Social Media Influencers - Yes, You Have to Pay Taxes on That!

 

The rise of social media has opened doors for countless individuals to gain popularity, influence, and even financial success. However, with great opportunities come great responsibilities, including paying taxes on the income earned. The recent New York Times article Lora Kelley, "They Went Viral and Made Money. Now They Owe Taxes," sheds light on a growing problem for many social media influencers who are struggling to keep up with their tax obligations.

 

According to the article, many social media influencers have found themselves in a precarious situation where they have earned significant income from brand partnerships, sponsorships, and ad revenue, but have failed to properly report or pay taxes on that income. Some influencers have even admitted to intentionally avoiding taxes, thinking they were too small for the IRS to notice or that they could get away with it.

 

However, as the article notes, the IRS is now cracking down on influencers who are not paying their fair share of taxes. The agency has reportedly launched several audits and investigations into social media influencers, and some have already been hit with hefty fines and penalties, and some with jail time.

Part of the IRS enforcement strategy is to demonstrate to taxpayers the wrong way to approach things, publicize it heavily as a demonstration of the adverse consequences of failure to comply with tax laws. It seems as each generation has its own “poster boy” of what not to do – Leona Helmsley in the late 1980s; Richard Hatch 2006; and more recently Julie and Todd Chrisley in 2022.

So, what can social media influencers do to avoid the same fate? The first step – Get a tax guy. Now. And by tax guy I mean a professional, like me, an Enrolled Agent, as a TaxConsultant. Tax consultants can help influencers understand the tax laws and regulations that apply to them and ensure that they are compliant with all reporting requirements. They can also help influencers identify deductions and credits that can reduce their tax liability.

Second - Influencers must recognize that any income earned from social media activities is subject to taxation. Take to heart the words of 26 US Code Section 61 – Gross Income defined:

(a)   General Definition. Except as otherwise provided in the subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

 

Spoiler Alert! This includes income from sponsored posts, affiliate marketing, and even donations received from fans. Influencers should keep accurate records of their income and expenses and report all income on their tax returns. As you running a business, you’re now entitle to deduct expenses that are reasonable and necessary. What are those expenses? See Step 1 above.

 

Finally, social media influencers should be proactive about addressing any past tax liabilities they may have. This includes filing any past due tax returns and paying any outstanding taxes, penalties, and interest owed. The IRS offers payment plans and other options for taxpayers who are struggling to pay their tax debts, and a tax consultant can help influencers negotiate with the agency and develop a plan to get back on track.

 

Failing to report and pay taxes on social media income can result in significant fines, penalties, and even legal action. Therefore, influencers should take the necessary steps to stay compliant with tax laws and regulations, seek the guidance of tax professionals, and address any past tax liabilities they may have. By doing so, influencers can avoid the financial and legal consequences of tax evasion and continue to thrive in the world of social media.

 

 

 

 

Popular posts from this blog

Unlocking the Secrets of an Offer in Compromise: A Comprehensive Guide Chapter 3 - How Much Do I Offer?

  Calculating the Amount of your Offer in Compromise – What is Your Reasonable Collection Potential (RCP)? Drum roll please! This is what you’ve been searching for – how much do I offer? How little can I get away with? Why not low ball them?   Here are the two most important concepts to understand before you start your OIC.   Key Point 1 - You’re not buying a car or a house. The Settlement Agent does not work on commission. They don’t have to settle and the decision to settle rests entirely with the Settlement Officer. Any offer or counter-offer you make has to be backed up by the numbers.   Key Point 2 – Determine your Reasonable Collection Potential before making an offer. Reasonable Collection Potential (RCP) is a key factor considered by the IRS when evaluating an Offer in Compromise (OIC). RCP refers to the amount of money the IRS believes it can collect from a taxpayer based on their assets, income, and future earning potential.   The IRS...
Read more

Unlocking the Secrets of an Offer in Compromise: A Comprehensive Guide - Chapter 4

  Chapter 4 – Filing Details/Payment Terms/Important Consequences IRS FORM 656 – OFFER IN COMPROMISE Use IRS form 656, Offer in Compromise to submit your offer. You can access the form via this link .   Be sure to read the accompanying booklet. Note that there are different forms of Form 433, Collection Information Statement, that are a part of the submission process. Form 433-A is for use by Wage Earners and Self-Employed Individuals. Form 433-B is used by Businesses. Also note that there is a specific form, 656-L, for use if you are claiming doubt as to liability. The IRS site also has a pre-qualifier tool. But don’t get too upset if it reports that you are not eligible. The tool does not take into account any special circumstances or other issues that may be relevant to your situation. Please refer back to this section of my Blog for a more detailed discussion of this issue.   Who Can File An Offer? An Offer in Compromise (OIC) can be filed by any individ...
Read more

Your COVID-19 Relief Check is in the Mail! (Well, maybe. It depends.........)

President Trump signed the massive coronavirus relief bill last week. Money will be distributed to the public by the IRS. So will the IRS offset what I owe against the check? What about my spouse? Here are some specific takeaways that you need to know now, and take appropriate action: 1. The government is using the IRS to distribute the checks only. They will not offset any IRS debts against the checks as this is not an IRS matter. The government is just using their infrastructure. 2. However, the only exception to this rule is child support obligations. If you owe back child support, it will come out of the check. This is the only exception at this time. 3. The only way the IRS will know about you is if you have filed a return in 2018 or for 2019. If you have not filed for 2018, and have not filed 2019, you will not receive a check.  In order to receive a check you must file a return for either of those years.  We love working with taxpayers who are delinquent ...
Read more