Use profit to purchase camera or pay for vacation... (Tax ??)

Discussion in 'General Shop Talk' started by jcskeeter, Sep 29, 2016.

  1. jcskeeter

    jcskeeter TPF Noob!

    Joined:
    Nov 7, 2010
    Messages:
    83
    Likes Received:
    6
    Location:
    Minnapolis, MN
    Can others edit my Photos:
    Photos OK to edit
    Ugh, this is probably a really dumb question but I'm still green on a number of tax related things. Be gentle please.

    I've got a FT gig doing photo/video with a corp. I've got a side biz to do jobs here and there. It's Self Propriater (I know, I know it should be LLC but it's low-key jobs still.) I've got a bank account for it so I can keep things separate and organized. The main purpose right now for the side biz is to do projects I enjoy for some extra income.

    For the sake of example and using even numbers let's say I will be getting paid $4,000 for a recent job. My plan was to pay myself after subtracting a tax amount let's just say $3,500. Bam, vacation money, done. Daiquiris for everyone! Or....

    Is there someway to work this around when it comes to taxes? Totally not trying to be shady or do anything illegal. Just wondering if there are any loopholes or strategies that could be applied here.

    So is it possible to instead use the "profit" to purchase a camera and have the right-off of the purchase be applied at tax time. Would I then be getting money back in some way that I could then use for the vacay??

    Apologies if this is really dumb and not even how any of this works. Blame my brain for having the crazy idea. It's prob not possible to "have my cake and eat it too"... or is it?? TIA!

    (For those who are wondering, I'm currently renting gear for shoots and basically having the client pay for it without them knowing. Nothing new but just throwing that out there.)


     
  2. pixmedic

    pixmedic I am the Lord thy Mod Staff Member Supporting Member

    Joined:
    Jun 7, 2012
    Messages:
    15,289
    Likes Received:
    7,367
    Location:
    Central Florida
    Can others edit my Photos:
    Photos NOT OK to edit
    if you have a legitimate business, then business related purchases can be written off at the end of the year...but only a portion of it which comes off of your taxable income from the business. it doesn't negate you paying taxes on that income, or make it some sort of "rebate" where you basically get the gear for free.
    you should probably look up how business taxes work before you get yourself in a tax mess, or better yet, go in and talk with a business tax professional and find out exactly what you can/should-cant/should not be doing.
     
    • Like Like x 1
    • Agree Agree x 1
  3. jcskeeter

    jcskeeter TPF Noob!

    Joined:
    Nov 7, 2010
    Messages:
    83
    Likes Received:
    6
    Location:
    Minnapolis, MN
    Can others edit my Photos:
    Photos OK to edit
    Yes, it's a business. It's still young yet but it's there. Totally agree on all of your suggestions. I absolutely err on the side of figure it out first. Figured I could start here if there was something "standard" when it came to this. And totally understand the "gear isn't free" part.

    I wish there was like a calculator or something for this type of thing. I'm a huge learn by doing/seeing person and it's hard for me to wrap my head around a word explanation. (Dang creative brain! lol) I know there's general tax calcs but is there something more specific for this kind of situation or maybe white paper that walks through it a little more visually/step by step? thx!
     
  4. tirediron

    tirediron Watch the Birdy! Staff Member Supporting Member

    Joined:
    Jul 8, 2005
    Messages:
    45,748
    Likes Received:
    14,782
    Location:
    Victoria, BC
    Can others edit my Photos:
    Photos OK to edit
    If you're buying new gear, that's not profit, that's money that should have already been ear-marked for gear upgrades/replacement.
     
  5. pixmedic

    pixmedic I am the Lord thy Mod Staff Member Supporting Member

    Joined:
    Jun 7, 2012
    Messages:
    15,289
    Likes Received:
    7,367
    Location:
    Central Florida
    Can others edit my Photos:
    Photos NOT OK to edit

    especially if your using rental gear as your primary gear to do jobs!
     
  6. Designer

    Designer Been spending a lot of time on here!

    Joined:
    Apr 13, 2012
    Messages:
    18,491
    Likes Received:
    4,823
    Location:
    Iowa
    Can others edit my Photos:
    Photos OK to edit
    Technically, you can use your own money for anything you deem worthy. You can even blow it up your nose, if that is what you wish to do. I don't advocate doing that, however.

    So yes, you can spend it on a vacation if that is what you want to do.

    As long as you claim the income and pay taxes on it, you can buy bubblegum for everyone in town if that is what you want to do.

    If you don't know for sure how much tax is due, you can probably just call up the local office of your IRS or State taxing authority, and ask. Of course, they might not be able to completely estimate your taxes because they won't know what all is going to go into your tax return.

    Then there are probably tax calculators you can use, by plugging in your city and state, but there again, it is going to be sketchy at best until you actually fill out your tax return.

    Now I've got some questions: Why do you think it has to be an LLC? Why do you think you need two separate bank accounts? Neither of these is a requirement, IMO.

    You asked:
    "Is there someway to work this around when it comes to taxes? Totally not trying to be shady or do anything illegal. Just wondering if there are any loopholes or strategies that could be applied here.

    So is it possible to instead use the "profit" to purchase a camera and have the right-off of the purchase be applied at tax time. Would I then be getting money back in some way that I could then use for the vacay??"

    I'm not sure what you're getting at when you say "work this around". When you file your taxes, you will find that there is an advantage, tax-wise, in re-investing the money in your business. If you simply spend it, you will not realize any particular advantage on your taxes. And "getting money back" really only depends on how much you have paid in taxes over the year. A small business should be at least aware of the requirement for quarterly estimated tax payments, and your local Dept. of Revenue or IRS office can help with that. Or a tax accountant.

    Now whether you can "write off" the full purchase price in one tax year will depend on the rules that are in effect at the time. So maybe. Maybe you can deduct the entire purchase in one year, or you might be better off spreading it out over a period of years. Talk to your tax accountant if you need help.
     
  7. Designer

    Designer Been spending a lot of time on here!

    Joined:
    Apr 13, 2012
    Messages:
    18,491
    Likes Received:
    4,823
    Location:
    Iowa
    Can others edit my Photos:
    Photos OK to edit
    I don't know, but I'll bet that Mr. Google will have some possibilities. Or Mr. YouTube. Or Wikipedia.
     
  8. KmH

    KmH In memoriam Supporting Member

    Joined:
    Apr 9, 2009
    Messages:
    41,401
    Likes Received:
    5,697
    Location:
    Iowa
    Can others edit my Photos:
    Photos OK to edit
    You have 3 tax systems that you need to be familiar with - Local, Minnesota, and Federal.
    Are you using the cash method of accounting, or the accrual method of accounting?
    Minnesota - Withholding Tax Calculator

    Are you collecting and forwarding sales taxes to the state of Minnesota?
    Minnesota, like most states, has Use taxes.
    If you buy gear from an out of state vendor you will probably owe Minnesota Use taxes on that gear.
    Sales and Use Tax

    The $4000 is business revenue. Some portion of that revenue is used to cover your cost-of-doing-business (CODB). Part of your CODB is whatever salary you pay yourself.
    Income & FICA taxes are likely due on the income portion of the $4000, and business taxes may also apply.

    Be careful with deductions on federal taxes.
    Is It a Business or a Hobby? | The U.S. Small Business Administration | SBA.gov
    When the IRS Classifies Your Business as a Hobby - TurboTax Tax Tips & Videos

     
    Last edited: Sep 29, 2016
  9. astroNikon

    astroNikon 'ya all Bananas I tell 'ya Supporting Member

    Joined:
    Aug 15, 2013
    Messages:
    13,668
    Likes Received:
    3,334
    Location:
    SE Michigan
    Can others edit my Photos:
    Photos OK to edit
    Think of this another way.

    Let's say you own a house. And you have monthly mortgage payments. And you have semi annual City Property Taxes which may be say $750 for Summer and $4,000 for winter.

    Do you (a) not save up for the taxes or do you (b) save up for the taxes

    or a more likely scenario (a) do you not save up then have problems coming up with the capital whilst the tax man is knocking ... or (b) your free cash flow is high enough where it's not a problem what-so-ever.

    Of course the bank may require you to pay extra each month by having an Escrow account because people CAN'T save money properly.

    For most people it's easy to spend money, and hard to save. And revenue/taxes can seem linear so it's hard no matter how much you make. So saving based on revenue is the best method to make sure all is paid later on.

    I recommend You have a separate savings account to put away, say 30% of your earnings for potential tax payments. At the end of the year after you calculate your taxes you can then spend the surplus if you wish.

    Now since you rent your gear you may go into tax software and create estimations of what your future tax may be based upon your Expenses / Revenue model. Of course if you own gear you can depreciate it over 3-5 years. But I would consult a business tax accountant at least for the first couple years to get everything right and for you to understand how to prepare the taxes.

    Now if that didn't make any sense let's say you borrowed money from Guido who's 7'2" and 350lbs and uses a bat as a cash register ... in the end it's all up to you how you handle your money but Guido uses a different type of "lein" with interest than the gov't but I'm not sure which one is the biggest Gorilla in the room.
     
  10. jcskeeter

    jcskeeter TPF Noob!

    Joined:
    Nov 7, 2010
    Messages:
    83
    Likes Received:
    6
    Location:
    Minnapolis, MN
    Can others edit my Photos:
    Photos OK to edit
    Thanks everyone.

    Annnnd now I feel like an idiot.

    (no further responses needed.)
     
  11. Designer

    Designer Been spending a lot of time on here!

    Joined:
    Apr 13, 2012
    Messages:
    18,491
    Likes Received:
    4,823
    Location:
    Iowa
    Can others edit my Photos:
    Photos OK to edit
    You're welcome! We're glad to help, and that is why you asked.

    No need to feel like an idiot, however. You asked a legitimate question, and received several posts that attempted to answer it. Nobody automatically knows EVERYTHING, so that is why we ask questions.

    This response was needed.
     
  12. mckownphotography

    mckownphotography TPF Noob!

    Joined:
    Sep 27, 2016
    Messages:
    10
    Likes Received:
    1
    Location:
    Colorado Springs
    Can others edit my Photos:
    Photos NOT OK to edit


    My vacations are business expenses ... I'm a photographer ... travel photos are a business asset whether I sell a shot to a magazine or not. It's an expense that gets lumped into the overall business. Go on a roadtrip .. rack up 5000 miles on your car ... that's over 2 grand in deductions. Don't forget local stuff too ... I do a lot of location scouting. :)
     

Share This Page