Author Topic: Taxes (US) (Read 8353 times)

helix7 · « **on:** February 15, 2008, 09:55 »

So what can we in the US expect in the way of tax forms from microstock sites? I already received my SS form. Any other sites send out 1099s?

What about the sites that don't? Do we just report earnings info per site to our accountants?

Waldo4 · « **Reply #1 on:** February 15, 2008, 11:01 »

Maybe I'm off in thinking, but it is my understanding that once a certain threshold in earnings is passed ($400?) by law they are required to provide a 1099 as technically they are employing you, though you are a freelance employee.

I have another question about taxes. It should be possible to write off all of your equipment expenses on your taxes. What needs to be done to do this? Obviously save all receipts, but does one need to make themselves a buisiness to write it off as a buisiness expense, or is it possible to prove income via photography with a 1099 form, and that be all that is needed for an allowable write off? As this year at least I plan on putting 100% of my earnings back into equipment, I want to be sure that my earnings are completely non-taxed and that I take the steps now to ensure that is the case. If you have to itemize all deductions to do so, that is not an issue, I do it already.

Sean Locke Photography · « **Reply #2 on:** February 15, 2008, 11:03 »

Quote from: Waldo4 on February 15, 2008, 11:01

Maybe I'm off in thinking, but it is my understanding that once a certain threshold in earnings is passed ($400?) by law they are required to provide a 1099 as technically they are employing you, though you are a freelance employee.

iStock is not a US company. They do not send out 1099s.

wysiwyg_foto · « **Reply #3 on:** February 15, 2008, 14:13 »

Quote from: Waldo4 on February 15, 2008, 11:01

Maybe I'm off in thinking, but it is my understanding that once a certain threshold in earnings is passed ($400?) by law they are required to provide a 1099 as technically they are employing you, though you are a freelance employee.

I have another question about taxes. It should be possible to write off all of your equipment expenses on your taxes. What needs to be done to do this? Obviously save all receipts, but does one need to make themselves a buisiness to write it off as a buisiness expense, or is it possible to prove income via photography with a 1099 form, and that be all that is needed for an allowable write off? As this year at least I plan on putting 100% of my earnings back into equipment, I want to be sure that my earnings are completely non-taxed and that I take the steps now to ensure that is the case. If you have to itemize all deductions to do so, that is not an issue, I do it already.

first piece of advice is hire a CPA that knows what they are doing (don't trust H & R Block).

With relation to deducting income - it all depends on whether your income is classified (or could be classified) as "passive" or "active" and whether or not you "materially participate". Here's links to IRS publications covering the topic....

http://www.irs.gov/pub/irs-pdf/p925.pdf

You also need to read up on rules relating to depreciation §179 deductions, etc. with relation to learning how much equipment you can deduct and what you need to depreciate, and what length of time....

http://www.irs.gov/publications/p946/index.html

If you don't work under a registered company, you can report your income and deductions on Schedule C of the 1040.

iStock may or may not be required to issue you a W-9 depending on whether they have sufficient nexus in the United States - it doesn't matter where the company is based.

Good luck!

Mormegil · « **Reply #4 on:** February 15, 2008, 14:18 »

I'm no tax professional, so don't take what I say as law. I'll just mention what I've done.

AFAIK, having a business license is up to the city or county you live in. As far as Federal taxes go, you can either claim you're running a business (likely a sole proprietorship) or a hobby with income.

If it's a hobby, then you can't claim a loss. If it's a business, you can claim a loss for the first 2 or 3 years or so. After that, I think the IRS figures you really doing this as a hobby, and you may get in trouble.

Luckally, from the first year, I've been making a profit, so I've been claiming that I'm running a business (which I am).

That means fill out the Schedule C. I've been using TurboTax, and have been pretty happy.

So how it works is, you put in your business expenses, including supplies and equipment, travel, etc. And you put in your income. If your income exceeds your expenses, you owe money on that income. If your expenses exceed your income, then you took a loss, and that comes off your taxable earnings, I believe. So I don't think it's an itemized deduction, but I could be wrong, as I've always made a profit.

Here's where it gets tricky. You might think, I bought $2100 lens this year, while I made $2100, so you expect that you netted $0. No you didn't. You need to depreciate your equipment. Photography equipment depreciates over 7 years, so that's a $2100/7 or $300 a year you can deduct as a loss. So you really made $2100 - $300 or $1800 a year.

There are also options to depreciate all in one year, but I'm not sure how that goes. It's a bad idea if you're making a profit every year, so I don't generally do that.

Hope this helps.

Also, DreamsTime sent me a 1099. So far, that's just DS and SS.

Sean Locke Photography · « **Reply #5 on:** February 15, 2008, 15:04 »

Quote from: Mormegil on February 15, 2008, 14:18

Here's where it gets tricky. You might think, I bought $2100 lens this year, while I made $2100, so you expect that you netted $0. No you didn't. You need to depreciate your equipment. Photography equipment depreciates over 7 years, so that's a $2100/7 or $300 a year you can deduct as a loss. So you really made $2100 - $300 or $1800 a year.

There are also options to depreciate all in one year, but I'm not sure how that goes. It's a bad idea if you're making a profit every year, so I don't generally do that.

I write off all my purchases each year under that part of the code. I don't know why you'd want to worry about tracking those things over time.

Mormegil · « **Reply #6 on:** February 15, 2008, 15:44 »

Quote from: sjlocke on February 15, 2008, 15:04

Quote from: Mormegil on February 15, 2008, 14:18
Here's where it gets tricky. You might think, I bought $2100 lens this year, while I made $2100, so you expect that you netted $0. No you didn't. You need to depreciate your equipment. Photography equipment depreciates over 7 years, so that's a $2100/7 or $300 a year you can deduct as a loss. So you really made $2100 - $300 or $1800 a year.

There are also options to depreciate all in one year, but I'm not sure how that goes. It's a bad idea if you're making a profit every year, so I don't generally do that.

I write off all my purchases each year under that part of the code. I don't know why you'd want to worry about tracking those things over time.

2 reasons.

TurboTax makes it easy.

If I deducted my big ticket purchases (couple of L lenses and a 5D), then I would have taken a loss that year, and made a big profit the next. So I wanted to equalize my earnings, so I wouldn't have a big tax hit the next year.

Read_My_Rights · « **Reply #7 on:** February 15, 2008, 15:46 »

I think - again I will be doing my taxes shortly - if you do not generate a profit a minimum number of years than you will have to depreciate over the 7 years. If you are profitable than you can either choose the 100% first year or 7 year time period. If you do not opperate profitable sufficiently and you did claim the 100% depreciation you might be in for a pay back to the Government.

Again not a tax professional but I choose the 7 year route just in case I can not generate enough profits.

Take home message:
Hobby with income - maybe profit - maybe not -- 7 year depreciation
Business income - your choice 1 or 7 years.

BTW. I use TaxAct.

wysiwyg_foto · « **Reply #8 on:** February 15, 2008, 16:11 »

Quote from: sjlocke on February 15, 2008, 15:04

Quote from: Mormegil on February 15, 2008, 14:18
Here's where it gets tricky. You might think, I bought $2100 lens this year, while I made $2100, so you expect that you netted $0. No you didn't. You need to depreciate your equipment. Photography equipment depreciates over 7 years, so that's a $2100/7 or $300 a year you can deduct as a loss. So you really made $2100 - $300 or $1800 a year.

There are also options to depreciate all in one year, but I'm not sure how that goes. It's a bad idea if you're making a profit every year, so I don't generally do that.

I write off all my purchases each year under that part of the code. I don't know why you'd want to worry about tracking those things over time.

Take a look at the depreciation link I attached above. §179 Deductions (what you describe) are limited based on income.

Also, depreciation is usually done on a MACRS basis - not straight line as is calculated.

wysiwyg_foto · « **Reply #9 on:** February 15, 2008, 16:13 »

Quote from: Read_My_Rights on February 15, 2008, 15:46

I think - again I will be doing my taxes shortly - if you do not generate a profit a minimum number of years than you will have to depreciate over the 7 years. If you are profitable than you can either choose the 100% first year or 7 year time period. If you do not opperate profitable sufficiently and you did claim the 100% depreciation you might be in for a pay back to the Government.

Again not a tax professional but I choose the 7 year route just in case I can not generate enough profits.

Take home message:
Hobby with income - maybe profit - maybe not -- 7 year depreciation
Business income - your choice 1 or 7 years.

BTW. I use TaxAct.

You don't have to show a profit - you have to prove certain conditions...there is a test and this relates to the active/passive activity rules in the pamphlet I linked to above.

Guys - I work in the tax profession - been doing it for the past 15 years - I don't specialize in income tax anymore and I'm not going to give advice (that's what a hired professional is for) but if you don't want to hire someone, then at least read the regulations I linked to above.

graficallyminded · « **Reply #10 on:** February 15, 2008, 16:18 »

Mike - I received 1099's from FT, DT, BigStock, SS, and LO this year - I didn't make enough on my other micros to get 1099's from them. StockXpert is Hungarian, and iStock Canadian so they don't give a crap about US taxes. I think when you make money working for a company in a foreign country you don't have to pay taxes on it, but correct me if I'm wrong. I found an IRS article on it online somewhere, relating a hockey player from the US that plays in Canada - and doesn't pay US tax on his earnings, unless he plays games in the states.

I use a free tax program, and last year put all of my 1099's under the misc income section. I haven't done max taxes yet for the year, but I'm hoping I break even on what I owe in, from the amount I've paid in from my dayjob. We'll see what happens. I probably should just go to a real accountant, but I'm going to try it myself first. I own a home, just got married last year - everything gets more and more complicated from year to year. I hate doing my taxes. I love paying them honestly, but what I hate is figuring out how to file!

I have a feeling I'm going to need help this year, as about 20-25% of my 2007 income came from selling stock.

yingyang0 · « **Reply #11 on:** February 15, 2008, 16:42 »

Quote from: Read_My_Rights on February 15, 2008, 15:46

I think - again I will be doing my taxes shortly - if you do not generate a profit a minimum number of years than you will have to depreciate over the 7 years. If you are profitable than you can either choose the 100% first year or 7 year time period. If you do not opperate profitable sufficiently and you did claim the 100% depreciation you might be in for a pay back to the Government.

This answer is why you don't ask tax advise in a forum.

If you're a US citizen and don't know what I'm talking about when I say §162 requirements, or the class life of property that needs to be capitalized and depreciated, then you shouldn't be trying to deduct your photography expenses.

The only advise you should listen to is advise that has been paid for. Go hire an accountant/tax professional (H&R block and the like are not what you're looking for when you're claiming this as a business).

graficallyminded · « **Reply #12 on:** February 18, 2008, 13:58 »

Does this clear up anything about taxes to non US sites like iStock and Stockxpert?

helix7 · « **Reply #13 on:** February 18, 2008, 19:41 »

I spoke to my accountant, and he confirmed that we U.S. folks do have to report earnings from foreign companies, including istock, StockXpert, etc. He said it was as simple as compiling a list of the foreign companies and how much I earned, and he would take care of the rest.

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Author Topic: Taxes (US) (Read 8353 times)

helix7

Waldo4

Sean Locke Photography

wysiwyg_foto

Mormegil

Sean Locke Photography

Mormegil

Read_My_Rights

wysiwyg_foto

wysiwyg_foto

graficallyminded

yingyang0

graficallyminded

helix7

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