1099-misc question

<p>last year i receive a 1099-misc for 18-Landscape jpg files of photographs which were displayed digitally in a high end condominium complex. They paid me $3000 for the files.<br>

from what i've read it says "you can write off expenses related to the production of the income."<br>

other than some edits on the photos which took several hours there were really no expenses unless you include the travel expense to take these photographs. i would love to hear what others in this situation are doing with the deductions if any. i'm not a professional although i do sell several thousand dollars worth of prints in the year. it's more of a hobby.<br>

thanks for any feedback.<br>

owen</p>

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I prefer to keep audit risk very low and just pay the

taxes associated with misc hobby income.

Talk to an accountant.

iRS has some very useful guides regarding hobby

businesses and hobby income. Worth reading.

<p>"i'm not a professional although i do sell several thousand dollars worth of prints in the year"<br /><br />Yes, actually you are. Part-time, perhaps, but professional nonetheless. If you're being paid for your photography, that's the difference between being an amateur and professional, especially to the IRS. Has nothing to do with whether you're any good. It's whether you're getting paid.<br /><br />The bad news is that you have to report all of that income to the IRS. If you don't and they find out -- and they will find out -- you're in trouble. They know about at least the $3,000 because of the 1099 -- businesses are required to file an 1099 when they pay a vendor $600 or more in a year.<br /><br />The good news is that once you start reporting your photography income, a wide range of your photography expenses are deductible. Camera equipment, computer equipment, subscriptions to photo magazines, the cell phone you use to make business calls, etc.<br /><br />Your accountant is the only person who can give you reliable advice on what is and isn't deductible. And now that you are bringing in business income, you really should be using an accountant rather than trying to do your own taxes. It can cost a few hundred dollars but you've already covered that on this one job alone.</p>

<p>I am in Canada and I'm sure the rules in the U.S. are different, but no doubt similar. <strong>Look on the IRS site for publications and find out how a home or hobby business is regulated</strong>.<br>

<br />I am a retired government translator but now I do contract work for the government as an independent contractor for about 400 hours a year.</p>

<p>The Canadian tax rules allow me to add my translation income to me retirement pension and other personal income. Most of my direct expenses are fully deductible. Shared expenses (home office space rental, electricity, municipal taxes, Internet net, telephone, etc.) are a percentage based on the square footage of my home office and the pro rata time of use of Internet etc.</p>

<p>I could not have a loss (business costs exceed income) for more than about three years in a row at the beginning, so you have to be careful not to over claim if your business is marginal.</p>

<p>Some tax software (TurboTax, I think) have editions that include your personal (regular employment) income with your independent contractor income. They are easy to use. Of course, if you choose to have your taxes done by an accountant, the cost (or % thereof) is deductible.</p>

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<p>thank you for the responses.</p>

<p>Owen my guess is that recurring sales with few expenses gives you a profit motive that makes your photography at least in part a business engaged in for a profit. That does mean that you may also deduct ordinary and necessary business expenses like for the travel required to produce the photographs. If you display your photos for sale on a web site consider some part of the cost of web hosting as a business expense. There may be more expenses to consider that weren't associated with that particular shoot that would be deductible against that shoot's income nevertheless.</p>

<p>The other issue is whether or not your net profit is or isn't self-employment income subject to self-employment tax. This article touches on that issue <a href="http://www.journalofaccountancy.com/Issues/2009/Jul/20091639.htm">http://www.journalofaccountancy.com/Issues/2009/Jul/20091639.htm</a> . From that article, considering whether a you are or are not in a trade or business for self-employment tax purposes: "Revenue Ruling 58-112 further characterizes a trade or business activity as one that is regular, frequent and continuous." My opinion, and certainly there is room for disagreement here and despite the fuzzy facts, your sales were for profit, but your photography sales business isn't regular, frequent, and continuous enough to be considered a trade or business whose income is subject to the self-employment tax.</p>

<p>The easiest thing to do is report the $3,000 as other income on Form 1040. If you itemize, take the travel expense and other expenses as itemized deductions. Not reporting it on Schedule C emphasizes that it isn't self-employment income if like me, you honestly believe it isn't self-employment income. If you choose Sch C instead, look for a check box like "Not subject to self-employment tax" and consider checking it.</p>

I prefer to file the taxes on incomes I receive from the photography as hobby too, you might well find some instructions here on how to do so with the form 1099-MISC online and for hard copies rules will be same

I'd suggest also looking up LLC (limited liability company).

Ancient thread, but still not a bad topic.

 

The advice to talk to an accountant is spot on.

 

With that said, photography has never been financially anything other than a money pit for me(albeit an enjoyable one). With that said, I've done contract work in some of my other fields of interest that has yielded some income/profit and my fair share of 1099 over the years.

 

When I know a 1099 is coming, I file a 1040-EST and send 20% of the payment to the IRS as soon as I get the payment(along with a 740-EST and 5% to the state). I just pay it right off the top of the payment, and treat that portion as money I never had. I usually end up overpaying for what I owe, but the only "consequence" from that is that it just pads my refund a bit more-you can argue to the end of the day about that, but I'd rather have a check(or rather direct deposit) come in February than cough up a few hundred bucks in April. Also, this is something that an accountant would have to answer, but if you receive income early in the year and DON'T do a 1040-EST you may be liable for penalties on it.

 

I treat a $3000 contract like it's really $2250 and that just makes my life easier all around.