Money vs Maker
The creator life can be extremely rewarding if you are smart about it. Getting paid to dress up in free branded clothes, test new products, produce video content, visit exciting places, and enjoy brand partnerships that span digital media… what’s not to love?!
HubSpot’s 2022 State of Consumer Trends report found that the creator economy is rising in popularity rapidly. In fact, 30% of surveyed 18- to 24-year-olds and 40% of 25- to 34-year-olds consider themselves content creators. As Forbes describes, “Ask a kid today in the U.S. what they want to be when they grow up. No longer is musician or athlete the top answer. It’s a YouTuber—an answer 3x more popular than astronaut.” And at $104.2 billion, the creator economy is one of the fastest growing industries, and it’s expected to double in size by 2027.
However, whether you’re a social media influencer, an up-and-coming TikTok creator, a streamer, or an Instagram-famous photographer, if you are making money from it, then you are running a business. That means the not-so-fun parts of business need to be taken care of too: for example, paying your taxes and managing your accounts.
Many such professionals ignore this part because they are unsure what to do—we promise, it is not that hard! Here are our top accounting tips for content creators and influencers to follow to maintain spotless accounts.
Record all transactions. Accounting for content creators requires you to keep a complete record of all income and expenses. This is tricky when you work in content creation, because you’re more likely to have multiple sources of income—ad revenue, brand deals, merch sales, speaker fees, etc.
Use an accounting tool to create invoices and record the payments when they come through. Affiliate income is another excellent source of digital content creator income. There is no invoice for this, so you can just record it as a general sale of goods. To record expenses, your easiest option is to link your bank account to the software so it can automatically pull the details and calculate any relevant sales tax. You can also look for a tool with a “receipt capture” feature to take a photo of any receipt or bill and upload it from a mobile device.
Lastly, if you get paid in kind rather than cash, you need to record the market value of the gifted item for tax purposes. Gifted items can be tricky but must be included in accounting for social influencers – which brings us to our next point.
Be careful of freebies. Many influencer deals include freebies, i.e., the company gifts you an item separate from the money they pay for your content. If you are required to post about the gift, though, the IRS may ask you to pay tax on the item’s market value – so it is not quite as “free” as you think! One way to avoid this is by demonstrating that the items you are given are for use only in your content, making them allowable expenses. However, this means that you must be careful about using them elsewhere. Gifts are to be included in accounting for content creators.
Plan for taxes in advance. The influencer life can be lucrative, from sponsorship deals to affiliate income streams. You do not want to spend it all, though! It’s best to keep aside 15% of your income for paying taxes and consider tax-free investments for the rest. A good bookkeeper can get you started, but at tax time, it’s always best to consult with a CPA on building wealth and minimizing your tax burden.
Make sure your entity structure is set up correctly. Typically an LLC if you’re self-employed, or S-Corp if you have employees or hire freelancers/contractors. Some creators set up separate business entities for their various income sources. The necessity of this practice depends on the accounting implications for each income stream. With things like ad revenue, monthly subscriber fees, and affiliate brand deals, you could easily lump those into one entity. Once you start adding things like an e-commerce store, which has inventory and sales tax in different states, it makes sense to set these up under a separate entity.
The most important thing is to start things off right from the beginning, while you’re small and while you’re capable of tracking these things. That way, you can set up a foundation for success before you get to a point where it’s too hard to manage.
By the Numbers
$207M
content creators in the world today.
Source: Linktree
6 months
The average time it takes to earn the first dollar. At 17 months, they start earning enough to support themselves. And at 25 months, many are able to hire their first employee or freelancer.
Source: The Tilt
46.7%
of creators are
full time.
Source: ConvertKit
10%
of influencers earn $100K or more per year. 26% make between $1,000 and $10K. And 27% make between $10K and $50K.
Source: Influencer Marketing Hub
21B
the global influencer market value as of 2023, a 53% increase over 2021’s $13.8 billion valuation.
Creative Business Claims
In accounting for content creators, you do not have to pay tax on several categories of expenses including (but not limited to):
• Legal expenses
• Business travel
• Advertising and marketing
• Office rent, maintenance, and utilities (If you use part of your home as your office, you can claim part of the associated costs as an allowable expense.)
• Website/email list maintenance
• Outsourcing to other professionals
• Business-related equipment. This includes hardware like phones, cameras, or computers, as well as software such as editing and social media management programs
• Trademarking and/or copyrighting
• Business-related subscriptions, such as to a site providing licensed images
