because it helps you create more content that brings in income. The same case applies to furniture; you can write this off as part of your office space and count it as an expense.
Brands will write off the gifts they send you as expenses; consider doing the same. For example, as a travel blogger, consider turning your hobby into a career so you can write off things like sponsored trips.
Other things influencers can write off include:
- Email services
- Home office space
- Gadgets, including smartphones and computers
- Software purchases, including content editing software
- Website hosting fees
- Travel and mileage
- And many more self-employment write-offs.
The critical thing to remember is to tie your write-offs to your work as an influencer and keep meticulous records.
Talking of records:
As your influence grows, more brands will want to partner with you. Brands take different approaches to this, including sending gifts.
You should track and keep clear records of these items and their prices to ensure you can declare them accordingly when filing your tax returns. Always ask brands for receipts, mainly because it can take time to determine the market value of a PR package.
Take advantage of giveaways to write off freebies
While some brands may approach you before sending a gift, most won’t. In most instances, you will receive unsolicited gifts that you must account for when filing your taxes. Fortunately, you can give away these gifts and write them off as advertising expenses.
Learn to say no to gifts
While being an influencer is appealing, receiving gifts has downsides. To ensure your taxes are manageable, only accept gifts you know you can use, preferably ones you can relate to your work, and write them off. Always remember that you are under no obligation to accept every gift brands send you.
One way to ensure brands don’t send you unsolicited gifts that they then write off is to have detailed guidelines asking brands to reach out to you before initiating the delivery of any gifts. This way, you can review whether the product is worth the tax it will impose on you.
When it comes to freebies as compensation by a brand, remember that free isn’t always free, especially when it comes to the tax man. Thus, besides these tips, keep learning how to become a more impactful social media influencer.
More importantly, consider getting a tax agent, especially if you are still struggling to make head or tails of your taxes on freebies and when more and more brands start seeking you out for influencer marketing deals.