Hobby or business?

catspaw

The more I talk to 'professional' photographers, the more I realize that many don't truly know if they are a hobby or a business in the eyes of the IRS. Some don't even bother to file taxes on the 'business' since it is 'too much bother'.

As a business major, this is me -> :huh :huh :huh

Is this really typical, or unusual? Do you keep your receipts and separate out expenses? file tax returns? (Schedule C or corporate returns). ARE you even incorporated with status business value and such?

I'm rather curious what sort of 'status' some of you see yourselves as, if you care to share. Or questions you have about the different statuses available.

mercphoto

catspaw wrote:

The more I talk to 'professional' photographers, the more I realize that many don't truly know if they are a hobby or a business in the eyes of the IRS. Some don't even bother to file taxes on the 'business' since it is 'too much bother'.

While I agree that taxes are a big bother, using that as an excuse to commit tax fraud is pretty appalling. I do file a Schedule C, even for last year when my photo income was less than a grand. I'm a sole proprietor with a registered name with the county I conduct business in.

By the way, this is one of MANY reasons why I'm a supporter of the Fair Tax.

catspaw

mercphoto wrote:

While I agree that taxes are a big bother, using that as an excuse to commit tax fraud is pretty appalling. I do file a Schedule C, even for last year when my photo income was less than a grand. I'm a sole proprietor with a registered name with the county I conduct business in.

By the way, this is one of MANY reasons why I'm a supporter of the Fair Tax.

Good reason to be! I think those that don't file just consider themselves a 'business' but in action only, not name. No registered name, no tax claims, etc. In some cases, they could be getting back money for their investments, but they are too lazy too.

yeah, I don't get it either.

Cygnus Studios

mercphoto wrote:

By the way, this is one of MANY reasons why I'm a supporter of the Fair Tax.

I would love to know what fair is. I have been in the highest tax bracket since 1992.

Blaker

catspaw wrote:

Good reason to be! I think those that don't file just consider themselves a 'business' but in action only, not name. No registered name, no tax claims, etc. In some cases, they could be getting back money for their investments, but they are too lazy too.

yeah, I don't get it either.

Sort of along the same lines , Utah is cracking down on and auditing the sales tax photographers must collect- making it clear that they must collect sales tax on "photo services" such as sitting fees, retouching, etc as well as on tangible goods such as prints.

http://www.aphotoeditor.com/2009/03/16/utah-sticks-it-to-all-their-photographers/#more-2

catspaw

Blaker wrote:

Sort of along the same lines , Utah is cracking down on and auditing the sales tax photographers must collect- making it clear that they must collect sales tax on "photo services" such as sitting fees, retouching, etc as well as on tangible goods such as prints.

http://www.aphotoeditor.com/2009/03/16/utah-sticks-it-to-all-their-photographers/#more-2

erk. I THINK because the print sales go through SM and not through me or a local printer, that covers it (actually, 99% certain), but I know some local very very small photogs who will be hurt by this.

ChatKat

The official scoop is this
If you generate more that $600 in gross receipts you are required to file a Schedule C (Profit and Loss by a Sole Proprietor) with your 1040. Your expenses have nothing to do with the filing requirement. You can take a loss for three of five years before you could be deemed a hobby but the other bottom line is that your motive is to turn a profit.

Along with writing off your equipment costs, there are a number of other tax advantages. If you use your equipment - computer, camera, software, telephone, you are reuqired to keep a log of it's use for business/personal use because you allocate the expenses by a percentage of use.

If you have a dedicated space in your home, you might be eligible to write off some home expenses and even depreciate a portrion of your home.

Tax advice is not one size fits all and every one who is in business should have at least a consultation with a reputable CPA to determine what is best for them. (and yes, my business is tax, bookkeeping and accounting work by profession for small businesses and entrepreneurs with many photographers as clients).

catspaw

Good, and accurate, information. Mostly was curious in generating discussion over what folks here do and do not do for their photog 'business' and how they've defined it to themselves.

ChatKat wrote:

If you generate more that $600 in gross receipts you are required to file a Schedule C (Profit and Loss by a Sole Proprietor) with your 1040. Your expenses have nothing to do with the filing requirement. You can take a loss for three of five years before you could be deemed a hobby but the other bottom line is that your motive is to turn a profit.

Along with writing off your equipment costs, there are a number of other tax advantages. If you use your equipment - computer, camera, software, telephone, you are reuqired to keep a log of it's use for business/personal use because you allocate the expenses by a percentage of use.

If you have a dedicated space in your home, you might be eligible to write off some home expenses and even depreciate a portrion of your home.

Tax advice is not one size fits all and every one who is in business should have at least a consultation with a reputable CPA to determine what is best for them. (and yes, my business is tax, bookkeeping and accounting work by profession for small businesses and entrepreneurs with many photographers as clients).

Blurmore

I've been filing a schedule C for like 4 years now, ever since I shot my first wedding with MY name on it. I didn't in the days of assisting and subcontracting, but my income was measly and I was still showing a lot of w2 income. I used to have my taxes done by HR Block (very expensive, possibly not always right) this year I started working with a small business CPA and the preparation is less than half. I'm still showing some w2 income (because a company I sub for took some of us on as part time employees so we could be insured and get other benefits) but basically my self reported income was double my w2's or 1099's last year. I've been worrying about the sales tax for some time, and was told by other preparers that I am not liable for "photography services" as I don't sell paper. I have never bought that, and my new CPA is going to ensure that I am on the right side of the law. When I'm making more a year than my wife who works full time, I'll inc or LLC. My accountant tells me it is not to my benefit now, and I trust him. I carry insurance, so he thinks being an LLC would be redundant in protecting me from liability risk. I have no employees, and I work out of my house, my business owns no real estate, and less than 10,000 dollars in property. Either way...I trust my accountant, and don't sweat the rest.

mbellot

Cygnus Studios wrote:

I would love to know what fair is. I have been in the highest tax bracket since 1992.

The only fair tax is the one someone else pays!

clcoronios

What mercphoto said.

Registered business name in county; Schedule C; keep records. Better than some businesses/banks we've heard about recently, but I probably wouldn't pass muster with a CPA.

C

sweet caroline

I've filed schedule c any year someone has paid me for photography. I'm getting better about keeping track of my expenses now that I'v been getting more serious.

Caroline