Yahoo Finance Do Influencers Have to Claim Those Unboxings on Their Taxes?
Going to gifting suites, getting sent the latest designer handbag, posting unboxings from a favorite brand — just another day in the life of a content creator or influencer, right? While many of you may be watching those videos thinking, 'Wow I wish that was me,' or have even been inspired to build your own online presence, know that those things don't exactly come for free. These creators may owe taxes on a lot of it.
"The taxable threshold for gifts is $100, so if you receive a gift that exceeds that amount, then you should consider it taxable income," says Jaya Johnson, MSA, CPA and founder of CPbAe Accounting & Taxes. She notes that the influencer and content creator industry is relatively new, and "its tax implications are not as clearly defined yet by the IRS. However, tax evasion is a serious offense, so you have to be mindful that you're including all of your income on your tax return, including gifts."
Understanding Taxes as an influencer
Taylor Chambers, a content creator and digital marketer based in St. Louis, has been sharing her life online since 2016, building up an audience of 220,000+ across social platforms. In her first year filing taxes for influencer (a.k.a. self-employed) income, she had made about $10,000 — a great feat for a student doing something "fun" on the side, she notes.
"When it came time to insert that 1099 income, I had crazy sticker shock for just how high taxes on self-employment income really are," Chambers says. "Luckily, I was a student at that time and qualified for tax deductions that helped lower what I owed."
Since then, Chambers has continued her pursuit of understanding tax filings as a content creator and influencer. One of the biggest items that has murky waters is gifting and PR mailers.
Photo: Maury Phillips/Getty Images for Reach x HiitHaus
Loreen Hwang, a Los Angeles-based influencer with a following exceeding 233,000 on Instagram, started out more than 13 years ago, and points out that many newcomers don't realize that they're not only responsible for reporting their income, but that brands may report it for you — leaving you with a 1099 form come tax time.
"I still think a lot of influencers are shocked when they receive 1099s on gifting," Hwang says. "I didn't know that items would be taxed when I started, but I also started 13 years ago, when it was still a gray area. Instagram or influencers [didn't really exist], but as the job started to get more defined, so did the FTC guidelines and tax guidelines."
Gifting as a practice has also evolved, she notes: "Gifting wasn't as abundant then as it is now. Brands didn't have budgets or departments that handled influencers."
Now, with gifting suites (where content creators and influencers, as well as media, can choose items from an event or showroom) and PR mailers becoming a common occurrence, it seems like everyone's getting items from brands these days. While many individuals are starting to understand that they have to disclose when something was gifted or sent to them by PR on their social channels, some are still learning that much of this is taxable by law. That includes non-creators and influencers — anyone who gets a PR mailer or gift from a brand is liable, including media or UCG, aka user-generated-content creators.
Are all gifts taxable?
"Every time I talk about [taxes and PR gifts] on social media, it always goes viral because people are like, 'What?' And I'm like, 'Why aren't we talking about this?" says Lissette Calveiro, founder of Influence With Impact®, a creator-forward consultancy offering services across business coaching, talent management, creator education and more. As both a business coach for influencers and a social media content creator herself, she knows how important it is to educate yourself (and others) on what's taxable and what's not.
Although she's not a tax professional ("I never give financial or legal advice"), Calveiro notes that there can be a taxable difference between a gift sent to you without strings attached (like in a PR mailer) and one which you're expected to promote. If you agree to promote a product that you receive — even just by putting it up on social media — that could be fully and wholly taxable beyond just a "gift".
"I think some accountants have different opinions on this, but there's generally a difference between receiving gifted items as truly a gift, and when creators are actually receiving items in exchange for work," she says.
Lisa Greene-Lewis, CPA and Tax Expert at TurboTax, agrees: "In general, you're expected to pay taxes on gifts sent from brands if you're expected to perform a service in exchange for the gift, like promoting the brand on social channels through unboxing. The gift would be included in income at the fair market value."
1099s for Gifts
Content creators or influencers should also know when they're going to be given a formalized 1099 from a brand. These more often happen when brands are providing continuous, monthly gifts or stipends or there's a contractual agreement (i.e. work in exchange for product).
"[It] is a lot more likely if the agreement was that you have to post in exchange for products," says Chambers. "Usually, brands will frame this as, 'We'd love to send you x,y,z in exchange for you sharing content on your channels.' This pretty clearly outlines the PR or gift as compensation. I tend to avoid these types of agreements, as my business couldn't support the volume of gifted collaborations I'm offered and I don't want to end up paying to work for a brand. I think it's common practice for brands to expense one-off or smaller gifted collaborations. But if you're receiving a subscription every month, for example, it's more common for the company to issue 1099s."
As a tax professional, Johnson says she's seen brands become more mindful of the value of the gifts that they send, or will even "have more expensive items be loaned so that the influencers aren't financially responsible." One rule of thumb: If you're giving over your Employer Identification Number (EIN) or your social security number, you more than likely will be getting a 1099 or some other tax form.
Calveiro notes that new influencer collaboration platforms such as Obvious.ly, Aspire.io and Grin.co — which basically act as middlemen between a brand and an influencer (and help brands reach audiences, while connecting influencers to brands) — will most likely also give 1099s, because they're tracking all work done through their service.
Photo: Edward Berthelot/Getty Images
Is accepting gifts even worth it, then?
"One conversation I think a lot of creators need to be having [is] evaluating when you want to take a trade or when you want to take a freebie in exchange for work," says Calveiro. "In exchange for content that you're giving to the brand, is it worth the amount of taxes that you might potentially pay on it?"
For example, taking an all-expenses paid luxury trip as a gifted experience may be worth it in the end, even though you have to pay taxes on it, but taking a $120 sweater in exchange for an Instagram story unboxing may very well not be. The influencers Calveiro works with get a fully scripted email when talking to brands about collaborations, so there are no surprises on what's being agreed to when it comes to tax time.
"I think it's the moment you have a contract in place — that's when the red flags start kind of happening," says Calveiro. "This happens a lot in the travel space and also in the home space, because those items tend to be very expensive, like when moving to a new home and you're getting a 'free' mattress [that you're then taxed on] and you're like, 'Thanks, guys.'"
It's the gifts sent unannounced and not agreed upon that feel especially taxing (pun intended), according to Hwang. "Some gifting that we get as influencers is unsolicited, and I don't feel like it's fair that you have to pay taxes on it," she says. "It makes you think twice about accepting gifts [in the first place]." (Many brands and agencies send unsolicited packages once they know a person's address, which isn't ideal for the brand nor the influencer.)
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Best practices when negotiating with brands
That being said, it's still the individual's responsibility to track all gifting and note the monetary value for tax purposes — and for errors on 1099s. (Chambers remembers a time when she was sent a 1099 with $63,000 worth of compensation. Thankfully, she was able to rectify it with the finance department of the brand, who noted that they had just switched financial software which had resulted in errors.)
Hwang argues that knowing the full scope of the offering and what's being promised — whether that's through the mail or through a gifting suite — will help both brands and influencers, because it'll cut down on the over-consumption that many partake in.
"You shouldn't just take and accept things because it's given to you," she says. "When I'm at a gifting suite I pick things I actually like and want. It's important to not take advantage of the brand, [which makes brands] hesitant to want to work with influencers."
Lila DeGroot, a Seattle-based bookkeeper and skin-care influencer who started creating content in 2022, agrees with Hwang about influencers being more choosy: "I believe that not only will it help them make better choices on products and brands to work with, but because they will need to be more mindful of what they accept, their content will be more sincere and relatable. Having a tax consequence could benefit their content just by having to be more choosy when accepting gifts."
Figuring out your local tax regulations
Taxes obviously vary state to state, but federal taxes are the same across the board, so you'll need to make sure you're following tax protocols. And while you can talk to your tax pro (should you have one) about their perspective on state filings, you can also just, well, call your state. That's what DeGroot did: Knowing the basics, she understood that agreeing to post something from a brand was taxable, but working in the construction industry, she didn't know all the ins and outs of influencer filing.
"I wanted to ensure I was paying the correct taxes, so I reached out to my DOR [Department of Revenue] for my state regarding state taxes and consulted a tax expert to make sure I was fulfilling my federal obligations," she says. "Your state DOR will have two ways you can get an answer for a specific tax question — you can ask informally or have it binding. I asked for a binding answer regarding PR."
In essence, she asked for a tax ruling, and got her answer: In Washington state, all PR mailers — whether an influencer used it or posted it or not — would need to be reported as use tax. She disagreed with the initial ruling, and asked for it to be researched further, citing examples and facts on why she disagreed. "In the end, the ruling was overturned, and the tax for these types of promotional products, under WAC 458-20-17803, was the responsibility of the brand."
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With unboxings showing up more and more on social media, all experts agree that the IRS is getting wise to the ways of the influencing economy, and it's more important than ever for influencers, content creators or anyone creating content for online consumption to get their tax records straight.
"Influencers might be getting by not reporting gifted collaborations for the time being, but I would not be surprised to see an increased crackdown from the IRS as the industry continues to grow," says Chambers.
There is a bright side, in the form of deductions, Greene-Lewis says. "Although influencers and content creators may be just finding out that gifts from brands could be taxable, they should keep in mind that they can deduct expenses directly related to their content creation like video equipment, ring lights, website development and support, travel to influencer events and paid appearances."
Things like deductions and navigating self-employment taxes as a whole are why most influencers and content creators would benefit from working with a tax professional — or, at the very least, starting early and being very diligent with their record keeping. Some online tax-preparation platforms, like TurboTax Premium, are finally starting to recognize the creator and influencer economy, and can guide influencers through deductions and credits specific to the industry. ("Influencers and content creators can also hand their taxes over to a TurboTax Live Premium tax expert who specializes in self-employed taxes," says Greene-Lewis.)
That said, Calveiro notes that a content creator shouldn't be overly concerned over whether a tax pro has worked with an influencer before.
"I get a lot of questions from creators saying, 'Do you know a creator accountant?' she says. "What I would look for in an accountant is someone who's local, because in-person conversations are actually really valuable when you're navigating charts and dollars and trying to have complex conversations. Find someone who really understands your state's tax guidelines, because that really matters, and someone who's just worked with freelancers, because our industry is new, but the on-paper nature of it isn't. It's a freelancer getting paid money and having expenses, and you don't really want to overcomplicate it for yourself."
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