Tax Question

[Sharkbait]

Okay, so my wife and I are probably going to make Whiteshark Photography a legal business as of 2004, so when we go to file our taxes with the CPA, what kinds of things do I need to know?

I'm especially curious about how depreciation works on the camera gear--we bought a lot of gear in 2004.

 

[SWFLA1]

Hi John -

First of all, you need to know what type of entity - partnership, corporation, sub-s, sole- proprietor...etc....

That decision in itself will affect the future choices you have.

Your camera equipment, as well as computer equip, car(s)...and basically every major purchase you make for stuff you use in the business will be subject to depreciation, depending on whether you go cash basis or not...

The most important thing right now is to talk to a tax accountant and ask him for advice... i'm not speaking from knowledge...but from experience...

by the way.... i'll be through indy again next week, back in june and in august....

If you have some specific questions, I can help with what I've experienced - one of the studios I owned was for 10 year - freestanding commercial building in Indiana...so i'm a little familiar with the requirements.

Let me know...

Bob

 

[Alison]

Definately talk with your accountant and determine what type of business you want to set up. It can be sticky with assets like cameras and the like if you purchased them prior to setting up your business legally. Basically your accountant will need to know your revenue (sales) and expenses to determine your taxable income. Most photography business run at a loss for the first few years. Your accountant will know what type of depreciation schedule to set up for your gear. We started as an S-corporation but this year will change that to LLC.

Have you registered with the state? That was the first step that we took to be a legal entity.

One of the biggest mistakes we made was not keeping close track of finances from the get go. So now I have to go back and recreate the information for income statements, balance sheets, etc. My accountant will teach you Quickbooks for a reasonable fee which was good.

Just make sure you keep copies of all your receipts, set up an invoice/billing system and figure out your cost of goods sold and you'll be set.

 

[Sharkbait]

We've got all the paperwork, receipts, etc. Last year (04) was the first year we did anything for pay for the photography, and it was also the year we picked up the majority of our camera gear, so that's why we figured we'd better make it legal in 04. Sounds like we've got some long appointments ahead of us with the CPA. :|

 

[mavrik]

Did you get your DBA or partnership agreement filed yet? Do that first. Then go to your accountant with basically everything you kept - and just have it organized to save everyone a bit of time. They will want receipts (in chrono order rocks for time saving), they will want dates, income, how you got it, who you got it from and when and if you don't have a business checking/savings account, now's the time to go to the bank and set one up.

M

 

[Sharkbait]

What's a DBA?

 

[Alison]

DBA=Doing Business As ... basically where you set up your company name with the state.

 

[Christie Photo]

In Illinois, we have to collect sales tax. It's not too bad though. Since photography is considered a "service" in our state rather than merchandise, the sales tax is for processing. So here, we collect tax on 10% of the total sale. Since this is not a BUNCH of money in my small operation, I don't have to file every month.

I wish all I had to do was make photographs! Geezzz!

Good luck!

-Pete Christie

 

[deb]

If you operate as a sole proprietorship, you only need to file a Schedule C with your federal tax return. You need records for gross receipts, mileage, insurance(if you maintain an e & o policy or liability insurance for a studio location or have equipment insurance), rent (for a studio location, equipment etc), If you have a studio, you will need utility bills. Also, receipts for long distance telephone calls related to you photography business, business cards, postage, advertising, payments to assistants, printing, etc.

To better establish your photography as a business, open a business checking account. In the event that you have two or three years of operating at a loss, this will help keep the IRS from claiming you have a hobby loss as opposed to a business loss.

Cameras, lighting, backgrounds, stands, computers (will be treated as listed equipment and prorated between business and personal use), printers etc can be depreciated straight line or you can take a section 179 deduction which allows you to take a form of accellerated depreciation, but may also require a depreciation recovery in the event the equipment is disposed of.

If you incorporate, you will need to keep up with you organization costs which will be amortized over 5 years.

You may want to get a program like quick books to keep up with your expenditures. You can even direct certain categories of expenses to particular lines of your tax return.

Check with you state sales and use tax office for instructions on collecting and remitting sales taxes. The laws vary from state to state, and it may be possible that you collect taxes on prints but not on sitting fees.

If you have all your information together, you shouldn't have to spend hours with your cpa. Most expect you to have your ducks in a row when you come in.

Good luck.