Tax time and federal returns..

[Nocturnus]

So, this is my first return that i'll have that includes money I made from photography. I've done my state sales tax stuff, but how do I do stuff for my federal return? 1099-MISC?

[haraki74]

Are you a sole proprietorship? If so, then you include your income on your regular 1040. Do you have an accounting program like QuickBooks that will list out your epxenses and income?

[Nocturnus]

No special software.. only made $500 off my photography for 2007. I'm not claiming any gear since it's mainly personal use.

[bondarnes]

You will need to add a "Schedule C" Profit or loss from a business. It is pretty straight forward and when you get all the spaces filled in you will probably find that you made way less than $500.00. You probably had more expenses than you realize. The form will remind you of a few of them.

[Nocturnus]

Oh, i'm sure I had expenses, but I tracked none of them. No advertising, no travel, etc. Only things I bought to do this job was paper for my printer, and I guess the electricity I used while doing it.

[kamari]

my apologies for switching directions on this thread but it kinda touches on things you'll come across. I bought tix to Friday's mavs/heat game. It was a thank you for a client who lent her time for me to practice on. Does this constitute a business expense? Secondly, if it is justifiable, the game is in 2008 but the purchase was made in 2007; does that get reported on 07's or 08's return?

[bondarnes]

You can estimate expenses such as mileage to and from the event. I think the IRS allows $.67 per mile. If they take your word for income (unless it was all by check), then they should take your estimates on expenses. I have a specific credit card that I only use for business expenses so that I don't have to keep up with a bunch of receipts. When my cc statement comes in I go through and make notes on what everything was for. A good thought for 2008.

[bondarnes]

Originally Posted by kamari

my apologies for switching directions on this thread but it kinda touches on things you'll come across. I bought tix to Friday's mavs/heat game. It was a thank you for a client who lent her time for me to practice on. Does this constitute a business expense? Secondly, if it is justifiable, the game is in 2008 but the purchase was made in 2007; does that get reported on 07's or 08's return?

If all the tickets went to the client you should be able to deduct it as client entertainment expense. Deduct it in the year the money was spent.

[studiocygnet]

As Don said, look for the Profit and Loss Schedule C, but at $500 your probably looking at Schedule C-EZ, the short form version. Did you keep a mileage log? You can do a straight cents per mile deduction instead of actual expenses for mileage if you did.
The results from Schedule C then go into the Income part on your 1040. But you have to pay your own social security out of it, the self-employment tax part. So I'd try and find some receipts to knock that $500 back down to zero if you can. Just one lens receipt would do it.
Otherwise the combined total of income tax and self employment tax gets in the 30+% range, so you'll be paying $150 bucks on that measly $500 you made.

[CobyPhoto]

Originally Posted by Nocturnus

Oh, i'm sure I had expenses, but I tracked none of them. No advertising, no travel, etc. Only things I bought to do this job was paper for my printer, and I guess the electricity I used while doing it.

One of the first rules of doing this to make money...KEEP EXCELLENT records and ALL receipts. If you are going to take money for doing photography work and not keep records, you are going to be paying Uncle Sam the Lion's Share of everything you make.

And all told, it will be closer to 200.00 that you get to pay Uncle Sam outta that little 500.00 Pay Check if you do not offset it with expenses related to your work.

CJ

[SCone]

Rule of thumb - A home-based business should have $3-$5k of tax write-offs

If you have less, then you might want to take another look at your expenses. Don't over-look classes you've taken, subscriptions, new hardware/software, mileage, office supplies, insurance, business use of your home, etc, etc, etc.

It's all perfectly legal and you are entitled to the deductions as long as you keep receipts and fill out the right forms.

I use the "big box" method for receipts & Turbo-Tax to do the calculations.

[CobyPhoto]

Originally Posted by SCone

Rule of thumb - A home-based business should have $3-$5k of tax write-offs

If you have less, then you might want to take another look at your expenses. Don't over-look classes you've taken, subscriptions, new hardware/software, mileage, office supplies, insurance, business use of your home, etc, etc, etc.

It's all perfectly legal and you are entitled to the deductions as long as you keep receipts and fill out the right forms.

I use the "big box" method for receipts & Turbo-Tax to do the calculations.

The key to what you stated above is "operating with the intent to earn a profit." If the IRS feels that you are merely engaged in a Hobby and try to use that as a write off, they will disqualify ALL your expenses and you get nothing, you simply have to report the earnings as additional misc income.

Hence the age old warning about keeping business and personal money seperate and keeping extremely detailed records. There are other concerns as well, as far as posting loss 5 years running, and some other issues.

Using a portion of your home as a business office is risky at best. IF audited, that can turn into a major, HUGE headache as the portion you claim and equipment, etc. has to be soley used for business and the IRS will then nit pick and determine WHAT percentage you can take as an expense etc. and it is NEVER what you originally took.

Th key factor in this case is the fact that he has kept NO records. That is a indication he is NOT operating with the intent to make a profit, merely a hobby that supplies additional income.

Disclaimer: No longer a practising CPA, nor attorney. But I have been in business for myself 25+ years and I have been audited by the IRS TWICE, the TWC once and I have been involved in 2 Texas State Sales Tax audits. I learned early on...don't cut corners and don't do your own taxes: Have a professional that deals with these issues daily do them for you if you are self-employeed.

CJ

[SCone]

That's what a good tax attorney is for. Never attend an audit alone.

[CobyPhoto]

Originally Posted by SCone

That's what a good tax attorney is for. Never attend an audit alone.

This is getting off the OP's original subject. If you have a qualified CPA prepare your taxes, you won't need a "good tax attorney."

Back to the OP's subject...He was asking about what he needed to do with his additional income earned from his photography. Depending upon the receipts and documentable expenses related to the job, he may be able to reduce that 500.00 income.

CJ

[SCone]

Wasn't my intention to get off-track, just pointing out the possiblities.

Documentation is the key to tax deductions. And knowing what deductions are possible leads to better documentation.

Back to the question...

You will not have a 1099-MISC - this forn is used if you have paid someone else (like an assistant) & you want to remove that amount from your tax responsibility.

Fill out a Schedule C, taking all relevant deductions & move the total to the proper line on your 1040.

IE- You take a job that pays you $1000. But you hired an assistant for $200. You would fill out a 1099-MISC for the assistant in the amount of $200. you would show all of this on your Schedule C and have a tax liability of only $800 instead of $1000.