Are Social Media Influencers Independent Contractors? | Influencers Contract
Are social media influencers independent contractors? Previous jobs that an influencer has had are very likely employee W2 opportunities. Let’s just say you’re working in retail. You are an employee, meaning, the employer has complete control over you. They tell you where to work, when to work, how much you work, and what your duties are. And then, you’ll receive a W2 at the end of the year, you’ll have taxes withheld in your paychecks throughout the year. In that scenario, you’re an employee. Now, as an influencer, your job is different. You aren’t working full-time for any of these companies that you’re sponsoring. You’re doing a short-term burst of marketing, I guess, depending upon the relationship.
And for the most part, it’s up to you, maybe what the exact content that you post. I mean, obviously, there’ll be some bare bones. We want you to post this many times a month, we want you to do 90-second spots on your YouTube videos once every two months, whatever it is. But you’re not going into a nine to five job every day. And when the sponsor does not exert complete control over the influencer, that’s more of an independent contractor relationship. And so, at the end of the year, the independent contractor receives a 1099, and any compensation paid to the influencer has no taxes withheld. At the end of the year, the influencer is going to be the one that must pay the taxes on all of the compensation that they’ve received.
Is there an advantage to being an independent contractor versus an employee? Well, if you’re a smart independent contractor, you’re going to create an LLC and then you’re going to get a tax ID number, an EIN through the IRS, and then you’re going to create a bank account for that LLC. And then you’re going to run all compensation and expenses through that account. As an influencer, you can take many tax deductions as an independent contractor. Many of the things that go into being an influencer can be deducted like travel, maybe you’re in the fitness industry and you’re trying out new products, well, you can likely deduct the products that you bought as well, meals, gas, cars sometimes. There are a ton of things you can deduct when you are considered your own business as an independent contractor and self-employed. Other topics of interest include:
I’m not an accountant or tax attorney, so I’m certainly not a complete expert on this, but I would suggest that you reach out to an accountant, and they can assist you in setting up the LLC and then letting you know exactly the things that you can and cannot deduct. And that way, you can maximize your compensation and tax deductions at the end of the year. If you’re not doing that, you’re leaving a lot of money on the table. Now, there may be scenarios where you’re working so much for one sponsor or you’re doing so much work for them over the course of a week or a month or a year or whatever that you may be classified as an employee. It’s very rare that a scenario like that would exist, but there may be certain times where there’s so much activity between an influencer and a sponsor that they might be considered an employee.
If you’re concerned that you’re being misclassified, either as an employer or as an independent contractor, I would suggest you speak to the sponsor and let them know your concerns and talk through that. So, that’s a little bit about whether a social media influencer is an independent contractor. They very likely are, and you will receive 1099 at the end of the year.
Independent Contractor Misclassification or Employee?
Is an influencer considered an employee? In short, no. An influencer is going to have two types of employment relationships. You’re going to have a contract with your agency or manager or marketing firm. That’s one contract, and then you’re also going to have a contract with the sponsors as well. And so, I mean, sponsoring companies is a normal way of saying it. Now, your relationship with these sponsoring companies is that of an independent contractor. A normal employee would receive a W2 at the end of the year, and then they would have taxes taken out of whatever compensation they would receive. They would get benefits such as health, vision, dental, disability, life, and retirement, all of the benefits of being an employee.
However, an influencer is considered an independent contractor and would receive a 1099 at the end of the year and no taxes are taken out or withheld during the entire year. The influencer is going to be responsible for paying those self-employment taxes at the end of the year. Now, I find this is the dad in me that many influencers don’t understand the tax implications of being a 1099 independent contractor. And then they get to the end of the year, and they have an enormous tax bill and they think, oh, well, I’ve spent a lot of that money and I’m not sure what to do. So, you just need to make certain, and this is what I would suggest, is reaching out to an accountant wherever you live, establishing a relationship with them and trying to find the best ways to maximize your tax deductions.
Employment Status Updates
Now, most of the time, what would happen is an influencer would create an LLC. Basically, they’re their own business. They’d get a tax ID number, an EIN from the federal government, they’d create a bank account, and then they’d run all their compensation and expenses through this account. And that way, they’d be able to deduct several things that go into being an influencer like travel, and any expenses that go with it depending upon what type of influence you are, equipment, clothes, all that kind of stuff can potentially be deducted but it needs to be set up properly. Now, is there any time when you would be an employee? The answer to that is most likely no. As I said before, if you have an employment relationship with somebody, you are an actual employee, you’re likely working a nine to five full-time job.
Whereas most of the time, as an influencer, you’re just kind of coming in, endorsing a product coming out, or maybe you have a year-long relationship where you’re required to do. If you’re on YouTube, maybe you’re required to do a 90-second spot once a month for a company, that type of thing, but it’s not an ongoing employment relationship. It’s just a straight-up independent contractor relationship between the sponsoring company and the influencer. Well, hopefully, that was helpful and that’s kind of whether influencers are employees, and the answer is no, they’re very likely not.
1099 Influencer and Income Taxes
Does an influencer receive a 1099? So, what is a 1099? If you are classified as an independent contractor, which you likely are if you’re a social media influencer, you’ll receive a 1099, which is a form at the end of the year. And then the compensation received by the influencer from any of the sponsoring companies will have no taxes withheld. At the end of the year or quarterly, which would be preferable, the influencer would need to pay to the government whatever self-employment tax would go with whatever you had been compensated. In a normal kind of professional environment, you would have either employees or independent contractors. An employee would receive a W2 and then their compensation would have taxes taken out of it during the regularly scheduled payroll.
As an influencer, you’re not acting as an employee. You’re acting as an independent contractor. You’re just doing a specific amount of work for a sponsoring company for a specific amount of time. You don’t see most influencer agreements go beyond a year. Most of the time, at most they’ll be 12 months, and then they’ll be renewable by the agreement of both parties. Sometimes it’ll just be an event, so you would just have to show up for a day or for a few hours. And obviously, in that scenario, it’s a very short-term relationship, and being an independent contractor would be the only way to properly classify the influencer. What I would suggest is if you’re an influencer and you haven’t done this before, and you’re uncertain how to handle the tax implications of this, you need to reach out to an accountant preferably close to you.
Creating an LLC as Independent Contractors
I guess it doesn’t really matter nowadays, but someone who has some familiarity with social media influencers and kind of taking tax deductions and that type of thing. What they’ll likely do is they’ll tell you that you need to create an LLC. You need to get a tax ID number from the IRS, which is called an EIN, and then you’ll also need to create a bank account under that LLC. And then you’ll put all compensation and expenses, then run through that bank account so you can easily track the expenses. And then at the end of the year, you can deduct a lot of the things that you need to be an effective influencer. It could be travel costs, lodging, meals, or any type of cost associated with meetings, depending on what type of influence you are.
It could be clothing or different products. There are just a ton of things that you can deduct. And so, ultimately you may come out ahead if you were just kind of classified as an average employee. There are certain tax benefits to being an influencer. It’s a different type of job, as you probably know. And I think the professional environment is kind of evolving as far as how they see influencers and then kind of what the potential tax deductions for them can be. So, does an influencer receive a 1099? Very likely yes. Absolutely, they would. If you have any questions about your independent contractor agreement or influencer agreement, we certainly can help with that.
Scope of Work Considerations
Suppose potentially working as a social media influencer independent contractor or hiring one. One issue that comes into consideration is the precise definition of the scope of the work that an individual will perform. It is critical that the contract between the two details some of the following:
- The Type of Work to be Performed – The contract should have specifications about the kind of work that will be performed by the social media influencer. This should include some precise details about the kind of post that will be created.
- The Endorsement That the Influencer Must Make – Companies that hire influencers to work for them are looking for someone who can literally influence others to take a particular type of action. As such, the endorsement that the social media influencer needs to make on behalf of the company should be laid out in full detail. Influencers need to offer a convincing pitch that makes it seem as though they are true fans of the product (regardless of how they may really feel). This needs to be explained in the contract as well.
- The Length and Number of Posts – In some cases, the influencer is paid for a single post that they release at a strategic time. However, there are some companies that will bulk order a number of endorsements that they can spread out over a certain period of time. These considerations should be spelled out in detail in a contract between an independent contractor and their business partner.
Conditions that Makes an Influencer a 1099
Now, as an influencer, your job is different. You aren’t working full-time for any of these companies you sponsor. Depending upon the relationship, you’re doing a short-term burst of marketing.
And for the most part, it’s up to you, maybe the exact content you post. I mean, there’ll be some bare bones. We want you to post this many times a month. We want you to do 90-second spots on your YouTube videos once every two months, whatever it is. But you’re not going into a nine-to-five job every day. And when the sponsor does not exert complete control over the influencer, that’s more of an independent contractor relationship. And so, at the end of the year, the independent contractor receives 1099, and any compensation paid to the influencer has no taxes withheld. At the end of the year, the influencer pays the taxes on all their compensation.
Smart Way of Maximizing 1099 Tax Deduction Benefits
Is there an advantage to being an independent contractor versus an employee? Well, if you’re a smart, independent contractor, you’re going to create an LLC, and then you’re going to get a tax ID number, an EIN through the IRS, and then you’re going to create a bank account for that LLC. And then you’re going to run all compensation and expenses through that account. As an influencer, you can take many tax deductions as an independent contractor. Many of the things that go into being an influencer can be deducted:
- Travel
- Maybe you’re in the fitness industry business and trying out new products. Well, you can deduct the products you bought, meals, gas, and cars sometimes.
- You can deduct many things when considering your own business as an independent contractor and self-employed.
I’m not an accountant or tax attorney, so I’m certainly not a complete expert on this, but I suggest you reach out to an accountant. They can assist you in setting up the LLC and then let you know exactly what you can and cannot deduct. And that way, you can maximize your compensation and tax deductions at the end of the year. If you’re not doing that, you’re leaving a lot of money on the table. There may be scenarios where you work so much for one sponsor. You may be classified as an employee by doing so much work for them over a week, month, year, or whatever. A scenario like that would rarely exist. There may be times when there’s so much activity between an influencer and a sponsor that they can be employees.
How Are Social Media Influencers Taxed? | Influencer Taxes
How are social media influencers taxed? First, suppose you are an influencer, likely. In that case, your employment relationship with whatever sponsoring company you’re working for or endorsing is via an independent contractor relationship. As an independent contractor, you’ll receive 1099 at the end of the year. No taxes from any compensation you would receive from the company you’re working with. As an employee, you would receive a W2, and taxes would be withheld from whatever the regularly scheduled payroll period is. And then, at the end of the year, when you file your taxes, it’s very likely that you won’t have to pay much to whatever state or federal government that you’re working in.
Social Media Influencer Taxes and Deductible Income
As an independent contractor, as I said, no taxes are withheld throughout the year. So, at the end of the year or quarterly, depending upon how you want to do it, you’re going to have to pay self-employment tax, once again, to the state or federal government. I would suggest a few things: one. It would help if you met with an accountant before doing any work as an independent contractor influencer. It would help if you created an LLC, got an EIN from the IRS, and got a bank account for that business, and ran all compensation and expenses through that. That way, you can take business expense deductions at the end of the year.
If you’re an influencer, you must consider yourself a business. All the things that go into being an influencer depend upon what type of industry you’re in. You can use, for the most part, as tax deductions at the end of the year, like travel or product, depending upon what you are.
If you’re in fitness, it could be weightlifting equipment. Collaborations with other sponsors, getting there, and expenses paid can be used as deductions at the end of the year. However, as I said before, you need to hook up with a good accountant to figure out how to structure the LLC you’ll create and then know what types of deductions you can take at the end of the year.
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