question regarding taxes

FatNakedGuy

(I did some searching but didn't find the answers soooooo...)

At the end of the year, are federal/state taxes based on the price I set per image ($25) on smugmug, or on the Est. Profit of $21.07 that I make after smugmug gets their fees?

I'm guessing taxes will be based on the $25, and if that is the case, am I able to write off the fee that smugmug charges to process the sale?

Another question.. if I donate 30% net sales of a gallery to help raise $ for hurricane victims, can I write that off?
http://weller.smugmug.com/gallery/4475022_YQLLj#263234529_RFgZb


This is starting to get confusing so I'm going to look for a tax person.. Just wanted to ask the masses.

Thank you!

JohnBiggs

Always have a tax person. Smug should only report the amount they actually pay you.

A note about Tax guys.
My brother used my tax guy once and decided the $120 was too much money. So he started using a popular program. I told him it wasn't the same but he said it is and the program asks all kinds of questions. 3 years later he tried my tax guy again, The tax guy reviewed the last three years of his taxes and found $10,000 in mistakes. Fortunately my brother got his $10,000 from the IRS.

The point is don't use the software or perhaps even those cookie cutter tax companies.

Angelo

Yes you need a tax professional to guide you but generally speaking you pay taxes on your revenue, in this case the amount of money Smugmug sends you.

SM will send you a 1099 at the end of the year (are you a U.S. taxpayer? There's no location in your avatar) assuming you earn over the amount requiring reporting.

As for charitable donations you can only write off those dollars you actually turn over to charities. So unless you're actually writing a check at some point during the year...

Also be careful what you offer. 30% of gallery sales or 30% of your returns?

there's a difference. Remember you're not in the business of selling images, Smugmug is and paying you royalties.

Scott_Quier

Angelo wrote:

Yes you need a tax professional to guide you but generally speaking you pay taxes on your revenue, in this case the amount of money Smugmug sends you.

I'm not a tax guy, but I did stay at .... (that was supposed to be funny)

Anyway, US IRS taxes business on profit - generally speaking this is what is left from all your income after you pay all your bills. So, in the case of a smugmug sale, this is the your sale price, less the cost of the print and the cut that SmugMug takes, which, surprisingly enough, is the amount you received from SmugMug in the form of the periodic checks.

I believe that you are obligated to report and pay taxes on this revenue stream even if you don't exceed the IRS threshold that requires SmugMug to file a 1099 (oh, and send you a copy as well ).

FatNakedGuy

Thanks everyone, I really appreciate your taking the time to reply.

My questions have been answered, a check cut, and I'm looking for a tax person for future.

Rick

ChatKat

Don't forget

FatNakedGuy wrote:

Thanks everyone, I really appreciate your taking the time to reply.

My questions have been answered, a check cut, and I'm looking for a tax person for future.

Rick

Hi Rick,

I am a So Cal based accountant and my husband is a CPA - combined we have done numbers for 70 years. There is much more to the questions you have posed here. Sales Tax - Shooting is taxable in California in many instances. On the income side, labor is taxable and a business return filed for $600 of gross receipts. You also may have a gross receipts tax to pay based on which city you are in. You might be losing some benefits tax wise to offset additional income. There is a lot more to your question than what is on the surface.

Bigg Studios - my husband is representing a client in an IRS Audit that used a very popular program. It will be very expensive for the client because with all the questions it asked, she didn't know to include some of her income and that error is technically her fault. Her audit expense and taxes and penalties will cost far more than the fee if she hadn't done it herself. And now it has to be done all over from scratch. If you don't know what to look for on a tax form, then don't use those programs without finding an accountant who knows what is on line 31 and what AGI means. And a whole host of other questions. Not all people are created equal when it comes to tax situations. Everything is unique to the person and business.