Can I Write Off This Photo Trip?

<p>I started my photo business 5 years ago. I was doing freelance work with local newspapers and magazines, but due to cutbacks in the economy the newspapers sliced my fee per shoot by more then half. I was making more doing family beach portraits anyway. But then our area got hit with the BP oil spill last season and it really hurt our tourist based businesses. Since there was no work here, I decided to take a 2 week photo trip across the states to Yellowstone, Grand Teton and Moab hoping to get some pix worth selling, contests etc... I have not really put many of the photos up for viewing/sale yet, but I did enter a couple photos in our area's big annual contest and won first place in the flower/plants/trees category if that helps.<br>

So, I drove over 6,000 miles on that trip and had the 2 weeks of cheap motel rooms. Most of my meals were out of my cooler or fast food joints. I can see the IRS looking at this as a vacation but I was working at what I do for a living.... but not as a paid assignment for anyone. My 2010 income was only around $4,500.00 which including around $1,000.00 in compensation from BP. Like many others I have been waiting for an additional large check from BP for lost wages due to oil spill that should of been paid last year but the claims process is a complete fiasco. When I first took off on my trip I thought the oil spill would be all cleaned up in two weeks. Little did any of us know that the oil would still be on our beaches many months later.<br>

<strong>Short version- Was this photo trip a write off since I make a living doing photography? The 6,000 miles, rooms, meals would certainly help my IRS mileage rate deduction. </strong></p>

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<p>I would think if you could show income specifically from the fruits of the trip you could write off the expenses incurred in producing that income to the extent the tax code provides. I'm no tax expert though.</p>

<p>This is why I pay a CPA. Do you really want to rely on tax advice from the internet?</p>

<p>I have a rental house in Florida--I am in complete agreement with your characterization of the BP claims process. </p>

<p>You need a income tax accountant: if you try to deduct more $$$s than you earned, the IRS will likely audit you. If you are in business, the IRS likes four estimated income tax payments a year. So, if you spent $3,200 for the trip (one example) and try to deduct it all, you are telling the IRS you lived off of the $1,300 for the other 50 weeks in the year. Not a grand idea....</p>

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<p>Stephen- Off the top of my head I probably spent around $1,500.00 on my trip. My contest award was $50.00. Not too much fruit yet:)<br>

Allen- It is hard to shop for a reliable CPA. I found out that paying a lot did not always get me a CPA that specializes in my field and offers me advice, tips of what I can deduct etc.. The one I have now is reasonable but even I found a mistake in his work last year. Not sure, but I think he left my mileage deduction blank. I just remember that he had to correct it and it made a big difference.<br>

I called the IRS the year before and asked them about a similar but shorter trip to the Smokies. Their answer was kind of vague. It was something like...''If you consider this a part of your business.'' My accountant said it was deductible that year. I have not talked to him yet this year.<br>

The thing is when you go on one of these trips it could be hit or miss. You may get some great shots that you can sell or you may not get anything due to weather or just due to not getting any good images. I hope to get all my paperwork together in the next couple of days. We know how that goes...ughhh<br>

Anyway I was hoping to get some feedback from here. I looked at some other threads that suggested getting a good CPA, but I hoping to hear from someone that has had a similar photo trip like mine.<br>

Regarding BP. After they let Ken Feinberg/GCCF take over, so many businesses have been ruined because of the stall tactics and denials of legitimate claims. When GCCF took over August it was hurry up and wait. Then they denied my claim, saying that my area and business was not affected by oil. I told them I had documented the spill with over 300 photos to prove otherwise but they made me start the claim process over again. This time I sent them over 100 pages of documents. Did you hear the latest? Transocean rewarded its executives for the "best year in safety performance." Their rig caused the biggest oil spill in US history. You can't make this stuff up. http://www.msnbc.msn.com/id/42393722/ns/business/</p>

<p>Jerry, As you can see from my last comment I am between a rock and hard place. Hundreds if not thousands of us had to live off our life savings because of the BP disaster. So many coastal businesses had to shut down. I heard rumors that the IRS will be considering this but I need to double check on it. Of course the IRS wants their share of taxes from any ''lost wages'' check that we receive from BP and I have no problem with that. But it should be a crime for the stall tactics that we have had to endure because of the claims process.<br /> I don't even want to think about an audit. I have probably spent hundreds of hours doing paperwork for the BP claim. Then again if I get audited I got plenty of paperwork all ready for them.</p>

<p>It would be nice to get credit for the extra mileage etc... but of course I don't want to do anything that is in a gray area or illegal. I have been making my quarterly payments. I called the IRS about that about a month ago and they told me I paid more then enough because I was paying according to the income from the year before.</p>

<p>The economic impact of a wrong answer to this question exceeds the value of an annual subscription to photo.net. </p>

<p>On your wait for oil spill compensation: it doesn't take a Medici to see that waiting is a form of punishment. Some years ago, I, too, had to wait for significant compensation from a different corporation. After almost a year of delays and dickering and sad tricks, they paid up. My conclusion was that they delayed, quarter by quarter, until they could slowly add up routine payments, like mine, as little as they had to. The payments we receive are important to us, but to the corporations doing the paying, they are routine. I believed, but could never prove, that this milking of the payout process was part of their profit protection. By the time they paid, they had long since had enough opportunity to recruit five times as much profit, I thought. I suspect something similar will happen to you. Considering the massive number of people who need to be paid off, and the exceptionally low percentage of annual gross revenue devoted by oil companies to paying off routine claims, like yours, expect to wait several years, if not decades, for your number to come around. They have no incentive to increase the rate of payout solely because there are many claimants. Even though it is obvious that they are guilty of many, many crimes worthy of lifetime incarceration, still, there will be no incentive on their part to pay either swiftly or intensely or even completely.</p>

<p>This will affect all of your tax returns for the duration of that claim period. </p>

<p>For example, "when" does this claim, and its related payment occur? To most people, if we are paid today, in our hometown, then our payment took place today, in our hometown. Unfortunately, this is not how common concepts like "today" or "here" are defined by large corporations. Their definition suits their advantage. </p>

<p>Remember that payment I mentioned collecting after a year? To me, the payment occurred when the payment was received. The company who paid me could easily argue that the liability occurred at various times: when the contract was initially signed, when a specific event took place, when a claim on the contract was made, when funds were devoted to payment, or when those funds were received. Further, they could chop up the concept of "when" into financial quarters. [i found a pattern of calendar coincidence. Each quarter, I'd receive and "update" or "questions" or some other delay. Even if answered promptly, their next move would not be made until their next financial quarter. Collecting payments can be a seasonal business, much like farming. It would be swifter to watch the linen grow that cash gets printed upon.]</p>

<p>Since they can play with the definition of "when", this only complicates matters for you. Rest assured, if they can gain any measurable profit out of retroactively filing documents, filling out a sheet of paper, amending past tax claims (probably done continuously), or any other paperwork trick, they'll do it. They may even wait to exploit the depreciation of the dollar, inflation or deflation, if that helps ease their payment burden overall. Thus, any sum they owe you now may be likely to be worth only a percentage when its paid.</p>

<p>That kind of percentage change occurs all the time. Daily. There is no limit as to how much foot dragging or delay can be used to create what percentage of loss for you. So long as they stick to the letter of the contract, they're good. This means that if you have a contract with them, look at it carefully. The answer to your tax question is probably buried in the language used to describe the criteria for paying you, if they pay at all. </p>

<p>"When" and "how" they pay you will determine later if this is earned income or unearned income, and of what year.</p>

<p>Delay can be used as its own form of liability shielding. This means that in the end, you may receive some payment, but likely as not, no profit. Know what time it is.</p>

<p>You will need tax advice to cope with your BP oil spill claim, alone. </p>

<p>IRS tax filing instructions often state the concept of "earnings" as part of self-employment. Did that trip result in earnings which brought you up to the limit of being required to report income from self employment? 1040ez instructions imply you need to make at least $400 to be required to file as self-employed. So, if you made more than $400, and would be compelled to file to report that $400 in self-employed earnings, it would be fair to report the liability of driving it took to earn that same money. If this question had been put to me, I'd look for: am I required to file, am I meeting limits that compel me to report, am I claiming the rights that go with meeting the responsibility of reporting? </p>

<p>Did you make $400 from that same business that you want to cover with mileage? </p>

<p>Exploring answers to questions like these are why you need to get someone to help you who has access to the full scope of your financial information. There could be many factors not listed above which might be pertinent. Get pro help. Regardless of where or from whom you get your help, you will ultimately be responsible for your own return. Good luck. Sorry to hear about BP. </p>

<p>Tax breaks, like mileage, by the way, if written correctly, are granted to the individual because they preserve an important concept of integrity for the government. The government will assiduously pursue its stated goal of collecting those taxes, under the terms it explicitly outlines. Those explicit terms include describing the tax breaks. One of the main functions of those tax breaks include protecting the government from lying to itself about value. It is not to the government's advantage to collect taxes too much or too intensely or too frequently than its own terms state it should. Therefore, by claiming tax breaks, when predicated on the honest and full fulfillment of your other tax responsibilities, you are actually fulfilling an obligation to the government. It is not in only paying the taxes, but in paying taxes under the most lawful terms possible, including claiming tax breaks, that you may be fulfilling your responsibilities as a citizen. </p>

<p>There is no need to feel guilty when claiming a tax break under honest circumstances. They exist as much for the protection of the government's own assessment integrity as they do for the purse of the individual taxpayer. So, if you are compelled to report the income as self-employment, because you made more than $400, there's no reason why you should not report all the driving you did to earn that $400. If that driving means you get mileage credit for 6,000 miles, then that's part of the way tax breaks for mileage work. Notice how tax monies go to building the roads, refining fuels, and so on. The mileage credit is not some magic coupon or hand-out. It may represent a method of protection for the government against double-collecting during the scope of the year. They need to maintain their integrity on the collection of taxes for several reasons. They are compelled to do so by law. Failure to fulfill that obligation accurately may subject them to scrutiny. Inaccurate tax collection creates errors even worse than the original pain of collection.</p>

<p>Keep this concept of self-preservation in mind as you hear political discussions about tax breaks. I find its absence from public discussion to be illuminating. It makes claims of more tax breaks to show support for an increasing complexity in government when the public image of that claim is actually of simplification. It makes flat tax proposals look like a disregard for not only the individual but for the integrity of government itself. </p>

<p>The tax breaks are not there for you, me or anyone else who is a taxpayer. Tax breaks are hypothetical limits. They describe where tax collection stops. They are not a gift. Tax collection stops where it does, when it does, and how it does, because the law for the earlier or greater collection took precedence.</p>

<p>An important concept in government is that those compelled to obey must follow the last order given. Taxing someone twice would create a situation compelling the return of the first tax collection. Since the first was probably the greater or more effective, errors which cause taxing twice, corrected or not, weaken, not strengthen, the support for government. It's in the taxpayer's best interest to keep his bill low, but it is in the government's interest to keep their contracts accurate. If you are being granted a tax break now, it is likely that somehow you have already paid a cost that was greater in the past for the same good or service related to an annual tax break.</p>

<p>You paid a dollar yesterday to get a dime back next year. Take the break. </p>

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<p> Taxing someone twice would create a situation compelling the return of the first tax collection.</p>

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<p>I wish someone would tell our government that (UK). We pay VAT of 20% on most purchased items. Obviously paid for with our wages which have already been subject to income tax!</p>

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<p>I called the IRS the year before and asked them... I called the IRS about that about a month ago and they told me...</p>

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<p>Unfortunately, calling the IRS is pointless. Asking the same question multiple times will result in differing answers and none of them are binding on the agency. Only written responses can be relied on.</p>

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<p>I looked at some other threads that suggested getting a good CPA, but I hoping to hear from someone that has had a similar photo trip like mine.</p>

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<p>That feedback, too, is as pointless as calling the IRS. Probably less so. The answer the people gave in the other threads may not what you wanted to hear, but is the correct answer nevertheless.</p>

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<p>I don't even want to think about an audit.</p>

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<p>Nix the deduction and no audit can ever arise from it.</p>

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<p>It is hard to shop for a reliable CPA.</p>

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<p>Its been a frustrating process overall, for whatever reasons, but photographers use reliable tax professionals all the time. Asking for recommendations may help. This may be a good forum to inquire.</p>

 

<p>Are there no information circulars (Internet) or guide books from the government or from the public sector about work deductions that could provide a reasonably clear answer in your case? Perhaps there are a number of examples that can be consulted. It seems that expenses should be reasonable ones. Maybe the claim of just a part of the expenses incurred might accord with that. A reasonable expense might be one that recognises a possible mix of vacation and work (After the BP disaster and the slowdown of your business you might well want to have a break). You are the one that knows whether the images are of the type that you can sell. If the expense deduction you want to make for a business trip is only a small part of your taxable revenues then it can probably be more easily defended.</p>

<p>If you are not working full time, as it seems, perhaps you have time to try to sell your work via art fairs or opening a small viewing room in your office or elsewhere. If this is documented, it may provide more rationale for the business trip. Just taking pictures without any attempt to sell them may not wash. Auditing often occurs from the government in most countries when they notice something out of step with what you had been previously claiming, or something that does not seem consistent. I am in Canada, and our tax rules (which I admit are not always easy to understand) may or may not be similar to yours.</p>

<p>Anyway, coments on Photo.Net like these may be helpful, but I wouldn't necessarily run with them. Talk with other working photographers or business people you trust or check the written documents (gvernment guides). The consequence of an audit can be its time consuming nature, even if you can defend your actionb by proper paperwork and defense. There may be other business expenses you can claim that would be more easily recognised (like the costs of producing prints for sale and the evidence of that).</p>

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<p>I'm not in the U.S. but from Belgium but I write all the trips that I've made so far off. If I would fly to NYC to go see a photography exhibition just to get some inspiration from it for future work : that's a legit write off.</p>

<p>There's no definative answer. It's a judgement call on the part of the IRS if you get audited. There are always grey areas. Circumstances alter cases.</p>

<p>Consult a tax professional. They're likely to have an opinion on what is and isn't likely to be regarded as a legitimate business expense by the IRS. But remember that it's only an opinion in a case like this.</p>

<p>

You can certainly deduct any legitimate business expenses. The question is whether the IRS will regard this as a legitimate business expense. If you can prove that the only reason you took the trip was to make money then it's deducatble. However that's much, much easier to prove if you actually did make a profit from the trip or can otherwise prove you have actually attempted to make back the money by having your images from your trip for sale in galleries or if they have been accepted by a major reputable stock agency, or if they have been publised in a magazine article - or even if you've submitted magazine articles using those images. If you just took the pics in the hope of maybe selling them someday, that may not make the IRS happy. It would also be easier to prove if you had a track record of selling images of the type you took on the trip. If it looks like a vacation but you also took some photographs, you'll have a lot more trouble convincing them it's a legitimate deduction (and in fact it wouldn't be).

<p>

 

Upside is they may allow it. Downside is that if you are audited this year or in the next few years and they decide it wasn't a valid deduction, you'll have to pay it back with interest and penalties. The upside of that is that since you weren't trying to deliberately defraud the IRS you probably won't go to jail (unless you don't pay them what you owe them!).

<p>Even if it is deductible, it's usually limited to off-setting the profits, or at least it was a few years ago before I retired. You can show a loss, to be sure. However, year after year of losses, and the IRS tends to conclude that it is a hobby rather than a business.<br>

I am not a lawyer and my last tax expert is I think now serving time...</p>

<p>"Was this photo trip a write off since I make a living doing photography?"<br>

=======================================<br>

Definately, I would try Turbo Tax they do a good job of squeezing the most out of your expenses.</p>

<p>Thanks for the input gang.</p>

<p><a href="../photodb/user?user_id=96425">Jerry Litynski</a> I think I commented to you on one of your past photos that you and I might live in the same area. You have lots of photos from here (Pensacola) but it looks like you might live in Crestview? Anyway, I tried to call my accountant and his phone was disconnected. I googled the obits and I am sad to say that he passed away in November.</p>

<p><strong>Can you recommend a good/reasonable CPA in Pensacola?</strong></p>

<p>Anytime you think an expense is related to the business you are in, then it is deductible. The IRS can challenge any expense, but making money off an expense is not a criteria. You might do a photo trip to build up your portfolio or to make images for future sales--art or stock. It is deductible. If it was just a family vacation disguised as a photo trip--then no.</p>

<p>There are many companies that lose money year after year and their expenses are fully deductible--tax loss carry forward for a corporation. I don't know that you need a tax accountant to decide that a legitimate trip is deductible or not. Even if you have a loss, it can offset income from other sources, it is not limited to your income from the business. Tax law does suggest that you could be construed as a hobby if you don't show a profit for a certain number of years however I know I lost money for many years before I made any and had no repercussions. This is the area where you need to check with a good accountant, but you don't have any worry if this year is just thin as to profits or it is the first year you lost money.</p>

<p>John H - I'm not a tax accountant! Repeat, I am not a tax accountant! I am an independent computer consultant. I expense all my business-related mileage, business-related housing (motels), etc. If you took any family members on your trip you will probably have to be much more careful in what you deduct and how you deduct it. My camera and lenses have been used to take photos that are now on client web sites. I don't charge a special/different fee for my photography, it's just part of my regular hourly consulting fees. I've taken many photos but few have been used. I deduct all my camera equipment along with my computer equipment because I use the equipment in the day-to-day conducting of my business. Any books, software, equipment, travel, training that furthers my business I feel is deductible. I feel I'm making a "best effort" to be legal and if called into question I believe I can justify my expenses. Like others have said before, a lot depends on the IRS auditor. Again, I feel I have enough people skills to deal with an IRS auditor.</p>

<p>I'm probably going to get audited next week now.</p>

<p>Best thing to do: keep all receipts, well organized, don't include anyone else's costs in your expenses, show you would not have made this trip if not for the spill, and cross your fingers.</p>

<p>Good luck - Mark</p>

 

<p>Hi John Hill, I'm a CPA licensed in Calif (48164) with a small buisness tax practice for 30 years or so. You asked: "Was this photo trip a write off since I make a living doing photography?" Short answer: Yes. Longer answer:</p>

<p>You have described yourself as in the trade or business of photography. Business travel expenses are an ordinary and necessary busniess expense of photographers. Here you are specifically asking about out of town travel for a purpose directly related to your business as a photographer. The business expenses you describe are related to driving, lodging and meals. Meal expenses are 50 percent deductible, the others are 100 percent deductible. It sounds like when you do use a car for business you are using the standard mileage rate, so these additional 6000 miles would be in addition to other business mileage. Keep your gasoline receipts or credit card statements, whatever, that shows you filling up over those two weeks and do so because they are a written record that substantiates you were in fact out of town racking up those extra business miles. Keep the documents that showed you entered some of the photos in contests, clearly you had a profit motive as opposed to being on a personal vacation. </p>

<p>At times, people in business have a net loss instead of a net profit. At times, people who are not in business put together their tax return to show a hobby as if it were a business, where with a hobby a profit motive is absent. There is a rule that a profit motive is presumed for what would otherwise look like a hobby, presumed if in any three of five consecutive tax years a profit is shown unless the IRS proves otherwise. This in no way means that someone actually in business needs to show a profit in any three of five consecutive tax years. You aren't a pretend business trying to gin up a loss. That you have a real business would clearly show if you do get audited.</p>

<p>I am not going to offer tax advice as such, but it is also worth preparing a response to potential IRS questions, about these being unusual circumstances: you normally work in the coastal area that was decimated by the oil spill so you travelled to alternative locations to build your portfolio. If your tax return permits such an explanation maybe it would help to add this on the form?</p>

<p>I apologize for not getting back sooner and thanking everyone for the input. It got a little hectic and then I spent the last couple of days talking to the IRS (lots of hold time..they are swamped) a couple of CPA's and even the accountant at the BP office and they all agreed that the trip would be a write off. I think that having the oil spill will help my case if I were to be audited. I have a ton of documentation from my dealing with BP.<br>

<a href="../photodb/user?user_id=4890042">Charles Wood</a> I always keep all my business related receipts,plus I am keeping all the fuel, lodging and meal receipts from the trip in a separate folder just in case they are needed in the future. There are no receipts to Disneyland or places like that and I was traveling by myself so I won't have to worry about having family or friends on the trip being included in my expenses. I did go to some beautiful National/State Parks and many interesting side roads off the beaten track. Hoping to finish getting all my paperwork together by daybreak:)<br>

I guess CPA price per hour varies just like photographers? Anyone want to share what they pay their tax preparer and is it by the hour?<br>

What about you Charles? I understand if you prefer to not share that online.<br>

I keep good records and try to make it easy for whoever prepares my taxes. I figure less work for them means billing time? Time to get back to my spread sheets and receipts.</p>

 

<p>I'm glad you found some local help and hope you develop a great business relationship iwth that person over the years. CPA fee rates even in the greater Los Angeles area are varied, and between state to state and across regions: it varies there too. I used to have a CA Society of CPAs survey data, but haven't participated in that lately (cost $300 per year to participate!). My <em>guess </em>is $150 around here about average. That is great you kept all the receipts!</p>

<p>I agree with Charles. When I was doing computer consulting and web work (in the "old" days when you had to know HTML and Perl) I spent a lot of money on machines, high end 3D software, etc...I had a couple of years where I spent more than I took in. The rules at that time allowed 3 years' of losses before they considered it a hobby. Even as a hobby, a deduction was still allowed however it was much lesser.<br /> I have a full time job where taxes are taken out each pay check so this was a side business. If this is your main source of income and since you have previous years in which the IRS knows that you make your living as a photographer. Additionally with the loss of income from the oil spill spending $6000 trying to find other places to generate photography income isn't such an extraordinary amount. Think of how many rounds of golf, how many expensive dinners at top end restaurants, how many drinks at some upscale Gentleman's Clubs have been declared and accepted as business expenses? There are those who take it to an extreme and the IRS might view it suspiciously but they'd only question it or worst case disallow it. You can then address it with them. I had a couple of deductions that I thought were legitimate that the IRS said didn't meet the criteria. They didn't audit me. It just lessened my loss.<br /> Oddly one time I thought I owed them about $70 and included a check. They reviewed it and sent me a letter saying I made a mistake and then said I had a refund due me of over $700 and sent a check. However, as was pointed out, what one IRS person says doesn't match what another will say. The next year the IRS's amended return was reviewed by someone else and I was told I owed them about $90. They corrected their own amended return!<br>

EDIT: I thought I was replying to the latest post. I didn't realize you are working through it. Good luck! Not just with the taxes but the mess with BP.</p>

<p>Aside from advice from an accountant, good common sense always applies. If you have substantial income from sales of what you've photographed, then it makes sense. Otherwise you'll probably send up a flag. </p>