Taxes

[seantos]

Hi Guys,

My name is Sean and I'm an established photographer in Arizona. I left my desk job about a year ago to pursue my freelance work as a photographer and had a couple questions regarding tax filing. I've always filed a W2 with my company but this year is a lot different because of my income. Most of my income is paid either by cash, check, paypal, or square (mobile payments.) Over the last year I have traveled quite a bit to take photos that I eventually sold or licensed to companies. My tax guy said I should hop on a forum and ask what some expenses I could write off that might not be listed on my 1040 Sole Proprietor Schedule C form? What do you guys suggest I avoid when filing?

Thanks,
Sean

 

[SnappingShark]

Your Tax guy is clearly not a tax guy if he's asking YOU to do the work let alone hope onto forums.

 

[The_Traveler]

The IRS has loads of pubs on what independent contractors or small businesses can deduct.
If you use TurboTax or its equivalent, there is a product exactly for that https://turbotax.intuit.com/personal-taxes/?view=desktop
If you use Quicken or its equivalent, and use the standardized categories and chart of accounts, you can load all your expenses directly from Quicken into Turbotax.

Start keeping records of every mile you drive and every expense you incur.
If your tax guy hasn't told you all of this, get a new tax guy.

 

[Gavjenks]

http://www.irs.gov/pub/irs-pdf/p535.pdf

Scroll down to the "other" section of this document and read through it and see if anything sounds like something you did.

Some examples that stick out as possibly relevant:
-Domain name registration cost
-Disability accommodations to let you work, if applicable
-Research/Development (for example chemicals and equipment to try out an archaic development technique that you are considering offering to portrait clients)
-Interview expenses that aren't normal wages (second shooters?)
-"Penalties and fines for late performance or nonperformance of a contract are generally deductible"
-Subscriptions to professional trade journals

And also there's a special form for home business area usage, which might be important to you if you have a dedicated studio space.




By the way, if you're "established" already, then how have you not been filing a schedule C before this? The cutoff is only $400 of profit to file.

 

[CCericola]

Really? He said to go check forums? Fire him NOW and hire a real tax accountant.

 

[runnah]

Write off any expenses incurred during business. This means gas, food, mileage etc. if you used your home to do shoots or editing you can claim certain things as well. But certainly check with a pro.

P.s. Never report cash transactions.

 

[Gavjenks]

His tax guy could be his buddy from poker club. Never said it was a professional. And if the person is professional, they might have been willing to do the research, but at an hourly rate that was pretty high, so as a courtesy, they suggested savings in doing it himself. And/or for specialized business knowledge the person who knows photography terms, etc. might be more efficient or successful in researching, and the tax guy suspects that the extra dollars squeezed might be worth the minimal effort.

Who knows.

P.s. Never report cash transactions.

I've never been, but from what I hear, jail isn't very fun.

 

[KmH]

So you now have 1 year in as a self-employed business.

Business or Hobby? Answer Has Implications for Deductions

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year.

In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
In order to make this determination, taxpayers should consider the following factors:

• Does the time and effort put into the activity indicate an intention to make a profit?
• Does the taxpayer depend on income from the activity?
• If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
• Has the taxpayer changed methods of operation to improve profitability?
• Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
• Has the taxpayer made a profit in similar activities in the past?
• Does the activity make a profit in some years?
• Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

If 4 years from now you have failed to make a profit "during at least three of the last five tax years" the IRS will likely reclassify your 'business' as a hobby and disallow any business deductions you have applied in that 5 year period. That notice will likely include a bill for back taxes.

So be careful what you claim for deductions now and for the next 4 years.

 

[seantos]

Your Tax guy is clearly not a tax guy if he's asking YOU to do the work let alone hope onto forums.

He's not making me do the work, he just said I should hop on a forum and see what other photographers claim that he might not be aware of. He's told me a lot that I didn't know.

 

[seantos]

Thanks for the reply! I looked through the other and only the Domain and Home Business area relates to me. I use my apartment as my office (5x10 space in 700sq ft apartment)

I said established because a lot of people know me for my photography. I never reported any income in the past cuz it was mostly a hobby that is now my full time job.

 

[seantos]

http://www.irs.gov/pub/irs-pdf/p535.pdf

Scroll down to the "other" section of this document and read through it and see if anything sounds like something you did.

Some examples that stick out as possibly relevant:
-Domain name registration cost
-Disability accommodations to let you work, if applicable
-Research/Development (for example chemicals and equipment to try out an archaic development technique that you are considering offering to portrait clients)
-Interview expenses that aren't normal wages (second shooters?)
-"Penalties and fines for late performance or nonperformance of a contract are generally deductible"
-Subscriptions to professional trade journals

And also there's a special form for home business area usage, which might be important to you if you have a dedicated studio space.




By the way, if you're "established" already, then how have you not been filing a schedule C before this? The cutoff is only $400 of profit to file.

Thanks for the reply! I looked through the other and only the Domain and Home Business area relates to me. I use my apartment as my office (5x10 space in 700sq ft apartment)

I said established because a lot of people know me for my photography. I never reported any income in the past cuz it was mostly a hobby that is now my full time job.

 

[seantos]

So you now have 1 year in as a self-employed business.

Business or Hobby? Answer Has Implications for Deductions

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year.

In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
In order to make this determination, taxpayers should consider the following factors:

• Does the time and effort put into the activity indicate an intention to make a profit?
• Does the taxpayer depend on income from the activity?
• If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
• Has the taxpayer changed methods of operation to improve profitability?
• Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
• Has the taxpayer made a profit in similar activities in the past?
• Does the activity make a profit in some years?
• Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

If 4 years from now you have failed to make a profit "during at least three of the last five tax years" the IRS will likely reclassify your 'business' as a hobby and disallow any business deductions you have applied in that 5 year period. That notice will likely include a bill for back taxes.

So be careful what you claim for deductions now and for the next 4 years.

I plan on making this my life career, so hopefully this doesn't happen

 

[table1349]

Hi Guys,

My name is Sean and I'm an established photographer in Arizona. I left my desk job about a year ago to pursue my freelance work as a photographer and had a couple questions regarding tax filing. I've always filed a W2 with my company but this year is a lot different because of my income. Most of my income is paid either by cash, check, paypal, or square (mobile payments.) Over the last year I have traveled quite a bit to take photos that I eventually sold or licensed to companies. My tax guy said I should hop on a forum and ask what some expenses I could write off that might not be listed on my 1040 Sole Proprietor Schedule C form? What do you guys suggest I avoid when filing?

Thanks,
Sean

Sounds like Al Capone's tax guy.

 

[Designer]

Keep accurate records all year. If you don't have complete records now, this is the time to start. Actually last year, but you get the idea. Whatever you report to the IRS, be aware that if you are audited, you will have to prove any expenses by showing receipts. A good accounting software will help. Still keep all receipts, either on paper or electronically.

 

[Jamesaz]

Seantos, you've really found photo work in Arizona? I know people with 25+ years of experience in photography who are on the brink of losing their houses. Good luck.


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