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Author Topic: Tax questions... anyone else finishing up this weekend?  (Read 10758 times)

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« on: April 15, 2011, 18:32 »
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Hi gang,

I have to write some big checks to the IRS and my state this year, so I've held off until I really had to do it.

Now that I'm trying to wrap it all up, I realize that I'm missing some info...

I moved late in 2010, and I might not have changed my address at all the microstock sites to get them to send the 1099s to my new address.  I know what I made in 2010, so I am fine in filling in the amounts, but I think I need an EIN (Employer Identification Number) for each of the agencies.  I did get my 1099s for some of them, but I'm missing a bunch...

Anyone know the EINs for:

iStock
CanStockPhoto
123RF
HAAP/StockXpert/Thinkstock

Regarding iStock... I read somewhere that they don't send 1099s.  Is that correct? 


« Reply #1 on: April 15, 2011, 18:42 »
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I just added up the payments from the agencies that didn't/don't send 1099s and reported it on the appropriate form.  No place to identify who paid what, so I didn't.  The IRS didn't complain; I got my refund in good time.

And no, iStock doesn't send a 1099.  I assume it's because they're a Canadian company.

« Reply #2 on: April 15, 2011, 18:46 »
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I would try the "add them up" approach, but if they actually did send 1099s and I just didn't get them because of my move, that could raise a flag at the IRS and get me audited.  I want to do the best I can to break out all the ones that paid me enough to trigger a 1099.  I'm scouring the Intertubes, but can't find the EINs anywhere.

lisafx

« Reply #3 on: April 15, 2011, 18:52 »
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The sites you mentioned didn't send 1099s.  I only got 1099s from SS, BigStock, Fotolia, Dreamstime, and Veer, despite being on the rest.   

« Reply #4 on: April 15, 2011, 19:10 »
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Cool. Those are the exact ones I got.  So do you simply add the rest up and enter it as Miscellaneous or something?

lisafx

« Reply #5 on: April 15, 2011, 19:14 »
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Sorry, wish I remembered.  The past two years I was incorporated, so it went under corporate income.  Can't remember how the accountant handled it for 2008 taxes. 

« Reply #6 on: April 15, 2011, 20:39 »
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Cool. Those are the exact ones I got.  So do you simply add the rest up and enter it as Miscellaneous or something?

TurboTax put it on Schedule C, Part I (Income).  The first line (unnumbered) reads "Enter other gross receipts or sales (not reported on 1099)".

PaulieWalnuts

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« Reply #7 on: April 15, 2011, 20:59 »
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Anybody take the Home Office Deduction?

« Reply #8 on: April 15, 2011, 22:59 »
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Anybody take the Home Office Deduction?

I hear that's a flag that can trigger an audit... if you try to deduct too much, you could be calling unwanted attention to yourself.  You'd have to be realistic about how much of the time spent in the office is spent on your business, and be conservative about utilities -- electric, internet, etc.  So you'd probably have to scale it down to a pretty small number, and when you get down that low, you have to ask if it's worth it... how badly do you want to risk an audit?  My dad used to do taxes for H&R Block, and one of my best friends is a CPA, and they both talked me out of the home office deduction.

« Reply #9 on: April 15, 2011, 23:02 »
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I looked hard at the home office deduction again... If I were full time, I would have done it. But I can't quite make it look completely airtight (computer and room gets a bit of general family use, even though it's 80% business). I skipped it.

SNP

  • Canadian Photographer
« Reply #10 on: April 15, 2011, 23:14 »
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I'm still organizing my W-7 so Getty will stop withholding 30% of my income. can't believe the hoops you have to jump through to deal with the IRS. it isn't any better dealing with Revenue Canada either.

« Reply #11 on: April 15, 2011, 23:24 »
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I'm screwed until May.  I only have royalties and can't afford to file it online until May when I get paid.  So if I knew which * forms I needed (since the IRS was of no help or didn't exactly know what I was talking about) I'd be all done and out in the mail.

Why do they have to make this *bleep* so * hard?

« Reply #12 on: April 16, 2011, 10:03 »
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I'm screwed until May.  I only have royalties and can't afford to file it online until May when I get paid.  So if I knew which  forms I needed (since the IRS was of no help or didn't exactly know what I was talking about) I'd be all done and out in the mail.

Why do they have to make this *bleep* so  hard?

Sounds like someone needs a CPA badly. At least to help straighten out this current mess. I've dealt with the IRS several times from the wrong side of the argument. I've learned: You ALWAYS FILE on time. You ALWAYS PAY on time -- despite when you get paid. You MUST plan tax stuff ahead. You probably SHOULD be paying estimated taxes computed by the CPA.

One more thing. You NEVER trust what the IRS tells you over the phone.

« Reply #13 on: April 16, 2011, 11:55 »
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Sounds like someone needs a CPA badly. At least to help straighten out this current mess. I've dealt with the IRS several times from the wrong side of the argument. I've learned: You ALWAYS FILE on time. You ALWAYS PAY on time -- despite when you get paid. You MUST plan tax stuff ahead. You probably SHOULD be paying estimated taxes computed by the CPA.

One more thing. You NEVER trust what the IRS tells you over the phone.

Yeah realized that once I got the forms and started to fill them out and got extremely confused.  I'm just going to bite the bullet and pay penalties next month then next year get someone to do this for me so I can learn which ones I need to file then do it all on my own.  Which is what I normally do but with dealing with just royalties only and no other income it's been a struggle just to figure out what I'm supposed to be filing.

This is the first year that I've not been on top of my tax stuff.  I don't ever want to go through this again.

« Reply #14 on: April 16, 2011, 12:41 »
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"Which is what I normally do but with dealing with just royalties only and no other income it's been a struggle just to figure out what I'm supposed to be filing."

?

Royalties are just business income.  Nothing special.

« Reply #15 on: April 16, 2011, 13:04 »
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2010? That was last year. It's all about 2011 1st quarter now. Taxes are a year round process. Yay!!  ;D

« Reply #16 on: April 16, 2011, 13:26 »
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Anybody take the Home Office Deduction?

No. Given that I use it (and the studio space in a spare bedroom) for multiple uses, I think it'd be asking for trouble. Given the relative size of my income in the family mix, it isn't worth the unpleasantness of an audit.


« Reply #17 on: April 16, 2011, 13:37 »
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The home deduction is a red flag of enormous proportions. Think of the size of the U.S. flag on an aircraft carrier. Take it if you absolutely have an insatiable desire for an IRS audit.

I believe that there's also a downside to getting that deduction properly. I seem to remember that that deduction needs to be "recaptured" when you sell the property. It may be that that portion of the residence is "outside" the normal liberal home sale exclusion. Check with that aspect of the deduction with a CPA who can explain the latest wrinkles in a very convoluted tax code.

Short advice: IRS agents also need work. So forget about the home office deduction.

« Reply #18 on: April 16, 2011, 13:56 »
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My CPA says the audit fear is old school and a lot of people these days work from home and take the deduction, so it isn't unusual at all anymore.

« Reply #19 on: April 16, 2011, 14:11 »
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Worrying about IRS is so "old school"

Signed:  Wesley Snipes, Cell Block D, Florida Penitentiary

Seriously, I have done the home tax deduct so many times, I forget the number, never a problem.  Be reasonable, don't say your home office is more than 15% of your home and you should be fine.

PaulieWalnuts

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« Reply #20 on: April 16, 2011, 14:42 »
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My CPA says the audit fear is old school and a lot of people these days work from home and take the deduction, so it isn't unusual at all anymore.


That's what I've been reading

« Reply #21 on: April 16, 2011, 16:56 »
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Google these key words: home office irs red flag

If you still want to face a significant greater risk of audit (whether or not justified) be my guest.

« Reply #22 on: April 16, 2011, 18:23 »
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I've taken it for the last 3-4 years.  No issue.

« Reply #23 on: April 16, 2011, 21:06 »
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I'd take the deduction if I had a room dedicated to my illustration work, but my 'office' is a corner of the dining room.

jbarber873

« Reply #24 on: April 16, 2011, 21:19 »
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   Taking the deduction for your home is still a flag. The idea with the IRS is to stay under the radar, take only reasonable and justifiable deductions, and have lots of paperwork to back it up. There's a reason they put a little checkbox asking whether you took this deduction. The test is that the space is used 100% of the time for business, and cannot possibly be reconfigured easily to another , personal use.  And they WILL come and look, and once that auditor comes to your house, he's not going back with a "no change". He's got to pay his way..In an audit situation, the auditor will usually try to cut a deal on stuff that would take too long to deal with on a piece by piece basis ( i.e petty cash receipts), but the home deduction is all or none, and they will give you none, and it's up to you to pay a lawyer to defend it. And if you think that you're safe because you've gotten away with it for 3 or 4 years, you're wrong. Most full audits take a few years to wind through the system, and once they find it in one year, they will go back to the others. I've been there and fought these battles, and they are not worth the trouble and money. The best advice I could give is to incorporate. As a sole prop, I'm a big target. As a corporation, I'm lost in the crowd- just where I want to be.

« Reply #25 on: April 16, 2011, 22:55 »
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  Taking the deduction for your home is still a flag. The idea with the IRS is to stay under the radar, take only reasonable and justifiable deductions, and have lots of paperwork to back it up. There's a reason they put a little checkbox asking whether you took this deduction. The test is that the space is used 100% of the time for business, and cannot possibly be reconfigured easily to another , personal use.  And they WILL come and look, and once that auditor comes to your house, he's not going back with a "no change". He's got to pay his way..In an audit situation, the auditor will usually try to cut a deal on stuff that would take too long to deal with on a piece by piece basis ( i.e petty cash receipts), but the home deduction is all or none, and they will give you none, and it's up to you to pay a lawyer to defend it. And if you think that you're safe because you've gotten away with it for 3 or 4 years, you're wrong. Most full audits take a few years to wind through the system, and once they find it in one year, they will go back to the others. I've been there and fought these battles, and they are not worth the trouble and money. The best advice I could give is to incorporate. As a sole prop, I'm a big target. As a corporation, I'm lost in the crowd- just where I want to be.

I agree with most items here except with the incorporate advice relative to audits. I've been audited as both sole proprietor and corporation. Same ramifications with both types. As stated above they will find something to pay for their visit and to justify their selection of your books to audit. I suspect from my observations during audits that the agents for the corporate returns are even more aggressive. You may or may not have less of an audit chance as a corporation.
In my experience the few dollars saved with questionable deductions--meaning any red flag or even pink flag deduction--even after eventually being held as justified will never equal the direct costs of "hosting" agents in your home or office. Prior years records will come into play as well as countless hours spent accumulating records they order you to produce. Each audit in my case cost me thousands of dollars just to prepare for. Don't kid yourself that you are just small potatoes with minimal exposure. Once that audit is instigated if you have any brains at all you will hire professional help to get you through the process with minimal damage.

I challenge anyone to justify the "savings" of any red flag deduction with the IRS with the possible costs (financial and mental) of defending it.

jbarber873

« Reply #26 on: April 17, 2011, 10:14 »
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^^^^  Totally agree with you, louoates. I should not have implied that there is no risk of audit as a corporation. My accountant points out, however, that a sole prop in my income group is a high risk target, but a corporation in my income group is very small. At the time that I incorporated, the deductions for health care, and the limited liability were the deciding factors. The under the radar aspect was just an added attraction. The most important point to keep in mind is that any questionable deduction that brings the IRS to you will not end with a smile. Even if you win after protracted litigation, you lose fees paid to defend you, that are not reimbursed even if you win. One more point that I would bring up for the younger photographers in the US is that you should put the maximum amount you can in an IRA or pension plan every year, even if it hurts. It's one tax shelter that the IRS can't question.


lisafx

« Reply #27 on: April 17, 2011, 17:30 »
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Really good advice Jim and Lou.  Thank you both for posting your experiences.

I am really worried that I may be being audited because of the agencies sending 1099s on my social # and my claiming the income on the return for my S corp.  So far they are taking 45 days to look closer at my return.

Now that I dissolved my corp (hassles NOT worth it IMO) I will be back to sole proprietor status.

I have been taking the home office deduction, but I doubt what I've been saving is worth the red flag.  Probably won't be taking that anymore.

PaulieWalnuts

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« Reply #28 on: April 17, 2011, 19:21 »
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Any opinions on Sole Proprietor vs LLC vs S-Corp, etc?

« Reply #29 on: April 17, 2011, 19:36 »
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Any opinions on Sole Proprietor vs LLC vs S-Corp, etc?

Filing as an S-corp to reduce self-employment taxes this year saved me a bundle.

jbarber873

« Reply #30 on: April 17, 2011, 19:47 »
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Really good advice Jim and Lou.  Thank you both for posting your experiences.

I am really worried that I may be being audited because of the agencies sending 1099s on my social # and my claiming the income on the return for my S corp.  So far they are taking 45 days to look closer at my return.

Now that I dissolved my corp (hassles NOT worth it IMO) I will be back to sole proprietor status.

I have been taking the home office deduction, but I doubt what I've been saving is worth the red flag.  Probably won't be taking that anymore.

As long as you can show that you did not hide income, you won't have a problem. They will first send you a letter and give you a chance to show where the income was reported. You just have to show the S corp return to prove the income was reported. That can all be done by remote control.

Paulie Walnuts- As sjlocke says, in a corp status, you are just an employee, so your 1/2 of your Fica tax is paid by the corporation, which then takes it as a deduction. As a sole prop, you have to pay the whole thing. The health care used to be a big savings , but now thats the same for a sole prop. The other thing is the limited liability status, which helps protect your personal assets in the case of a lawsuit. Worth nothing until you need it. The downside is paying an accountant to do the corp return, and usually there is a minimum corp tax at the state level. On the other hand, if you have a bad year, you can carry a loss forward. Can't do that as a sole prop.

lisafx

« Reply #31 on: April 18, 2011, 09:15 »
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As long as you can show that you did not hide income, you won't have a problem. They will first send you a letter and give you a chance to show where the income was reported. You just have to show the S corp return to prove the income was reported. That can all be done by remote control.


Thanks Jim.  That is a relief.  I definitely accounted for all income - 1099 and otherwise - on my corporate return.  They haven't yet asked me anything or given me a chance to explain.  Just the ominous "We're going to take 45 days to look over your return" letter.   :(

jbarber873

« Reply #32 on: April 18, 2011, 12:42 »
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As long as you can show that you did not hide income, you won't have a problem. They will first send you a letter and give you a chance to show where the income was reported. You just have to show the S corp return to prove the income was reported. That can all be done by remote control.


Thanks Jim.  That is a relief.  I definitely accounted for all income - 1099 and otherwise - on my corporate return.  They haven't yet asked me anything or given me a chance to explain.  Just the ominous "We're going to take 45 days to look over your return" letter.   :(

They move at a glacial pace. I used to get letters that would say" we will read your letter within 90 days..." ;D

« Reply #33 on: April 18, 2011, 19:17 »
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Stop the madness!

www.fairtax.org
« Last Edit: April 18, 2011, 19:19 by dehooks »

« Reply #34 on: April 18, 2011, 19:25 »
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Stop the madness!

www.fairtax.org

Really. Think of all the thousands and thousands of hours we have spent this year keeping records only needed for the tax collectors and then filling out those all those forms. When we could have been taking photos and making illustrations! And the money spent to hire accountants. All wasted. :'(

« Reply #35 on: April 18, 2011, 20:13 »
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Stop the madness!

www.fairtax.org

Really. Think of all the thousands and thousands of hours we have spent this year keeping records only needed for the tax collectors and then filling out those all those forms. When we could have been taking photos and making illustrations! And the money spent to hire accountants. All wasted. :'(


All of that is eliminated with this system.  No more worrying about April 15th.  Everybody pays their fair share of taxes, including the wealthy and illegal immigrants.  In this system, even people who receive income illegally will still pay taxes.  There's no way to game the system. 

« Reply #36 on: April 18, 2011, 20:21 »
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That's why I donate to the cause :).


« Reply #37 on: April 18, 2011, 20:29 »
0
Stop the madness!

www.fairtax.org

Really. Think of all the thousands and thousands of hours we have spent this year keeping records only needed for the tax collectors and then filling out those all those forms. When we could have been taking photos and making illustrations! And the money spent to hire accountants. All wasted. :'(


All of that is eliminated with this system.  No more worrying about April 15th.  Everybody pays their fair share of taxes, including the wealthy and illegal immigrants.  In this system, even people who receive income illegally will still pay taxes.  There's no way to game the system. 


It looks like buying used and under the table would game the system. I imagine that it would pretty much crush new home sales too. Does hiring labor require that 23% - if not that could really boost hiring a photographer instead of buying images.

Not that there aren't plenty of problems w/ the current tax code and implementation. With most any changes, someone would benefit and someone would lose. I expect any changes to be according to the golden rule - those with the gold make the rules.

lagereek

« Reply #38 on: April 18, 2011, 23:45 »
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Taxes?  whats that?  ever heard of the Channel Islands?


 

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