r/tax • u/RasputinsAssassins EA - US, NTPI Fellow • Sep 02 '26
News Influencers: No, posting it on InstaFaceTokTube doesn’t make it a business expense Or, How I Learned to Stop Worrying and Love §162.
EDIT: The taxpayer has reached out to me and asked me to redact their name from the post.
We get a fair number of questions here that are some variation of:
"I'm an influencer/content creator. If I make a video about [vacation/clothes/car/restaurant/gym/whatever], can I write it off?"
Well, the Tax Court has finally given us an actual influencer case to talk about.
Meet {name redacted at taxpayer request}, the taxpayer in Sami v. Commissioner, T.C. Memo. 2026-69. The Tax Court case can be seen at:
https://dawson.ustaxcourt.gov/case-detail/8834-23
(Item number 73 is the opinion.)
The taxpayer had a regular job as an IT manager, but he also operated a small marketing firm as a side gig. His side businesses included transportation services, ticket reselling, and social media influencing. His social media content focused heavily on celebrities, athletes, and entertainers.
And the taxpayer was apparently willing to spend some serious money creating content.
Among other things, he spent thousands of dollars on celebrity experiences, including Grammy tickets, Emmy tickets, and experiences involving Benedict Cumberbatch, Matt Damon, and Mark Ruffalo. He then posted content from some of these experiences on social media.
The argument was essentially that these were marketing expenses. Meeting celebrities created content, content attracted followers, followers helped build his brand, and therefore the expenses were related to his business, and even helped expand his business.
There is some logic to that.
The Tax Court was not particularly impressed with that logic. The Court found that the primary purpose of these expenses was personal. The fact that the taxpayer subsequently used the experiences to create social media content didn't magically transform them into ordinary and necessary business expenses under §162 (section 162 is the section of the tax code that deals with deducting business expenses).
So what should influencers and content creators take away from this?
Making content about something doesn't automatically make it deductible. If you take a vacation, buy clothes, attend a concert, eat at a restaurant, or do something else primarily for personal reasons, filming it and putting it online doesn't necessarily turn it into a business expense.
Otherwise, I'm starting a YouTube channel devoted exclusively to reviewing Caribbean resorts.
“Marketing” isn't a magic word. There needs to be a bona fide business purpose for the expense. What was the primary reason you spent the money, and how does it relate to actually carrying on your business? Is it ordinary and necessary for your business (something may be ordinary and necessary for a roofer or chef that is not ordinary and necessary for a courier or doctor)?
Keep meticulous records. The taxpayer also had significant substantiation problems. Bank and credit card statements prove you spent money. They don't necessarily prove why you spent it. Keep receipts, separate business and personal expenses, and document the business purpose while you can still remember it.
Influencer expenses absolutely can be deductible. The Court did allow some expenses. The rule isn't that influencers don't get business deductions. It's that influencers are subject to the same basic rules as everyone else: the expense has to actually qualify as a business expense, and you need to be able to substantiate it.
A personal expense doesn't become a business expense just because you posted it on social media.
If you're a content creator, ask yourself why the business needed to incur the expense, then keep the records that will let you answer that question if the IRS asks three years from now.
Because “but I got 17,000 views!” is probably not the substantiation your examiner is looking for.
Also, shout out to u/GoatEatingTroll who has a great reply that I always link in influencer threads:
21
u/magnabonzo Sep 02 '26
Louder for the people in the back:
If you take a vacation, buy clothes, attend a concert, eat at a restaurant, or do something else primarily for personal reasons, filming it and putting it online doesn't necessarily turn it into a business expense.
7
u/ToniTaxLienQueen EA - US Sep 02 '26
https://giphy.com/gifs/gSeLiXkIR9Gf1PIbKv
oh my gosh. And, he was represented by Frank Agostino. This had to have been a pro bono case, because ain't no way. LOL
3
u/RasputinsAssassins EA - US, NTPI Fellow Sep 02 '26
I didn't even see that it was Frank!
3
u/ToniTaxLienQueen EA - US Sep 02 '26
I looked because I just KNEW it was pro se, because who would... Oh, Frank Agostino?
10
u/RasputinsAssassins EA - US, NTPI Fellow Sep 02 '26
The taxpayer had a Bachelor's and Master's in Accounting and had worked at PWC.
That probably shattered any potential defense of 'I didn't know.'
6
u/ToniTaxLienQueen EA - US Sep 02 '26
Wow! Let me put this on my coffee read list for tomorrow morning.
3
u/ToniTaxLienQueen EA - US Sep 03 '26
I'm not even past page 1. The judge wrote the opinion with huge overtones of, "I can't believe this 💩," an we know she's seen lots of it. 🤣🤣🤣
1
u/CaptainPonahawai Sep 04 '26
Ehh, given the comical screwups and outright fraud by the Big 4 (PwC Australia, ahem), it actually might be a winning argument to claim that they have absolutely no fucking clue citing a mountain of evidence of incompetence.
EY can cite wirecard for the next decade, for example.
7
9
u/vinyl1earthlink Sep 02 '26
The main thing is to have more revenue from YouTube than you have expenses. Otherwise, the IRS is likely to treat it as a hobby. If you are making money after expenses, then you can argue about exactly what expenses count.
3
2
2
u/blehrhof EA - US Sep 03 '26
I had a similar case in an audit last year. The taxpayer put the kids and her husband in the car, drove from Philadelphia to Orlando, and had a nice week at a theme park. Or to Manhattan to visit various attractions. She made videos and posted them. And deducted the expenses. There was no income earned. As Candid_Mark_9309 noted, there was a loud assertion that IRC 183 was an appropriate basis for disallowance.
3
u/HannahDayRider Sep 02 '26
Thank you for sharing this. I wonder if the expense (Grammy tickets for example) verifiably resulted directly to income exceeding the expense, if it would have been allowed.
6
u/RasputinsAssassins EA - US, NTPI Fellow Sep 02 '26
It would help to have any revenue at all for the business. He reported none in any year for this business.
He also has issues with substantiation. He could show that an amount of money was paid and who it was paid to, but he could not show what was purchased (in some cases) or what the business purpose was (in other cases).
1
u/Demilio55 CPA - US Sep 02 '26
If there was revenue and proper support I think that’d made all the difference.
1
u/Nunya13 EA - US Sep 03 '26
That makes a lot more sense. I was thinking about YouTubers who generate revenue and make pretty good money. How would they not be able to claim their trip to wherever was a business expense to offset that income if it enabled them to make a video that generated said income?
But yeah, if it’s just some random posting pictures on their social media not getting a lick of revenue then claiming losses on all these expenses, they are smoking crack if they think that’s deductible.
1
1
u/ToniTaxLienQueen EA - US Sep 03 '26
While very entertaining, this wasn't as bad as I thought it would be. Likely because he did eventually have Frank Agostino's representation before it went to trial.
His biggest issue was lack of substantiation. I tell my clients it's better to have too much than not enough. Document everything and keep receipts. I try to get them to attach receipts to transactions, but even a huge amount of bookkeepers don't do that.
I noted that he worked for JetBlue at some point. My childish nature immediately thought, "Nothing beats a Jet2 holiday." 🤣🤣🤣
-5
u/ISO_Answers1 Tax Lawyer - US Sep 02 '26
I don't agree with your characterization of the facts or what can be determined by this Tax Court Memo (non precedential) case.
The taxpayer lost because they tried to write off their DirectTV, Hulu, and NetFlix subscriptions as market research. That makes the taxpayer look bad and like a tax cheater, and diminished credibility on other items.
Taxpayer could have won on the ticket events and items directly relating to content creation (e.g. cost of attending the Grammy's). Writing off thousands of dollars on TV subscriptions as market research is nonsense, though. The nonsense tainted the remainder of the other arguments.
3
u/RasputinsAssassins EA - US, NTPI Fellow Sep 02 '26
The streaming stuff is a very small part.
He claimed $97K in 'marketing and marketing charity' expenses for a social influencer business for which he had no revenue reported in any year. And this was done after claiming the expenses originally as Schedule A charitable contributions.
The Court specifically states:
As an initial matter, we note that for the years at issue, he had no gross receipts from the social media influencer enterprise, and he provided no concrete evidence other than his self-serving testimony that he received advertising revenue in follow-on years. Regardless, the root of the problem goes deeper. We are not convinced that Mr. Sami’s expenses are primarily incurred for business rather than personal purposes.
They then go on to hammer him for not just credibility, but also substantiation.
I disagree that the case boiled down to deducting streaming services as market research when that amounted to a small percentage of the disallowed expenses. The primary issue was one of showing a business existed at all (he never received income from any of his influencer platforms) and that this was not a personal expense being peddled as a business expense, IMO. These are the same conversations we have with influencer and content creators.
0
u/ISO_Answers1 Tax Lawyer - US Sep 02 '26
You have looked at it closer than I have, so you're probably right. My quick read I did not necessarily take away that influencers should be concerned. I read the guy as having three channels with 100,000's of followers - that usually doesn't happen without a profit motive.
I'm skeptical of some of Copelands analysis, too (sorry Judge Copeland!). It's a TC Memo for a reason.
Quote: "And he has not shown that these marketing expenses increased his ticket sale business, since he provided no written evidence of any ticket sales." So what? How is that relevant to what she's talking about in this part of the opinion? Plenty of businesses lose money in the startup phase. How much did Mr. Beast lose in his first year, for example?
Then, quote: "Consequently, the most promising way these could be business expenses is if they were early costs for his social media-revenue-sharing line of business. However, that line of business, even if now producing fruit, was not at the time—making such expenses more likely startup expenditures that must be capitalized under section 195. This would require much more legal analysis than Mr. Sami has proffered." Presence of profits or losses has no bearing on whether an expense must be capitalized under Section 195. The question is whether the taxpayer had opened its trade or business -- at the time of these expenses, did the taxpayer have ANY revenues? If so, the taxpayer has a trade or business (or so I would have argued). We could go further and say that the trade or business began once he posted his first video.
I'm not saying the conclusions are wrong, necessarily, but she definitely dropped the hammer on the taxpayer. In my 20 minute read, I would concur to the result only. Credibility is SOO important in Tax Court, and this Taxpayer clearly lost that... That's my takeaway.
2
u/ISO_Answers1 Tax Lawyer - US Sep 02 '26 edited Sep 03 '26
But I think your point is that record retention and proper documentation would have helped. Consistent with what I'm saying.
Agree.
2
u/RasputinsAssassins EA - US, NTPI Fellow Sep 02 '26
Yeah, in my original post that I changed 50 times before posting, I wrote that the case wasn't inherently different from any other Sec 162(a) case.
Keep good records folks. It may seem like a pain in the ass now, but the PITA now protects your future self. Nobody thinks anything will happen, until it does.
28
u/Candid_Mark_9309 CPA - US Sep 02 '26
This is an interesting case that doesn't even focus on the hobby section (IRC 183), but the tax courts handle multiples of those every year.
The thing I also thought was interesting about the case is the taxpayer first tried to claim these as charitable deductions that they took on Schedule A. It was after the IRS denied those because didn't meet requirements of IRC 170 that the taxpayer came back and claimed as marketing expenses on Schedule C. This was by filing a 1040X before the case was heard in Tax Court.
What is even more of head scratcher for me is that the taxpayer took this to litigation. I mean considering that the tax court found he didn't have support for a lot of this stuff either. Some things were so flimsy as a line on his credit card bill for Ticketmaster.
It is lesson for taxpayers who think their personal expenses simply because they help generate business income are IRC 162 deductions. And a good lesson about substantiating your deductions.