As a content creator or social media influencer, you’re living in the wild west when it comes to tax deductions. It’s more important for you than the typical business owner to be specific and have reasoning behind your write-offs. There is no one comprehensive list of all possible deductions—it’s a conceptual framework. But when you’re in a newer industry, it’s so important to be smart and strategic about what you claim as business expenses.
If you’re a social media influencer, staying on the “good side” of the IRS is all about being reasonable.
The best way to explain this is to imagine a social media influencer getting a letter from the IRS. For this example, we’re going to use a lifestyle Instagrammer who promotes “fitness”. Think meal plans, workouts, holistic retreats, sustainable food. First off, they take pictures of their receipts and they log everything they spend on the business in a spreadsheet or accounting system. That in itself makes it much easier to explain transactions.
Here are their reasonable boundaries for writing off food, meals, gym membership, and some travel.
What’s Reasonable – Groceries
They only vlog healthy home cooked meals on Tuesdays. All the ingredients are bought the night before.
Justification: They can confidently say every bill is purely for content purposes and only features those specific ingredients, which checks out with their vlog, every Tuesday. They haven’t included anything else that wasn’t in the video (like toilet paper or a bottle of wine).
What’s Reasonable – Dining out
Business meals that are ordinary and necessary are included in deductions, like meetings with potential clients or when pitching a brand on a new sponsorship. Not the meals for their friends, not the five cocktails after they left the restaurant.
Justification: An itemized receipt is providing all the necessary level of detail for the right amount to be expensed. Only the meal itself is included, and related entertainment (if they went to see a show or a game) is backed out of the total.
What’s Reasonable – Gym membership
While for the overwhelming majority of people (including influencers with other specialties) gym memberships are NOT an allowable business deduction, for someone in the fitness industry, they are allowed to treat this as an ordinary and necessary business expense.
Justification: For someone in the fitness space, the gym represents many aspects of business value. It’s a place to network with other people in the industry, which can lead to referrals. It’s also a place to show off their own work, which again can lead to new relationships. And lastly, it’s the venue for shooting and producing a lot of their content. All of these create a compelling case for deducting the membership.
What’s Reasonable – Travel
They can expense their car ride to that holistic retreat, but only the amount the set mileage rate covers. They’ll also include the cost of any lodging and other incidental travel expenses.
Justification: They need to get to their business destination. This rule is particularly nuanced. Trips that include a combination of business and pleasure will need to be apportioned carefully.
This imaginary social media influencer is a smart cookie. Because all of these guidelines they followed suggest the business owner has applied rationale for every line item, the review of these expenses by the IRS would likely arrive at our desired conclusion: they were ordinary and necessary for the course of their business.
The fact that most of your business is online is a blessing and a curse.
One advantage social media influencers do have is nearly everything to do with their business is in the public domain. This means, along with receipts and invoices, they have digital evidence to back up their claim. On the other hand, it can also be used to justify why you can’t expense something too. If none of your content features anything to do with the gym, then why is the membership on your return? It’s something to bear in mind and once there is reason for doubt, the rest of your tax return goes under the microscope too. Furthermore, you’re legally obligated to have financial records for the three years preceding the current tax year. It’s hard to remember why you have written off “that thing” if you don’t have clear guidelines to follow. They’re a safety net, meaning there’s much less scrabbling around if you were ever to be audited.
Avoid the trap of taking advantage of things that sound too good to be true.
If someone online says you can write off an entire trip as a business expense as long as you post one picture on your feed, or anything along those lines, take that advice with several HEAPS of salt. It sounds too good to be true because it is. You can write-off a portion of that trip but only the part that reasonably falls under “ordinary and necessary in the course of business”. Social media is rife with claims like this at the moment, and our advice is: ask questions, and be smart. And to the sensationalist influencers claiming these facts? Be careful, you’re asking to be on the IRS’ shortlist.
To remain compliant and above board, you always have to get involved with your accounting.
If it sounds like you have to do a lot to keep in line with the IRS, you’re right, and this is where your business does start looking like the typical business owner. Accounting and administration comes with the territory when you’re a business owner but how much you manage is entirely up to you. Because of how relatively new this industry still is, it’s so important for social media influencers to do things right and be ready for scrutiny.
That’s where we come in. We’re the CPA for creatives and if you don’t want to manage a spreadsheet or spend time worrying about compliance, get in touch here. Accounting for digital creators, influencers and content creators is what we do. We live for this stuff; fill in our form today.
