Everyone loves free stuff, but no one loves an unexpected tax bill. If you’re an influencer and you get gifts from companies, we have all you need to know on the differences between gifting and payment. To start, you need to understand the difference between gifting and payment.
If you receive a gift, like money or another asset, and don’t offer a good or service in exchange, that’s a gift. As the influencer, know that the tax burden lies on the giver, not the recipient, so in this case if a company gives you a gift, they’re responsible for paying any taxes on it.
If you get something for free, but offer a good or service in exchange – including a social media shout out, review, or ad space, then that is considered payment for a service, and you must declare it on your taxes.
If you get a product in exchange for a review, that is considered a bartered service. Product exchanges are considered bartered services. It is required by the IRS to keep a record of any income generated from barter transactions. This means that the company and you both need to complete a 1099-B form.
If you receive cash payments for your review, you’re considered an independent contractor of that company, and have to file a W-9 with the company so you can get a 1099 at the end of the year. This includes commission, pay-per-post, ads, and retainers, anything where a company pays you.
If you’re living outside the United States and or working with international companies, you might also be subject to foreign taxes. According to the business news site Bloomberg, influencer freebies are worth billions and many countries are starting to implement strong tax laws to get a cut of that.
If you’re an influencer who is getting money, goods, or any other asset from companies, it’s important to meet regularly with your tax professional to make sure that you properly account for this income.
If you have more questions, contact us today!