BetterPhoto Q&A
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Photography Question 
Connie Niehaus
 

Selling Photos and Income Taxes


If I'm lucky, I shoot a wedding a year and maybe one or two senior shoots. I can clear $300 for my time on the wedding and maybe $20 on the seniors. I want to increase my business, but I'm wondering at what point I need to keep track of income and expenses for the IRS. The correct answer is probably "always," but is there a sensible and reasonable answer as well?


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9/4/2004 2:03:14 PM

 
John C. Schwentner
BetterPhoto Member Since: 7/24/2004
  Just do it and keep track of everything for your Schedule C. You can deduct anything you use photographically in the business - including part of your house/office to a point, and your travel expenses and overnight lodging and meals (even entertainment if it's the customer). Just make sure to charge enough. Rule of thumb is: The more gross, the more net.Charge commensurate with your skill


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9/4/2004 5:03:41 PM

 
Gregory LaGrange
BetterPhoto Member Since: 11/11/2003
gregorylagrange.org
  Better check real good on the home office deductions. I think there are some things about what really makes a home office - like if it's every used for any other reason, it nullifies it as a home office.


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9/4/2004 10:48:22 PM

 
Stephanie McMillan
BetterPhoto Member Since: 8/29/2004
  If this is all of the "business" you are generating at this time, it is allowable to consider it a hobby and thus you would not report it on your tax schedules at all. You are permitted to deduct hobby expenses on your income tax return, but the expenses cannot exceed your income AND you must pay taxes on the income. Essentially you would be paying the government taxes just to report the income. Again, call it a hobby (for which you are permitted to have "business cards") and keep the government out of the picture for now.


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9/7/2004 5:15:58 AM

 
Connie Niehaus   Thank you, all! As I read Stephanie's response, my question is this: Is there a point when it is no longer a hobby in the eyes of the IRS?


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9/7/2004 5:44:49 AM

 
Etta    An "in-home office" must be a space set aside for your business projects. I have a second bedroom I use only as an office. I get to use a percentage of gas, electric, taxes, payments. It helps out in the end. All for a little paperwork. With all of these deductions, you can show a paper loss. And paying into Social Security doesn't come into play until around $25,000 (I think, or higher) is made.


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9/7/2004 5:45:12 AM

 
Stephanie McMillan
BetterPhoto Member Since: 8/29/2004
  Connie,
Here's the IRS link for you to check out.
http://www.irs.gov/businesses/small/article/0,,id=99239,00.html
I'm presently in the same boat as you are with the number of "clients" that I have, but the income received would never begin to "support" me. $20, I'm sure, doesn't even begin to pose "profit" in your pocket when you compare it to the cost of your equipment. When you generate enough money to consider that it is supporting your livelihood, and it's money that you can't do without, that's "income".
What Etta says is true, but the IRS will only let you run a business at a loss for so long ... they expect you to turn a profit at some point and not just use a "business" for a tax deduction.
(I'd like to talk to you more about your fees ... maybe we can help each other out in this "starting a 'business'" thing. :o) Is there anyway to share email addresses with members?)


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9/7/2004 7:11:51 AM

 
Sharon Morris   Re: home office deduction: If you are going to deduct for a home office, my accountant told me to make sure that if in the case that I'm audited, to make sure that there is nothing in the office that is personal - i.e., the dog's water dish. I would advise anyone who is contemplating deducting expenses on tax returns to consult with your accountant or tax preparer.


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9/7/2004 8:07:27 AM

 
reza moghaddam   what is your name?


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9/8/2004 3:01:03 AM

 
Gregg Vieregge   I don't understand Etta claiming that social security tax doesn't come into play until $25,000. If you file schedule C and have a net income of over $600 you must pay in the 15% self employment tax.

As far as claiming household expenses and in-house office as a hobby expense, very risky.

I suggest not mixing your business income with your personal checking account.

Do it ligitimately, the IRS can be very brutal should you be audited.


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9/14/2004 5:29:28 AM

 
Ken Reaves   The IRS isn't all you have to worry about. Most states require you to collect sales tax for both tangible and services rendered. You need to check with the state department of revenue or whoever handles sales tax to find out those requirements.


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9/14/2004 5:29:30 AM

 
Liz    Does anyone know what the requirements on taxing is when you sell the pictures wholesale to a licensed retailer? If I understand it correctly, if they hold a sellers permit and retail license and you sell wholesale, you do not need to add tax, as they are going to turn around and sell it with tas. Any feedback?


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9/14/2004 5:54:21 AM

 
Etta    I take a paper loss and haven't paid any SS tax in my in home business since I started it in 1989. I have an account that does our taxes so I know it's within the laws.


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9/14/2004 7:39:55 AM

 
Jay    Be very hesitant to deduct home office expenses. Its an IRS red flag. deducting home
office expenses will have an effect when the house is sold. The sum
of the deductions gets added to the selling price of the house. This increases any capital gains and subsequent capital gains taxes (according to my accountant who is something of a shark)


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9/14/2004 3:43:23 PM

 
John C. Schwentner
BetterPhoto Member Since: 7/24/2004
  Poor Connie, Ive read all this. Seems you could save all the reading material by just asking your tax man in the first place. You know, everyone is an expert when you ask opinions.


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9/14/2004 3:58:35 PM

 
Connie Niehaus   Hah! Yes, John, my head is spinning as I read...

There is a LOT of information here, and I appreciate everyone's comments. Bototm line seems to be this--it's a tricky thing. The way I'm doing it now, I'm not encroaching into anyone else's territory or making enough money to worry about it.

And I WOULD ask my tax man--but since I do my own taxes,... I'm him. ;)


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9/15/2004 5:20:04 AM

 
John C. Schwentner
BetterPhoto Member Since: 7/24/2004
  Connie, John again. Yeah just do what you think is right, keep track of the stuff you use, it's really not rocket science, and dont worry, if you're not perfect you wont go to jail.


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9/15/2004 7:36:10 AM

 
Melissa Peirsel   I suggest you contact your local IRS office. Usually listed in the first few pages of your phone book. I was under the impression, that if you make more than $600, you need to claim it. But then again the tax laws are continually changing, including the home business deductions. I would also keep a seperate checking account, if you have a TIN (tax identification number - free), you can open a bank account in the businesses name. My business license cost me a total of $5, and it keeps my butt out of trouble. This will be my first year for filing taxes, but I have kept a detail ledger that I purchased from Walmart for a few dollars. I plan on taking that to whoever I hire to complete my taxes.


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10/5/2004 7:30:47 PM

 
Steve Biffle   I know in Colorado we don't have to pay sales tax on services. But selling tangable items such as prints (separately) require a state sales tax & licience. That also changes depending upon what city you live in. I include prints in my wedding packages. They hire my services for there wedding which includes those prints. I don't charge or have to pay any state sales tax on that. Now if I get a reorder my services are not being performed so at that point I need to charge and pay state sales tax.


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10/11/2004 10:52:43 AM

 
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