Photography business taxes

[waynegz1]

I was wondering, how would my taxes look? Technically I started my photography business (weddings and other evetns etc.) this year and I really took a loss after all equipment expenses.

Can my vehicle, internet, phone line, and of course equipment be reported as a deduction? This is my very first year doing this, so any info would be great!

Thanks.

 

[c.cloudwalker]

Everything related to your business can become a deduction but it doesn't mean you deduct the full value of certain things all in one year.

Bodies, lenses, etc are deducted over the life of the items.

With a vehicle, unless it legally belongs to the business, you are going to take the miles or do a full value of detailed expenses minus those costs for personal use. But you need to keep records of all that. When I used a vehicle for both business and private use, I took the miles, much easier, with a record of mileage each time I went somewhere on business

Consumables are fully deducted the year of use however.

One thing that you will get different advice about is deducting part of your house costs (the home office and home studio) because it can be a red flag for the IRS.

The main thing is to find the right person to do your taxes. Start asking for referrals now and have a chat with those people to try and determine if they are any good.

And as you will soon learn, you are supposed to pay taxes quarterly.

Is there sale's tax in TX? Have you been collecting it and paying it. Up in Maryland, the last place where I collected sales taxes, the payment of such was also quarterly but TX could be different.

It would have been a good idea to look into all this before launching your business so start figuring it out NOW.



EDIT: BTW, all those expenses (including the tax preparer, which is also deductible) are part of your cost of doing business and should be reflected in your rates. Are they?

 

[waynegz1]

It would have been a good idea to look into all this before launching your business so start figuring it out NOW.
QUOTE]

I was going to but then I got offers from friends to cover weddings, which then turned into referrals. So I just lost track of time. I usually do my personal taxes at HR Block, but now I need to find a CPA.

 

[c.cloudwalker]

A CPA is one thing, a tax preparer is another. Not all CPAs are good at doing taxes. For a small business like yours, you can do your own accounting. It's not rocket science and software like Quickbooks make it very easy.

My last tax preparer was from H&R block and his work included business taxes. Some of the people there are quite good but again, you need to have a chat with them and figure it out because some of them are quite bad.

 

[c.cloudwalker]

I was going to but then I got offers from friends to cover weddings, which then turned into referrals. So I just lost track of time.

I understand but it is not very bright, sorry. IRS fines can get quite costly. And I don't think those are deductible.

 

[waynegz1]

I hear ya. I am doing quite a bit of research and will find a solution. Quickbooks seems to be the route I might take.

 

[c.cloudwalker]

Just ask business people in your community for referrals on tax preparers.

As far as Quickbooks, it was simple enough to learn, it is connected to my personal and business bank accounts that are on Quicken, it was fairly inexpensive, etc, etc. My biggest problem, because I am not an accountant, was how to set it up to start with. I got help from a CPA for that...

 

[DC-Photog]

This year, I'd recommend getting a good accountant to sit down and explain everything to you. A good one will even help you set up your Quicken categories and show you exactly what to do to make your life easier next year...and beyond.

I completely understand how you "accidentally" got started in business. Believe it or not, it happens to a lot of people in different fields.

It's also good that you're getting this under control before the end of 2010. For example, you would need to keep a travel log to take a large mileage deduction.

Section 179 equipment purchase deductions are a beautiful thing.

FYI--you also need to make sure you're collecting and paying state sales tax on the correct sales. Some states make you collect it for services, and others on products only. Again, please rely on your accountant.

 

[waynegz1]

Here in TX we have a Comptroller's license to be able to charge taxes. WHen I got the business name registered I was told that I didn't need that. So I just went on without it.

I will ask some local small businesses who they recommend. Thanks for all the info. I appreciate it.

 

[c.cloudwalker]

WHen I got the business name registered I was told that I didn't need that.

You may want to double check that. Not to say that civil servants are all idiots, plus I don't know anything about TX sales tax, but they sometimes talk faster than they should.

In states where I've lived if you sold a finished product, you were supposed to collect sales tax then send it in to the state. If you sold a service, you didn't.

Examples: Wedding photographers sell a finished product. Commercial or editorial photogs don't.

 

[waynegz1]

Good point. I am going to go down there on my next day off.

 

[KmH]

Another issue to be sure and cover with your accountant is that the IRS has requirements on your profitability, relative to deductable expenses.

Were you to take federal business expense deductions and the IRS were in later years to declare your business a hobby based on not meeting their profitability requirements, they would disallow those deductions and demand tax payments on those deduction $$$'s.

I have heard from several different photographers in Texas that the state has, and advertises, a rewards program for those who drop-a-dime on businesses they suspect aren't collecting and forwarding the appropriate sales taxes to the state.

What business type do you set up? A sole proprietorship, an LLC.......?

 

[waynegz1]

Right now I have it set up as a Sole Prop. DO you recall what that 'drop-a-dime' program is?

 

[KmH]

Right now I have it set up as a Sole Prop. DO you recall what that 'drop-a-dime' program is?

No, since I'm in Iowa.

Why not try the State of Texas Department of Revenue's web site, or it's equivelent there in Texas.

 

[orljustin]

" Bodies, lenses, etc are deducted over the life of the items."

You can write them off all in one year.
This tax tip outlines Section 179 expensing that allows a business to fully deduct the cost of property in the year it is purchased rather than depreciating the business assets over years.