Do Influencers Get a 1099? | Influencer Independent Contractor
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.
Can Social Media Influencers Receive a 1099?
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.
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. Other topics of interest include:
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.
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 between you and whatever sponsoring company you’re working with or endorsing is via an independent contractor relationship. As an independent contractor, you’ll receive a 1099 at the end of the year, and no taxes are withheld 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. As an independent contractor, as I said, no income 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.
You need to meet with an accountant before doing any work as an independent contractor influencer. It would be best if you created an LLC, got an EIN from the IRS, 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. And all the things that go into being an influencer, depending upon what type of industry you’re in. And then you can use it for the most part as tax deductions at the end of the year like travel or product, depending upon what you are.
Can You Get Tax Deductions?
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, you need to hook up with an excellent accountant to figure out how to structure the LLC you’re creating and then know what types of deductions you can take at the end of the year. What is the distinction between being an employee and an independent contractor? The IRS lists a 20-factor test describing what makes someone an independent contractor versus an employee.
Just a few of them have control over the influencer, meaning a full-time working relationship. Do they tell you where to go? How long to work, exactly what to do, and do they offer benefits? So, health, vision, dental, disability, life, insurance, and retirement are all. It’s doubtful that you will have an employment relationship between you and the sponsor if you’re working as an influencer. Maybe it’s a very strong relationship, and you’re working for them daily. Once again, it depends upon the state that you’re in. But most employment relationships between the sponsor and the influencer will be through an independent contractor relationship.
How Can an Influencer Terminate a Management Contract?
How can an influencer terminate a management contract? Most influencers will have either an agent, a manager, or maybe even a marketing agency working for them. And then you should have a contract with them. Sometimes, it might just not work out. The influencer is interested in terminating the agreement and then determining the implications if they end it. In any contract, a section states how you can terminate the agreement, customarily called termination. And there are generally four common ways you can end a contract. One, your influencer management contract is going to have a term. And the term simply means how long it lasts. An average amount for an influencer management contract is somewhere between one and five years.
And then, it will state after that initial term if it automatically renews or not. Let’s say it’s a one-year term. Many contracts will note that if neither party terminates the agreement. And it’ll automatically renew for successive one-year terms that go on forever until ended. Some contracts don’t have that language, and it’s just a fixed term, meaning it’s one year, and that’s it. And in that scenario, if your contract ended after a year, neither party renewed it, it’s done. The contract is terminated. The second way would be through mutual agreement. If either party just said, you know what, this isn’t working out, regardless of what the contract says, I’m just interested in washing our hands of the situation and moving on.
Social Media Influencer Tax Deductions | Influencers Taxes
What are some of the tax deductions that an influencer can take as an independent contractor? As an influencer, your employment relationship with all the sponsors will likely be that of a 1099 independent contractor. And that means, at the end of the year, you’ll be provided with 1099 from the sponsors. And then, no income taxes will be withheld from your compensation throughout the year. So, you will be responsible for the self-employment tax at the end of the year. Now, an intelligent influencer is first going to talk with an accountant, and then that accountant will have you set up an LLC in whatever state you’re living in.
Influencer Tax Deductible Self-Employed Expenses
You’ll create a bank account with that LLC and have a tax ID number. And by doing that, you can deduct many expenses and things that go into being an influencer. For instance, you could do travel expenses, home office deduction, advertising, and marketing, legal fees, travel, whatever industry you’re in, fitness, fishing, or whatever. You can likely deduct a product that you buy to be an influencer in that arena as well. There are dozens of things that you can deduct as an influencer. Now, I’m not a tax attorney or an accountant. I’m just a contract attorney. As I said, I suggest reaching out to an accountant you feel comfortable with. They can walk you through exactly the things that you can and can’t deduct and then things that you can track throughout the year as well.
One of the worst things to see is when you have someone new to the industry. They haven’t been an influencer before, they haven’t made money as an independent contractor before, and they just simply don’t realize that no income taxes are being taken out. And then they will be responsible for potentially a large amount of money paid to the government, either quarterly or at the end of the year. And it’s a shock to them; some spend more than they save. And then they have a problem at the end of the year. So, just be aware that almost every relationship an influencer will have with a sponsor will be that as a 1099 independent contractor.
Tax Advantages of an Independent Contractor
There are certainly some significant tax advantages that you can take advantage of as an independent contractor. The main downside to not having an employment relationship is being an employee. You would get benefits that most employees would get, like health, vision, dental, disability, life, retirement, and paid time off. They’ll pay for your licensure and continuing education. They will provide a lot of the things needed to do your job.
As I said before, as an independent contractor, you can take all those things and then deduct them at the end of the year. But many people just simply hate having to be the ones to initiate getting those things. So, most people I work with hate getting health insurance and disability and life. And that stuff they don’t want to worry about, however, is something you must do when you’re self-employed. So, that’s a little about income tax deductions for social media influencers. If you have any questions or concerns about your management contract, feel free to call my law firm.
Taxes That Are Deductible by Social Media Influencers
I guess it doesn’t matter nowadays, but someone familiar with social media influencers is taking tax deductions. 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, 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 through that bank account, so you can easily track the expenses. And then, at the end of the year, you can deduct many of the things 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, you may come out ahead if you were just 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 evolving regarding how they see influencers and what the potential income tax deductions for them can be. So, does an influencer receive a 1099? Very likely, yes. They would. If you have any questions about your independent contractor agreement or influencer agreement, we certainly can help with that.
Is a Social Media Influencer an Employee? | Influencers as Employees
Is an influencer considered an employee? In short, no. An influencer is going to have two types of employment relationships. You will have a contract with your agency, manager, or marketing firm. That’s one contract; you will also have an agreement with the sponsors. And so, I mean, sponsoring companies is a usual way of saying it. Your relationship with these sponsoring companies is that of an independent contractor. A regular employee would receive a W2 at the end of the year. Then they would have income 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. It would receive a 1099 at the end of the year, and no taxes would be taken out or withheld during the entire year. The influencer will 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 income 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 sure. I would suggest reaching out to an accountant wherever you live, establishing a relationship with them, and trying to find the best ways to maximize your income tax deductions.
What Happens If You are Working as an Independent Contractor
Now, most of the time, what would happen is an influencer would create an LLC. They’re their own business. They’d get a tax ID number and an EIN from the federal government, and they’d make a bank account. 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. Any costs that go with it, depending upon what type of influence you are, equipment, clothes, all that kind of stuff, can potentially be deducted. Still, it needs to be set up correctly.
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 probably 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, perhaps you’re required to do a 90-second spot once a month for a company. Still, it’s not an ongoing employment relationship. It’s 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. The answer is no. They’re very likely not.
Breaking a Management Contract in the Digital World
Can you break an influencer management contract? One thing that I find kind of gets confused is when someone considers breaking a contract, breaching it, or simply terminating a contract. Let’s go over the difference between the two. Suppose you’ve signed a management contract with an agency or a manager. In that case, a clause in that contract states how the influencer can terminate the agreement, meaning, end it. And for the most part, there are four ways that you can terminate a contract. If it’s for a fixed period and it doesn’t renew, let’s just say it’s a year, either party wants to renew, the contract ends, it’s terminated, and that’s it.
You could terminate it by mutual agreement. At any point, even if there are clauses in the contract that state a certain amount of notice that must be given, you can just say, you know what, it’s not working out. Let’s just move on. If both parties agree, then you can move on. The third way is for cause termination, meaning one party has breached the contract. Let’s just say you’re an influencer, your management company continues to pay you slowly, or they’re not paying you the correct amount. You’d send them written notice they’re in breach of a contract. Then usually, they’d have time to fix that breach.
Are Social Media Influencers Independent Contractors? | Influencer Media
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, how much you work, and your duties. And then, you’ll receive a W2 at the end of the year, with 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 you sponsor. I guess you’re doing a short-term burst of marketing, depending upon the relationship.
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 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?
Is there an advantage to being an independent contractor versus an employee? Well, suppose you’re an intelligent independent contractor. In that case, 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 income tax deductions as an independent contractor. Many things that go into being an influencer can be deducted. Like travel, maybe you’re in the fitness industry. You’re trying out new products, well, you can likely deduct the products that you bought as well, meals, gas, cars sometimes. You can deduct a ton of things when you are 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. Now, there may be scenarios where you’re working so much for one sponsor or doing so much work for them for a week, a month, a year, or whatever that you may be classified as an employee.
Talk with the Sponsor
A scenario like that would rarely exist. However, there may be times when there’s so much activity between an influencer and a sponsor that they might be considered an employee. Suppose you’re concerned that you’re being misclassified as an employer or independent contractor. In that case, I 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.
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