Have your social media accounts grown to the point where you can legitimately be considered an influencer? While congratulations are in order, it's also time to learn the fundamentals of tracking income and expenses. Some elements of both these categories are common to all entrepreneurs, but others are more unique to your role as a 21st-century influencer.
To help you grow your business, here's what you need to know about influencer income and expenses.
How much income do you earn from your activities? This sounds like a relatively simple question, especially if you rarely receive actual cash or checks. But influencers' income includes a wide array of unexpected things: gifted products, partnerships, samples, meals, lodging, products for review, and promotional services on other accounts.
All these may be considered income. But if you receive services or goods, how can you report a dollar amount of income? In general, the reportable (and potentially taxable) amount is the fair market value of each item. This is the amount that your accountant will track both in your books and on your tax returns.
Keep in mind that you operate your entrepreneurial endeavor in a very public forum. The IRS and state tax agencies can look at your social media and websites just as easily as your clients, and indeed they do.
The other half of the equation is expenses. The good news is that you can reduce that taxable income by deducting the cost of eligible expenses. The bad news is that you do need to track your expenses and keep documentation, which can be a challenge for entrepreneurs who are new to the business world.
In general, your business expenses as an influencer are the same as those available to other small businesses. They include things like personal use of your vehicle, equipment for working online or making videos, and paying your accountant.
But it's harder to determine if some expenses are deductible or not. For instance, if you buy clothing for photo shoots, it's unlikely to be deductible — unless it's somehow specialized for specific purposes and not normal personal use.
The best way to handle unusual expenses is to track them and keep records to discuss with a qualified professional later. Err on the side of caution. And if you need to remove these expenses later, it's usually easier than adding them in.
Where to Start
Ready to learn more about keeping proper books for your growing social media empire? Start by meeting with an accountant in your area today. With their trained guidance, you'll soon be on your way to more of your goals.