If you earn money through Facebook, you may need to report that income on your tax return. The specific tax form you use will depend on how you earn the income – whether through advertising, selling products, or other services.
Overview of Facebook Income Sources
There are a few main ways people can earn money on Facebook:
- Facebook advertising revenue
- Selling products through Facebook Shop or Marketplace
- Providing services like coaching or consulting
- Sponsored content as an influencer or content creator
Each of these may require a different tax form when reporting the income. The main factors are whether you earn the money as an individual or business and whether Facebook issues you a 1099 tax form.
Income Earned as an Individual
If you earn small amounts of income from Facebook occasionally, you likely earn it as an individual. This includes income from things like:
- The occasional sale on Facebook Marketplace
- Winning a contest or prize money from Facebook
- Crowdfunding donations through Facebook Fundraisers
For individual Facebook income like this, you would report it on Schedule 1 of your Form 1040 personal tax return. The specific line would depend on the nature of the income:
- Line 8 for taxable interest
- Line 3 for dividends
- Line 21 for other miscellaneous income
You would not get a 1099 tax form from Facebook itself for small amounts of individual income. You simply self-report it on your 1040 based on any income documentation you have.
Income Earned as a Sole Proprietor
If you earn repeated or substantial income from Facebook as an individual, you may be considered a sole proprietor by the IRS. This includes income streams like:
- Frequent sales on Facebook Marketplace as part of a home business
- Advertising revenue from a monetized video channel or Facebook page
- Consistent earnings from sponsored posts or influencer marketing as a blogger/content creator
For sole proprietor Facebook income, you would report it on Schedule C of your Form 1040. You list your income, deduct eligible business expenses, and pay self-employment tax on the profits.
Facebook will issue you a 1099-MISC if you earn over $600 in a year from things like Marketplace sales or advertising revenue. You would list the 1099 amounts on your Schedule C.
Income Earned Through a Business
If you earn Facebook income through a separate business entity like an LLC or corporation, the business reports the income on its own business tax returns. For example:
- Facebook advertising revenue earned by an incorporated media business
- Facebook Shop sales earned by an LLC clothing boutique
- Sponsored content income paid to an influencer marketing agency
In these cases, Facebook would issue a 1099-MISC to the business if earnings exceed $600. The business must report the 1099 income on the appropriate business tax form:
- Form 1120 for a C corporation
- Form 1120S for an S corporation
- Form 1065 for a partnership
The business owners/shareholders then pay personal income tax on their share of the business profits.
Common Facebook Tax Forms
In summary, here are some of the most common tax forms used to report Facebook income:
| Form | When To Use |
|---|---|
| 1099-MISC | Received from Facebook for over $600 in earnings as an individual or business |
| Schedule 1 (Form 1040) | For miscellaneous individual income under $600 |
| Schedule C (Form 1040) | For sole proprietor income over $600 as an individual |
| Form 1120, 1120S, or 1065 | For income earned through a business entity |
Some other tips when reporting Facebook income:
- Keep detailed records of all income and expenses
- Save invoices, statements, and 1099s from Facebook
- Deduct all eligible business expenses
- Report income in the year it was earned
Properly tracking and reporting Facebook income ensures you avoid problems and pay only what you owe in taxes. Reach out to a tax professional if you need help deciding what forms to use.
Advertising Revenue from Facebook Pages
If you earn advertising income through a Facebook page or videos, here are some key points on reporting that for taxes:
- Facebook pays out when you’ve earned over $10 total or $1 within the past month
- Income is reported on the calendar year whether or not you’ve received the payout yet
- Pages and ad breaks on videos can both generate advertising revenue
- Facebook will issue a 1099-MISC if you earn over $600 in a year
To report Facebook advertising revenue:
- Track your monthly earnings statements in your account settings
- Save the 1099-MISC form if Facebook issues you one
- Report the income on Schedule C (Form 1040) as a sole proprietor
- Deduct any eligible business expenses related to your page
Properly reporting the income prevents you from overlooking it and facing potential IRS issues down the road.
Selling Products on Facebook
If you sell products through Facebook Shop, Marketplace, or Buy & Sell groups, here is how to handle the tax implications:
- Track all income from sales throughout the year
- Deduct the cost of goods sold, shipping, platform fees, and other expenses
- Facebook issues a 1099-K if you exceed $20,000 in sales and 200 transactions
- Report net income on Schedule C (Form 1040) as a sole proprietor
Keep detailed accounting of products costs, sales income, shipping fees, returns, and other factors that affect your net taxable income.
Be sure to use your cost of goods sold to reduce your gross sales. This includes expenses directly related to the products sold, like:
- Materials and inventory
- Packaging and labels
- Import, freight, or delivery fees
- Storage or warehouse costs
This ensures you only pay tax on your true profits from the product sales after all associated costs.
Providing Services on Facebook
Providing paid services like coaching, consulting, tutoring, or design work through Facebook also generates taxable income. Here are some tips on reporting it:
- Keep invoices, PayPal receipts, or other records for all income
- Deduct any expenses related to providing the services
- Facebook will issue a 1099-MISC for over $600 in income
- Report income and expenses on Schedule C (Form 1040)
Be sure to track income on a per-client basis. And maintain records of any deductible expenses like:
- Mileage for in-person meetings
- Cost of any materials provided as part of services
- Website or software costs
- Home office deduction
Reporting your Facebook services carefully and accurately will save you money on your taxes.
Earning Money as an Influencer
If you earn income promoting brands or sponsored content on Facebook as an influencer, here are some key tax tips:
- Income can include direct payments, free products, commissions, gifts, or trips
- Facebook doesn’t issue tax forms but may report payments over $600 to the IRS
- Keep receipts and records for all sponsored income and product values
- Deduct expenses like equipment, travel, props, and assistants
- Report net income on Schedule C (Form 1040)
Sponsored social media income can be tricky to track and document for taxes. Using an app or excel spreadsheet to log all branded content earnings and expenses can help you report it accurately.
Many influencers treat their activities as a business. You may be able to register your social media activities as an LLC or S corporation to take advantage of additional business deductions. Work with a tax professional to determine the best structure for your situation.
Avoiding Penalties and Issues
When reporting any income earned through Facebook, be sure to follow these guidelines:
- Track all income – Keep detailed records of any payments received.
- Follow the rules – Disclose income and file the proper tax forms.
- Deduct expenses – Take all eligible deductions for expenses related to the income.
- Be consistent – Use the same reporting method every year.
- Keep documentation – Retain 1099s, invoices, receipts, and other income records.
Failing to report Facebook or social media income can lead to audits, late filing penalties, or even tax evasion charges if intentional. It’s not worth the risk.
Some key red flags to avoid:
- Not reporting income over $600 that receives a 1099
- Drastic unexplained decreases in business losses or expenses
- Inconsistencies between years that seem designed to avoid taxes
Using a tax professional can help ensure you fully comply with IRS rules and avoid any issues when reporting Facebook income.
Conclusion
Reporting earnings from Facebook requires tracking income sources, documenting expenses, deducting business costs, maintaining records, and filing the proper tax forms. The specific requirements depend on whether you file taxes as an individual or business entity.
Keeping detailed accounting of your Facebook income and costs allows you to accurately calculate net taxable income while minimizing your IRS liability. Consult a tax professional if you need help deciding what records to keep and forms to file based on your particular Facebook monetization activities. Properly reporting the income helps avoid problems and ensures you pay only the taxes actually owed.
Key Takeaways
- Income can be earned on Facebook through advertising, marketplace sales, services, influencer sponsorships, and more
- Track all income and deduct eligible business expenses
- Facebook issues 1099 forms for over $600 in earnings
- Income may be reported on Schedule C, Schedule 1, or business returns depending on your situation
- Keep detailed records and follow IRS rules to avoid penalties or issues