Photography Business – Washington Taxes Part 2


Federal Taxes

Continuing with my discussion on Washington taxes, I wanted to give an overview of what interaction you will have black-and-white-coffee-cup-applewith federal taxes conducting your photography business. Although this is not specific to Washington, it is an important piece of being a compliant and credible business.

Be sure to understand the difference between your photography being a hobby or a for-profit endeavor.  The IRS outlines points that may help you determine whether your activity is for profit or a hobby. Consider the following:

  • Does the time and effort put into the activity indicate an intention to make a profit?
  • Do you depend on income from the activity?
  • If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
  • Have you changed methods of operation to improve profitability?
  • Do you have the knowledge needed to carry on the activity as a successful business?
  • Have you made a profit in similar activities in the past?
  • Does the activity make a profit in some years?
  • Do you expect to make a profit in the future from the appreciation of assets used in the activity?

An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year. If an activity is not for profit, losses from that activity may not be used to offset other income.
Since you are running a photography business, you do need to pay tax based on the net profit. Your net profit is revenue minis expenses.

Tax is paid on your personal tax return (called “pass-through taxation”) if you are registered as a:

  • Sole Proprietorship
  • Partnership
  • most LLCs
  • S-Corporation

Being self employed as a photographer, you will use tax forms:

  • 1040
    • basic tax return
    • includes gross income, deductions, and basic tax credits
  • Schedule C
    • basic form used to complete a self employment tax return
    • includes income made from photography
    • deduction in your business (advertising, rent, utilities, insurance, etc.)
  • Schedule SE
    • used to calculate social security and medicare taxes
    • must be accompanied with the Schedule C
  • Form 2106
    • business expenses – mileage for traveling
      • can use standard mileage or actual expenses
    • used if employed by another photographer who is issuing you a W2 (use Schedule C if self employed)
  • Form 8829
    • business use of home
    • write off a portion of your rent or mortgage based on the size of your home office
  • form 4562
    • depreciation and amortization of equipment
    • classification of equipment should be checked for rates of depreciation

Expenses – must be “ordinary and necessary” 

  • basic expenses
    • advertising
    • insurance paid
    • contracted labor
    • repairs
    • supplied
    • rent or mortgage
    • utilities
  • travel
    • travel relating to photography
    • includes airfare, lodging, car rental, etc.
  • mileage
    • must drive minimum 30 miles to destination
    • write off travel based on mileage rate determined by the state
      • rate is determine by US General Services Administration (GSA)
  • meal
    • related to your work
    • during travel if 50 miles from home and overnight stay
    • 50% deduction of your meal expense on Schedule C
  • gift
    • gifts to clients no exceeding $25 per client
  • depreciation
  • education
    • seminars or workshops

Quarterly Payments
You are generally required to make quarterly estimated tax payments during the tax year. Form 1040-ES (estimated tax)

It’s important for you to keep documents (such as receipts) as you may be audited at any time. It’s best to stay organized not only helping you in the event of an audit, but helping you stay organized for your business as well.

For further information or clarification, should contact your accountant or tax specialist. As always, it is important to stay abreast of the law and any changes that may occur.

Have you hit any road-bumps trying to figure out your federal taxes as a photographer? What advice can you give to make the process easier.

Related Posts:

Photography Business – Washington Taxes Part 1

Resources:

IRS

GSA

 

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One thought on “Photography Business – Washington Taxes Part 2

  1. Pingback: Photography Business – Washington Taxes Part 3 | Mitsuyo Maser

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