Here’s what the new TDS rule mean for social media influencer
The Tax Digital Service (TDS) is a new rule that will be implemented by the IRS in July 2022. It will require all social media influencers to disclose their relationships with companies that pay them to promote their products or services on their social media platforms. This is a big change for social media influencers who have been operating under the assumption that they are exempt from disclosing these relationships. What this means for you as an influencer is that you’ll need to start thinking about disclosure and monitoring your tax compliance more closely.
What is the TDS rule?
The TDS rule is a new regulation that will come into effect on July 1st, 2022. The rule states that any social media influencer with more than 2,000 followers must declare their earnings and compensation from social media platforms. If an influencer does not comply with the rule, they may be subject to penalties including financial penalties, loss of credibility, and even have their accounts closed.
The purpose of the rule is to help prevent social media influencers from using their platform to promote products in a way that unfairly advantages themselves or their brands. For example, an influencer who earns money from promoting a product on social media but does not declare this income may be giving the impression that they are endorsing the product without being paid for it. By declaring their earnings, social media influencers can reassure their followers that they are receiving fair compensation for their work and avoid any potential conflicts of interest.
Although the TDS rule will undoubtedly impact social media influencers in a variety of ways, there is still plenty of room for creativity and innovation when it comes to marketing on social media. Influencers who are prepared to comply with the rule will be able to continue promoting products in a positive way while those who are not will face penalties.
What Companies will be Impacted by the TDS Rule?
The TDS rule concerns social media influencers and their compensation. Under the new rule, companies must pay influencers based on the value of their audience engagement, not just the amount of money they bring in. This could have a big impact on social media influencers, as it means that many of them will no longer be able to make a living from their work. While the rule won’t affect everyone, it is likely to affect a large number of social media influencers.
This is because most of them rely on small amounts of engagement from their followers to earn a living. In some cases, this could mean that they lose out on lucrative deals with companies. However, not every social media influencer will be impacted by the TDS rule. Those who have large followings and who primarily promote products or services from a company rather than engaging with their followers will continue to be compensated in accordance with the old rules.
How will the TDS Rule Impact Social Media Influencers?
The rule is designed to protect small businesses from being taken advantage of by social media influencers. Social media influencers who are paid to promote a product or service will need to disclose their compensation in their social media posts and profiles. This will allow viewers to make an informed decision about whether or not to buy the product or service. The rule does not apply to endorsements that are made in a personal capacity. For example, a celebrity’s opinion about a product is not subject to the TDS rule.
Nor is it necessary for an influencer to disclose if they are receiving free products or services in order to endorse them. There are some exceptions to the TDS rule. Influencers who work with large companies or brands that have a longstanding relationship with them will not need to disclose their compensation. Additionally, social media influencers who receive payment for promoting a brand through online video will not be impacted by the TDS rule. The TDS rule has raised concerns among social media influencers who fear that they will lose their following if they disclose their compensation.
What can Social Media Influencers Do to Prepare for the TDS Rule?
Social media influencers should be aware of the new TDS rule, which went into effect on July 1. The rule clarifies how social media influencers can treat their earnings from endorsements. Social media influencers who have more than 500 followers and earn more than $500 from endorsements in a 12-month period must disclose their income and provide a disclosure form to their followers.
If an endorsement revenue exceeds $5,000 in a 12-month period, the social media influencer must also provide a financial disclosure statement to their followers. Social media influencers who have less than 500 followers and earn less than $500 from endorsements in a 12-month period are not impacted by the TDS rule. However, they still need to disclose any endorsement income they receive so their followers know what they’re supporting.
Conclusion
Social media influencers are a valuable asset to any business. However, with the new TDS rule in place, there are some changes that need to be made when it comes to how social media posts are created and promoted. If you’re an influencer and want to make sure your posts follow the new guidelines, keep these things in mind.
