How to report money given to clients?

Restomage · Mar 28, 2014

Business/tax related question here everyone. I'm starting to look into using high school senior reps to help me acquire more business for senior portraiture. For those who are unfamiliar with what a Senior Rep is, it's someone who represents your photography at their high school. In exchange you provide them with a free photoshoot (usually). As part of my incentive program, I was thinking that for every client my senior rep refers me to, I would pay them $15. I know there are other photographers who have done this in the past.

My question is how I would I report this to IRS, or do I even need to? They're not an employee or even an independent contractor. Basically I just want to make sure I'm doing everything I need to do to not get in trouble with Uncle Sam. Thanks!

71M · Mar 28, 2014

imo it's a business cost: it's a fee, a commission. They invoice you and you pay it, and it goes in your books.

ronlane · Mar 28, 2014

This would be a question best posed to an Accountant but I would agree that it is a possible commission or part of your marketing funds.

KmH · Mar 28, 2014

Like legal questions, an online photography forum is a poor place to be seeking definitive tax advice.
There are state tax laws that also have to considered.

A couple of issues when using high school seniors to promote your business.
1. Unless legally emancipated people under 18 years old do not have sufficient legal standing to sign a contract.
2. Paying for referrals in the form of a free photo shoot and $15 per subsequent referrals likely does in fact make your senior reps self-employed independent contractors. You may also be required to provide each senior rep with 1099 forms at years end.
Independent Contractor Defined

IronMaskDuval · Mar 28, 2014

Restomage said:
Business/tax related question here everyone. I'm starting to look into using high school senior reps to help me acquire more business for senior portraiture. For those who are unfamiliar with what a Senior Rep is, it's someone who represents your photography at their high school. In exchange you provide them with a free photoshoot (usually). As part of my incentive program, I was thinking that for every client my senior rep refers me to, I would pay them $15. I know there are other photographers who have done this in the past.

My question is how I would I report this to IRS, or do I even need to? They're not an employee or even an independent contractor. Basically I just want to make sure I'm doing everything I need to do to not get in trouble with Uncle Sam. Thanks!

I don't think you need an accountant for this question. If it's just a few bucks, I would expense it as a marketing cost. Obviously, if you have one that is bank rolling for you by bringing in all the seniors, you should 1099 that individual.

Restomage · Mar 28, 2014

Thanks for the advice so far.

vintagesnaps · Mar 29, 2014

I would think you'd need to go thru the school system - how are you planning to find/contact these potential reps? In my experience anything going out to students needs to go thru the school or at least thru the PTA. I don't know if students would be allowed to engage in promoting your business on school property or during school hours. And with them being under 18 I think you'll need parent permission, at least in my area that's necessary for photo releases, to participate in school sports/events, etc.

I think it varies by state as to how much you can make before it's enough to report etc.; try looking up the secretary of state website for your state and look at the IRS.gov site and find out what you need to do.

vfotog · Apr 1, 2014

vintagesnaps said:
I would think you'd need to go thru the school system - how are you planning to find/contact these potential reps? In my experience anything going out to students needs to go thru the school or at least thru the PTA. I don't know if students would be allowed to engage in promoting your business on school property or during school hours. And with them being under 18 I think you'll need parent permission, at least in my area that's necessary for photo releases, to participate in school sports/events, etc.

I think it varies by state as to how much you can make before it's enough to report etc.; try looking up the secretary of state website for your state and look at the IRS.gov site and find out what you need to do.

this part is actually very easy. if you are paying someone, give them a W-9 to fill out. you can get the form at the IRS site. you need to know their tax status. unless they are a corporation, you need to report your payments to them to the IRS if they total $600 or above in the course of the year. This is a federal law and doesn't vary from state to state. One payment or a hundred, if it tops that reporting threshold, you need to report it. even if it's a company, they may not be a corp. Think of all those news stories on "nanny gate"... people not reporting payments to nannies, gardeners, maids, photo assistants.... keep track of your payments and save yourself from fines...

CMfromIL · Apr 4, 2014

Just do a 1099 for them, and document each payment. Even better, make sure you pay them by check. Never cash. And as a contractor, they are responsible for their own payments for SS tax, Medicare Tax, and income tax. As a bonus, because this is an expense you should be able to deduct the expense. Make sure of course you talk with a CPA or similar. This is an internet forum after all.