The traditional entertainment industry of studio-based film, television, and music greatly shaped our society and economy over the last century.
However, in just the past decade, social media has disrupted that studio-based tradition and shaped a new sector of the entertainment industry—influencing. This shift from studios to individuals has transformed the industry, allowing people living their everyday lives to become sought-after voices in the business.
Influencers redefine traditional celebrity and are valuable to companies by targeting specific demographics through curated content. Their ability to utilize social media platforms to blur the lines between entertainment and advertising has proved to be extremely lucrative for both influencers and companies alike. However, influencers’ role in the entertainment industry is still relatively undefined and there is a need for careful management and strategic planning to achieve long-term success.
Influencers’ Tax Tips
Because most influencers come from a background outside of entertainment, they may not have the proper tax infrastructure in place at first. Income generated from sponsored posts, brand collaborations, affiliate marketing, ad revenue, merchandise sales, and public appearances must be meticulously recorded so they are able to be accurately reported.
In particular, influencers need to know:
- “Free” products received from brands are not free from a tax perspective. They can be considered taxable income and must be tracked.
- Expenses related to content creation, such as equipment, editing software, supplies, marketing, travel, and home office, must also be meticulously recorded to easily determine which expenses are deductible by the individual.
- If working as an independent contractor, no taxes will be withheld on behalf of the influencer. Therefore, the individual is responsible for calculating and paying quarterly estimated tax payments throughout the year to avoid penalties.
As entertainment moves away from traditional studio-based gatekeepers, Withum guides clients through this complex landscape. We can help clients establish a tax infrastructure framework while also continuing to adapt to an ever-changing industry.
Author: Becky Ford | [email protected]
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For more information on this topic, please contact a member of Withum’s Theatre and Entertainment Services Team.
