Taxes & Business Registration for Hobbyist Photographers

<p>Several years ago, I had several people ask if they could buy my photo prints.  Trying to be "legal" about everything, I registered my "business" in the State of Washington, so that I could pay sales taxes on the prints I sold.  Honestly, I was only trying to be a "good citizen" and pay taxes on anything I sold, and I wanted my business name registered so that when I retire (~12 years from now).  I have not taken a deduction on income taxes for any of my equipment or workspace, I do not have an accountant for this.  This has unfortunately resulted in a lot of complication, just to sell a few prints per year (I bet a huge number of photographers make such occasional sales "under the table").<br>

Believe me, this is a *VERY* minor source of revenue, and in the current year, I didn't promote my "business" and only sold one small print.  In fact, I do not derive ANY income from this activity, and I donate prints of far greater value than any revenues derived from any sales (I often pay for framing of prints I donate...and they often sell for a pretty good price).<br>

The State of Washington, however, wants to collect B&O Taxes (like property tax) on all of my photo gear, the room where my computer and printer is located, and on the accessory equipment.  All told, this would amount to *WAY* more than I ever make in a year.<br>

How do other hobbyist photographers handle this?<br>

Is there a way for a hobbyist who gets asked for a few prints to make sales of say $1000 - $2000 per year without subjecting themselves to the liability of intense record-keeping, Business and Occupation Taxes, etc.?<br>

Honestly, when I registered as a business, I wasn't trying to claim any deductions or find ways to avoid any taxes...I was trying to find a way to collect and pay sales tax on the occasional prints I sold since I thought that was the correct/right/legal thing to do. <br>

Any thoughts/advice appreciated.</p>

<p>Cash is king.<br>

I suggest a tax attorney. Maybe he can detirmine the comuter belongs to your wife and she does the family accounting on the computer in that room. <br>

By all rights now you have to go back and file ammended income tax returns for 12 years, schedule depreciation on equipment, allocate part of your dwelling to business if no other work gets done there, and so on. This can get very messy. It will get even worse when you sell the house and have to pay profit on one room. You have no idea how messy. There might even be federal fraud charges. The are pleanty of real jerks for IRS agents. <br>

The feds will also not allow you to run a business at a loss for more than x years, I think 6. After that it is a hobby. This keeps people like me from depreciating their hobby equipment. I think that is reasonable.<br>

Once it is a hobby, I don`t see how Washington can levy a tax on business that does not exist for federal tax purposes.</p>

<p>Maybe it is cheaper to just pay the tax. Sell your equipment and dissolve the business. Be sure to pay TAX ONLY ON THE DEPRECIATED VALUE OF THE EQUIPMENT year by year. Add in the interest for what you missed. </p>

<p>Remember cash is king. </p>

<p>Yet another example of why we should burn our existing tax code, fire the people involved in its creation (i.e. all of Congress), and start over.</p>

<p>Why would you set up a business without talking to a tax accountant - sorry but this should be way too obvious! You have gotten yourself into a very messy and long drawn out situation. I was actually wondering about the same issues at one point, but I called my accountant and he made it very clear that I would create way more issues than I was trying to solve by declaring my hobby as a business.<br>

Do yourself a favour and call a tax accountant and see if there is an easy way out of your mess.</p>

<p>The way I see it, you are still a hobbyist getting paid for some photos. You are definitely not a business. You should only have to pay federal income taxes IF and only IF you make a profit. If you don't make a profit you don't pay federal income taxes but also cannot deduct your losses from your income. The IRS website has some very good information on this issue; search for "income from a hobby".</p>

<p>This sounds incredibly complex for selling a few photos. I was trying to be "legitimate" and not sell photos for cash under the table. I was trying to do my part as a citizen, and now I have a mess to deal with. I did pay sales tax. I was too lazy to actually calculate what my full production costs were (if I had, my equipment far exceeds in value the value of what I sold). In other words, I have *NEVER* made a profit from my photography (and that was never my real intention). This all seems incredible!<br>

Photography was a hobby...and only a hobby, until a *few* people asked if they could by copies of my prints. I didn't think I could sell my prints "under the table" ... and if caught doing so, could be subject to back taxes etc. Instead, by trying to do my part (even if only a very small part), I now will have to spend 1000s with an accountant to get me out of this mess. Over time, I have donated prints that sold for a total value far in excess of prints I've sold directly (in other words, my donations to charity have far exceeded any prints I've sold).<br>

I have never deducted a dime for any of my photo gear or for any of my property (my home). I understood that I could not in fact deduct for my camera gear if it was used over 50% for "personal use". In fact, I paid income tax on 100% of the price I charged for the few prints I sold. I know that to everyone out there, I must be incredibly dumb. <br>

At this point, it clearly will be prudent to close the business and shut down the website (heck, sell the camera gear!). Sad. :-(</p>

<p>SO, another question:<br>

Do the amateur photographer "hobbyists" that sell the occasional photo just do it "under the table"? Is that considered the right way to sell a few photos?<br>

...or, if you take photos that others want to purchase, but you don't have a business license, are you by law then required to charge no more than for reimbursement for the supplies consumed in the process (or does that violate the law as well?). Do you just have to give them away?</p>

<p>I suggest you follow the advice my wife gave me when I told her I was taking my photography to a "professional" level: "This sounds like a wonderful way to ruin a perfectly good hobby!"</p>

<p>Lose all the "business" tags, Dick... the business license(s), the tax reports, etc. Put a public notice in the local paper that you are no longer doing business as "Whatever Your Business Name Was." Keep a copy of the notice for your records and get back to enjoying taking photos instead of working to sell them.</p>

 

<p>And talk to a tax accountant - that might be the best $100 you have spent so far:-)</p>

<p>Hi Richard,</p>

<p>Every city, county, state and country has different laws and ordinances with respect to businesses. The worst place to try to get answers is on the Internet, unless it be at the website of *your* local city, county, state and country. People here on Photo.net hail from all over the world, and all have different rules and regs to deal with than you.</p>

<p>For that reason, please follow the best advice you have gotten so far and set up a consultation with a local accountant who specializes in the needs of small businesses.</p>

<p>In all likelihood, there are exceptions or exclusions in the local codes that might apply to you. For example, where I live it costs $150 a year for a business license. But, small businesses doing less than $20,000 gross per year can file for an exclusion that costs $35 a year. This is not to say the same thing applies to you, though. It's just an example. However I bet most local and regional rules and regs take into consideration all sizes of businesses. Even small, part time ones.</p>

<p>But you'll never know it this it true where you live and work, until you meet with that accountant who is knowledgeable about your local requirements.</p>