Do You Get Paid From Social Media Companies — or Do You Want To? Here’s What You Need To Know About Taxes, TikTok, and Business Strategy
- Dewayne Williams
- Sep 29
- 4 min read
Every day, creators are making real money on platforms like TikTok, YouTube, Instagram, and Facebook. Whether it’s through gifts, subscriptions, ad revenue, or bonuses, social media has become a legitimate stream of income.
But here’s the truth: once you cross certain income thresholds, that money doesn’t just stay between you and the platform. The IRS is watching — and the platforms are required by law to report what they pay you.
In this blog, we’ll use TikTok as an example to break down how payouts work, why you’re getting tax forms like a 1099-K, and how you can turn what feels like a tax headache into a real business strategy.
TikTok, PayPal, and the IRS: How the Money Flows
When TikTok pays you, they usually do it through PayPal. As soon as your gross payouts from TikTok cross the federal reporting threshold, PayPal is required to issue a Form 1099-K and send that information to the IRS.
Here are the thresholds:
2024 (form sent Jan 2025): $5,000
2025 (form sent Jan 2026): $2,500
2026 onward: $600
That means if you’re making content and receiving gifts, once you pass those levels, the IRS already has the number in their system — whether you file correctly or not.
And the kicker? If your PayPal is set up as a personal account, that 1099-K is linked directly to your Social Security Number (SSN).
Why Running Everything Through Your SSN Is Risky
When your creator payouts are tied to your SSN:
They count as personal self-employment income.
You’re responsible for self-employment taxes (15.3%) on top of regular income tax.
You have limited ability to separate personal and business finances.
You may miss out on deductions that corporations can claim.
In short: you’re paying more, you’re less protected, and you’re not building a real financial foundation.
This is why smart creators upgrade to a business PayPal account and connect it to a real business structure (C-Corp). That way, the 1099 gets reported to your company instead of your SSN, and you gain access to legitimate business tax strategies.
The IRS Wants a Paper Trail
The IRS is very clear:
“Good recordkeeping is critical for supporting deductions and income in case of an IRS examination.”— IRS Recordkeeping Guide
This means that whether you’re deducting TikTok gifts as marketing or reporting PayPal income as business revenue, you need organized records to back it up.
For creators, this includes:
TikTok Transaction History – shows how many coins you bought and gifts you sent.
PayPal Activity & Statements – shows every payout you’ve received.
Business Ledger – a simple spreadsheet or accounting software log classifying income and expenses.
Together, these documents prove the flow of money and support your deductions.
Business Expenses vs. Personal Spending
The IRS draws a clear line: you can only deduct expenses that are “ordinary and necessary” for your business. That rule is spelled out in Publication 535 – Business Expenses.
So what does this mean for creators?
Buying TikTok Coins for Fun → Personal spending, not deductible.
Buying Coins to Gift in Lives for Exposure → Advertising expense, deductible.
This distinction matters. If you’re gifting strategically to get your name on screen, to get shoutouts, and to grow your brand, that’s no different than buying ad space. But you can only call it a business expense if you actually operate as a business.
Advertising Expenses Are Deductible
The IRS specifically allows advertising expenses as deductions:
“You can generally deduct reasonable advertising expenses that are directly related to your business activities.”— IRS Publication 535
Examples the IRS recognizes include:
Ads in newspapers, radio, TV, or online.
Promotional giveaways.
Goodwill advertising to keep your name in front of the public.
By extension, using TikTok gifts to promote your brand visibility fits this rule.
As long as you maintain documentation, you can classify those coin purchases as marketing & advertising expenses.
The Smart Strategy for Creators
Here’s how to stop letting social media platforms (and the IRS) control the narrative:
Upgrade to a Business PayPal Account
Ensure payouts go to your company, not your SSN.
Form a Business Entity
A C-Corp gives you separation, flexibility, and more deductions.
Track Your Spending and Income
Save TikTok gift history, PayPal statements, and keep a simple log in QuickBooks, Excel, or Google Sheets.
Classify Correctly
Record gifts as advertising, not entertainment. Record payouts as business income.
Work With Professionals
Tax strategy isn’t just about filing — it’s about structuring in advance to minimize liability and maximize deductions.
Final Word
If you’re a creator earning money from social media — or if you plan to — it’s time to stop treating your content like a side hustle and start treating it like a business. The IRS already has the paper trail. The only question is whether you’re positioned to take advantage of it.
At MAC Enterprise Consulting, we help creators:
Form the right business entities.
Upgrade their PayPal and payout systems.
Track deductions the IRS actually recognizes.
Build strategies to keep more of what they earn.
👉 Don’t wait until tax season to scramble. Visit macenterpriseconsulting.com and let’s get your business set up the right way today.
📚 Sources
IRS, Form 1099-K Information:
IRS, Recordkeeping for Small Business:
IRS Publication 535, Business Expenses: