Save your reciepts. If you do get audited that's your proof. If you cannot prove it the deduction will be dissallowed and you'll have to pay it back plus penalities and interest.
For most self employed people their biggest expense is milage. Make yourself a milage log and put everything in there. Driving to a art show, gallery opening, post office, location of a photoshoot, meeting with a client, walmart to buy supplies. Write it all down in your log. The IRS milage rate for 2010 is $0.50 per mile. It adds up quick.
You mentioned not having a sales tax ID, do you live in a state that charges sales tax? If you do when you file your state return they may notice that you have sales but haven't given them their cut. email your state's department of revenue. They'll be able to tell you what you do and don't need to charge/pay sales tax on and where and how to pay. Also in many states having a sales tax ID allows you to not have to pay sales tax on purchases of supplies.
As far as other individual expense. For the most part, if it's bought for the business, then you should be able to deduct it. So long as it is "both ordinary and necessary" it can be deducted. The only big exception to this would be things like mat board. You are technically in the field of manufacturing. Things that go into your finished product (mat board, ink, paper, bags, etc) are factored in under Costs of Goods Sold. Those things aren't actually taken as an expense until they are sold. So say you spend $500 on materials in 2010. You sell half in 2010 and the other half in 2011. You would recognize an expense of $300 in 2010 and $300 in 2011.
I'm not a photographer, I'm an accountant whose girlfriend is a photographer. Let me know if you have any more specific questions.
Joe Orabona
Business Manager
Osgood Photography
Manchester NH
Joe@OsgoodPhotography.net
631-327-7190
OsgoodPhotography.net
Facebook.com/OsgoodPhotography
________________________________
From: artshow_photo@yahoogroups.com [artshow_photo@yahoogroups.com] On Behalf Of henderson [hdhobos@yahoo.com]
Sent: Tuesday, December 14, 2010 1:48 PM
To: artshow_photo@yahoogroups.com
Subject: [artshow_photo] Newbie question re Federal Income Tax on startup photography business
I have just started selling my photographs, but plan to do more. I sold a few things at an arts & crafts fair, and have some photos on consignment in a gallery. I would like to focus on galleries/consignment, so I do not have to deal with tents, possible damage, sales tax, etc. At the moment, I do not have a Sales Tax ID or a Business License. I have had lots of expenses for printing, matting, framing, etc., as well as travel costs to acquire images.
My question concerns Federal Income Tax. What can I legitimately deduct on my taxes this year and in future years? What do I need to do to insure that my deduction will be legitimate if audited?
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