Taxes

[Bill Kuta]

We've been having a CPA accountant do our taxes since before I started doing stock photography, so my form 1040 schedule C for that is just included in what he does, and I'm glad he's wading through that instead of me. (I do gather all the relevant info, which is probably most of the work anyway).

 

Back in the day, I did the tax forms for us, my mother, and our working kids, using the tax software of the day (and of course, manually on paper way back in the day).

 

I have no advice on finding a good tax accountant--our was a recommendation by (and good friend of) our CPA son.

[Jansos]

Stupid question to ask but what is the situation re filing a self assessment in the UK for a sale that was invoiced in 2014 but which I only got paid for in 2016? Should it go on the 2014-2015 tax return or the 2015-2016 tax return? HMRC told me that it I should work from the date when the photograph was initially available from (2014) but an accountant I consulted told me to stick with 2016. The sale was less than $10 so it all seems rather ridiculous. Thx in advance. :-(

[M.Chapman]

Not a stupid question at all. If you're registered as a sole trader and complete the Self-Employment (short) form with your tax return, you now have the option of selecting "Cash Basis" for your business accounts. If you do this, then income and expenditure is declared in the tax year that you actually paid or received the money.

 

If you don't select "cash basis" then I believe income is included according to the date of invoice.

 

Personally, I now use cash basis, as it's much simpler. One area I'm not 100% sure about is how to deal with business expenditure on a credit card. I book the expenditure in my accounts on the date that my credit card account is debited, and not the date when I paid the credit card bill. Keeps it simple.

 

Key thing is to be consistent from one year to the next.

 

NB. I'm a photographer and not an accountant!

[Bryan]

We've drifted away from Marvin's situation, although my own is very similar, albeit in the UK.

 

The UK tax people run (or did run)  free training courses for people setting up to operate as sole traders. I attended a couple and they were very useful.

 

I was interested to learn, for example, that there is room for manoeuvre over expenses such as the use of a mobile phone, you can claim a reasonable proportion of the cost if you use the phone both for home and business purposes etc. 

 

I don't use an accountant, for the amount of money involved it's probably not viable, and complete the self assessment forms online. Can't say that I enjoy it, but it's only a couple of hours each year - provided that proper records are kept of all monthly income and expenditure.

[M.Chapman]

 

The UK tax people run (or did run)  free training courses for people setting up to operate as sole traders. I attended a couple and they were very useful.

 

I was interested to learn, for example, that there is room for manoeuvre over expenses such as the use of a mobile phone, you can claim a reasonable proportion of the cost if you use the phone both for home and business purposes etc. 

 

There's also lots of stuff on the HMRC website. For example https://www.gov.uk/expenses-if-youre-self-employed

[Jansos]

Thanks all - very helpful. Having been PAYE for most of my working life it is a new can of worms that I need to delve into. Thanks for your support. :-)

[Marianne]

No advice, but just some links that might be helpful:

 

The IRS has publications for self-employed people which I found helpful when I first started freelancing:  https://www.irs.gov/individuals/self-employed

 

Sales tax varies widely by state and I've found the NY State sales tax people very helpful in giving advice. No clue about North Carolina. 

 

TurboTax has a small business version which I find very helpful in doing my Schedule C. But if you're just starting out and are unsure about all this, an accountant might be a better bet. 

[Scott]

Just wondered what are the best tax strategies for stock photographers.  Expenses for travel, home office, equipment, mileage for vehicle, and other expenses.  If you have equipment that you bought in previous years, can that deducted.  I have studio lighting, backgrounds, and camera equipment bought when I was doing photography just as a hobby.  I am talking about US taxes but I am sure other countries have their taxes too.  

 

Hi Marvin,   Here are a few bits for you to consider regarding your original post.   1. Have a look at how the IRS classifies a hobby v. business. They may still see you as a hobby should you get audited and there goes your business expense deductions.  2.  I don't believe you can deduct expenses for prior years when you were doing this for a hobby, unless perhaps you can restate (refile) prior years tax returns (professional help recommended).  3. Have a look at IRS Section 179 for options to fully deduct certain business expenses in the current tax year.  4.  Marrianne posted a link to the IRS small business advice PDF.  That was very helpful to me getting started and to ask good questions to an accountant.  5.   Don't overlook things like IRA, SEP, SIMPLE, or SOLO401K type vehicles to defer taxes until retirement when your tax rates may be lower.  6.  Health premium expenses may now be deductible and if you have an High Deductible Health Plan, your HSA contributions are tax free altogether.  7.   Look at various options in structuring your new business (LLC, Sole Proprietorship, C, S corp.   8.  I'm not an accountant just passing along some ideas to consider.  9.   Recommend a first session with an accountant who works with small business, perhaps let them do your first years return, then DIY if you feel comfortable. 

Regards, Scott