Taxes can take a considerable chunk of your business’ income. As a result, you must figure out how much you can legally reduce your taxable income when tax season comes around, whether this is writing off your business’ accounting or marketing expenses like hiring a brand ambassador. 

Understanding Brand Ambassador Expenses

A brand ambassador helps promote your business’s products or services and can be considered a marketing expense for tax purposes. The cost of hiring a brand ambassador is often deductible as an ordinary and necessary business expense since so many companies use influencer marketing to help generate revenue. 

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Tax Implications for Brand Ambassador Costs

Business expenses lower your business’s taxable income, so recording expenses like hiring a brand ambassador will reduce your taxable income in the same way that renting a storefront or paying website hosting fees would. 

The greater your write-offs, the less you usually pay in taxes. 

The key is always being honest, double-checking yourself legally (which is why a good accountant is so important), and saving receipts. 

Keep reading to learn more about what kind of brand ambassador write-offs you may be missing out on and how to take advantage of these alongside the help of a qualified accountant.  

What Qualifies as a Brand Ambassador Expense?

We often think of brand ambassador expenses as the fee we pay a brand ambassador for creating content to promote our products or services. But it can be so much more than that, and you don’t want to miss the opportunity to write off related brand ambassador expenses. 

Now, you’ll always want to consult your accountant to determine what is considered an ordinary and necessary business expense for your specific business model before turning in your taxes. 

However, in many cases, brand ambassadors and related expenses are considered tax write-offs. 

For example, you may be able to write off not just the fee you pay the brand ambassador but related expenses like the following: 

• Influencer travel expenses (the cost of flights, meals, transportation, etc.) 
• Supplies sent to the brand ambassador (whether that is a business product, service, props, merch, etc.) 
• Gifts or gift cards 
• Rewards given to the ambassadors as part of their compensation package
• Coaching, training, or development expenses related to educating ambassadors on your products and brand (for example, if you develop video content, a particular website, or host seminars, these expenses may be deemed write-offs) 
• Attribution tracking software and tools to track an ambassador’s sales, affiliate links, or brand lift
• Equipment, supplies, or electronics to create marketing materials

Tips for Writing Off Brand Ambassador Expenses

The critical thing to remember is to keep all receipts for proper IRS reporting to show that these expenses are necessary and reasonable for your business and how they directly tie back to benefiting your business’ activities and bottom line. 

For example, make a note in your accounting software on certain expenses, like whom you gave the gift card (the ambassador) and what the purpose was (i.e., a bonus for a sales goal or promotion). This reasoning directly ties back to your business and shows that it’s not a random personal expense. 

Keep detailed records and receipts, and share these with your accountant to get the most write-off opportunities. 

Common Mistakes to Avoid When Deducting Brand Ambassador Costs

Worried about crossing the IRS? Keep these common mistakes in mind and speak with a consultant to ensure you don’t get in hot water with the IRS: 

• Not issuing 1099s to brand ambassadors paid $600 or more annually. Brand ambassadors are typically independent contractors and must be reported using a 1099. If you skip this, you can incur tax notices and penalties. 
• Crossing the line into personal expenses. All expenses must have a clear business purpose and shouldn’t be overly lavish. For example, writing off gifts, entertainment, or meals for the ambassador when they’re traveling for your business is one thing. But, these expenses shouldn’t be so elaborate that they stand out amongst your other business expenses or what’s typical for the industry. 
• Failing to track metrics. You want hard data to prove why an expense is necessary for your business. In the case of marketing expenses, like a brand ambassador, having available metrics that connect their activities to sales, brand lift, and leads is essential to back up your claim that this is a necessary, helpful business expense. 
• Not keeping detailed expense records and receipts. In the case of an audit, all claimed deductions need to be substantiated with receipts. Missing paperwork could result in your deductions being denied and make it difficult to remember how much different expenses cost when you’re reporting your taxes.  
• Taking deductions that exceed the ambassador’s resulting income. This is an audit risk and makes your expense appear unreasonable. If they’re not generating more sales, brand lift, leads, or other value points than you’re paying them in total, the expense looks odd (and might not even make sense for your business). 

Maximizing Your Tax Savings with Brand Ambassador Expenses

The most crucial step in maximizing your tax savings is to save all your receipts and expense records and consult a tax professional. 

Speak with a tax professional about your specific brand ambassador program expenses and tax situation to assess all possible deductions. 

You’ll also want to structure your business agreements properly. Have contracts with your ambassadors that clearly establish the brand ambassadors are independent contractors, not employees. This structure allows you to deduct their fees as business expenses rather than employee costs and legally protects you and them. 

Another critical step is formalizing your ambassador program. Create a clear structure around your referral, discount, rewards, and loyalty program to demonstrate a clear business strategy that justifies related expenses. 

Lastly, pay your ambassadors a fair, competitive market rate for their worth. Paying an ambassador far more than most are paid (adjusted to their value, following, etc.) can stand out as an unnecessary or overly elaborate expense. 

So, pay them competitive pay rates, including performance incentives — which are common in the industry — to justify the expenses as ordinary and necessary. 

Conclusion: The Benefits of Writing Off Brand Ambassador Expenses

Nobody loves doing taxes, but taking advantage of write-offs can make the process a little less painful. Don’t miss out on potential savings! 

Review your receipts carefully and check your business bank accounts to ensure you haven’t missed anything. Locate missing receipts and records, and note why less obvious receipts (such as a meal out) are a necessary business expense.