September 28, 2007 8:54 PM Subscribe
I'm planning to do some on-the-side freelance photography in the next year. I'd like some advice on how to play the tax game most effectively.
posted by sprocket87 to work & money (8 answers total) 9 users marked this as a favorite
I have an 8-5 weekday job that pays my bills, but I'll probably be doing a small-potatoes amount of photography as a side business over the next year. Nothing to warrant obtaining a business license, incorporating, or anything like that; probably about 6-12 or so events/jobs at a modest rate. My expected earnings will almost certainly be higher than the $600 minimum for reporting additional income, but not anything in the several-thousand range. After doing a bit of research, here's my game plan:
1. Keep detailed receipts and records of ALL income and potential business-related expenses
2. Use 1040 (long) as normal for personal filing of W2s
3. Also file as "sole proprietor" using form Schedule C-EZ for business income based on receipts
Seems simple enough, right? Well, I'm wondering about deductions: I know with the Schedule C-EZ I'm allowed to file up to $5,000 worth of business expenses. I'm NOT planning on filing a home office expense, etc. But what about photo gear, computer equipment, software, or web hosting/printer subscription costs? Should I deduct these?
The obvious answer to me would be "yes", but I'm wondering that since I won't be making a tremendous amount of profit, it might be wiser to ignore some of those deductions to keep "under the radar". I mean, I'd love to get a new MacBook for my photo editing and write it off as a business deduction [which it legitimately would be], but if that offsets the majority of my profit, would the IRS consider me as being a "hobby" and screw me in the long run?
I know that the IRS looks for net profitability in 3 out of 5 years after filing as a sole proprietor. I don't plan on making this a primary source of income - be it next year or in five. Just a little side earnings. So would it be smarter to take the hit on my tax return and skip deducting too many expenses or to deduct away and keep my fingers crossed?
Would it be safe if I just made sure my net profits above were above $600 after all deductions?
Oh, and you can skip the "you should see a CPA" comments, I know you all ANACPA or ANAL, but I'm just "querying the hive mind" :)