Sex Toys, Cotton Candy, Red Piano: Influencers Write Off Ridiculous Items
Becoming a successful social media influencer is one of the biggest dreams among the younger generation. As millions of influencers create content across various social media platforms, an inevitable challenge arises: explaining their expenses to both tax preparers and the Internal Revenue Service.
According to a recent Adobe Inc. report, 14 million people in the US generate income by posting content on social media. Many of these folks are purchasing some of the most outrageous items for content creation.
WSJ spoke with influencer Ali Spagnola, who has been compiling receipts for thousands of dollars worth of supplies, including 15,000 Lego pieces, 40 pounds of cotton candy sugar, and a red baby grand piano.
Spagnola explained to her tax prepare that these purchases relate directly to creating her social media content.
“I need an accountant that understands outrageous,” she said, who is on her third accountant because the other two couldn’t understand her social media influencer business.
Another influencer is Rachael Johnson, who tours the country in an RV with her husband and two dogs. They create videos about their cross-country adventures and receive monthly payments from Facebook. She has to find a way to explain how pet costumes used in one of her videos relate to her business as an influencer.
Influencers earn income through non-traditional means, including selling merchandise, charging subscription fees, hosting advertisements, and until recently, receiving regular payments from social media companies for posts (some social media companies have reduced spending on influencers as ad revenue wanes).
Sima Gandhi, chief executive and co-founder of San Francisco-based Creative Juice, said influencers are at a significant disadvantage when filing tax returns because their profession is new and the tax code was primarily written before social media platforms existed.
Gandhi used to work at the US Treasury Department. He said many influencers have yet to understand they can deduct even basic expenses, including the cost of setting up a company and equipment such as computers, selfie sticks, cameras, and microphones. “These things should be reasonable and necessary in the eyes of the IRS,” she added.
Another influencer, YouTube creator Thomas Jackson, once live-streamed himself throwing dildos at a building. He spent $864 worth on sex toys that he later deducted.
“Nobody asked me any questions about it,” Jackson said.
YouTube and TikTok creator Tommy King generates income via live-streaming video games from his bedroom. He’s a full-time creator, and his tax preparer was shocked when he handed over thousands of dollars of receipts detailing ridiculous outfits he bought for his avatar in the game “Fortnite.” The accountant needed clarification about how people paid the influencer to perform live dances.
King completed his own taxes last year and was able to deduct $3,000 worth of computer parts and a $500 gaming chair. For 2022 taxes, he plans to write off even more computer gear.
And imagine what these creators are getting away with because the tax system was largely written before social media platforms. For all those creators, remember the easiest way the IRS can audit is to just watch the videos online as evidence.
Fri, 04/14/2023 – 21:20