It’s that time of year, the dreaded tax season. During this time, we all either hire someone to do this work for us, or we spend hours on websites trying to decipher the complicated tax laws that apply to us all. This can be a painful process, especially for us freelance photographers. Well I’m here to help you dig through the complicated process and simplify your taxes into a few terms that you might be able to understand.
I have been working in the tax field for five years. I am a Registered Tax Specialist and a Registered ERO by the IRS. During that time I have completed over 2000 personal income taxes, attended dozens of tax seminars and completed hundreds of training hours.
This guide aims to be a basic guide for photographers completing their taxes. Certainly I am not able to condense hundreds of hours of training and years of experience into one simple article, so please take this all as advice and not a complete guide to completing your tax return.
Also, this only applies to federal returns as I am unable to go through each state and tell you every loan that is available for your specific situation. If you are looking for something that includes the state level credits for your return, please contact a local tax professional, CPA or registered agent. They will be able to help with your specific needs.
Also, if you’re looking for a more comprehensive guide, I recommend checking out Fstoppers’ How To Become A Professional Commercial Wedding Photographer DVD. On the DVD they spend hours talking about taxes and give you a full understanding of the process.
If you fill out a tax return if you are self-employed, e.g. B. as a photographer, you should use the following tax forms.
This is your basic tax form that everyone will use (1040EZ/1040A applies to those with very basic returns). Enter your gross income, your deductions and your basic allowances. You must fill out one of these in order to fill out a tax return. Consider this your table of contents for your tax return.
A Scheme C is your basic form that you use to fill out a self-employed tax return. On this form you enter your income from photography as well as deductions in your company such as advertising, rent, utilities, insurance, etc. This is the basic form that almost anyone claiming income from their business will use.
This is the form used to calculate your year-end Social Security and Health Insurance taxes. It must be attached to Schedule C in order to file your taxes correctly.
Form 2106 are business expenses, specifically kilometers for your trip. There are two different ways to fill out this form, either using standard kilometers (Section B) or actual expenses (Section C). In my personal experience, the standard mileage is the cheapest way to calculate your travel expenses as it gives you a higher deduction. It’s worth noting that these expenses would go to a list C if you’re self-employed and 2106 if you’re employed by another photographer who will issue you a W2.
Form 8829 is an IRS-issued form for personal business use. On this form, you write off a portion of your rent or mortgage based on the size of your home office. This assumes a percentage (office square feet divided by the total square feet of the house).
Form 4562 is your depreciation and amortization paper. This form is used for writing off your equipment and other tools purchased for the year. Each piece of equipment is depreciated over a different number of years, so you should check your equipment’s classification to see what rate it will be depreciated at.
Basic expenses are what I would consider obvious expenses. These normally go in the expenses portion of an Appendix C and are deducted from your total income for the year to determine your taxable income amount. This includes any advertising expenses you may have for your business, paid insurance, contract labor (hired second gunners or support), repairs, consumables, and so on. All of this is pretty self-explanatory as to what you need to put in each category (that’s why I call them Basic Expenses). If you are considered self-employed, your prorated mortgage/rent and utility bills for your home office or studio space are also used here.
Travel expenses are also pretty obvious. If you are traveling abroad for a photography conference, you can deduct your general travel expenses for the trip (flight, hotel, entrance fees, etc.). An example of this would be next week’s WPPI conference in Las Vegas, NV. As this is a photographer-focused conference, all professional photographers who come are eligible for a travel allowance. This information will be recorded in your Travel Expenses category in your Appendix C.
Mileage costs are simply the costs you would charge for any local trips you have taken with your vehicle. So if you have to drive 30 miles to get to a photo shoot, you can write off that drive based on a mileage rate set by your state. The standard rate set by the IRS for the 2012 tax year is 56.5 cents per mile, however states often have higher mileage rates for these expenses. Contact your state directly to see if the mileage rate is more beneficial to you. This will go into your Auto category of your Schedule C.
This is difficult as this is usually the main reason the IRS examines your business returns. The IRS allows you to write off all subsistence expenses related to your considered work common and necessary. That means you certainly can’t write off the times you took your family to dinner, but you can write off expenses related to your work. A good example of this is when you meet a customer in a coffee shop or similar. If it’s related to your work (like meeting a bride to discuss your wedding packages), you can write off your expenses during that meeting, if that’s the case common and necessary. You are also allowed to write off your expenses during this meeting provided you paid for them too. However, you can only deduct 50% of your meal expenses on your Plan C.
In addition to food expenses, you may also have gift expenses. If you send your customers Christmas cards or gifts to thank them for their business, you can deduct this as a gift expense as long as the price doesn’t exceed $25 per customer. This will be filed under the Materials category in your Appendix C.
Photography gear is extremely expensive, but you can often get a tax deduction for the gear you buy year-round. This goes on Form 4562 of your tax return. Lenses, camera bodies and other large photographic equipment are depreciated over 5 years as standard. What that means if you can write off 20% of that gear per year for 5 years (So if you bought a lens for $1000, you can write off $200 as an expense for the first 5 years of owning it.) . However, the American Taxpayer Relief Act of 2012 allows you to write off 50% of the full amount of an expense in the first year you own it, if you wish. There are very specific rules that apply to these tax breaks, so be sure to check with the IRS directly before using the additional Section 179 deduction.
Again, this is just a basic overview of the various editions and forums available for freelance photographers. If this makes you feel overwhelmed, please hire a tax professional to complete your taxes. And again, if you’re interested in learning more, I recommend watching the DVD titled How To Become A Professional Commercial Wedding Photographer DVD. On this DVD, Patrick and Lee spend hours talking about the various tax laws that apply specifically to photographers. As always, more information on each tax form can be found on the IRS’s website.