Is It Really a Photography Business?

Here in the US our Internal Revenue Service has some regulations and guidelines that determine whether or not one can deduct expenses as a business. They also I think, provide some insight on the business of photography as opposed to the hobby of photography that that yields some gross income.

From: https://www.irs.gov …-expenses/income-expenses

You must generally consider these factors in determining whether an activity is a business engaged in making a profit:

• Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
  
• Whether the time and effort you put into the activity indicate you intend to make it profitable.
  
• Whether you depend on income from the activity for your livelihood.
  
• Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
  
• Whether you change your methods of operation in an attempt to improve profitability.
  
• Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
  
• Whether you were successful in making a profit in similar activities in the past.
  
• Whether the activity makes a profit in some years and how much profit it makes.
  
• Whether you can expect to make a future profit from the appreciation of the assets used in the activity.
  

Profitable ? Profitability ?
Yeah right !

iPhones and droid galaxies changed everything.

Everyone is a photographer now

My niece is 8 she is producing masterpieces for her 40k followers on IG and TikTok.

Nahhh, not for the money.
I do it for a bottle of 1942, a Jameson old Irish, or some good ol’ Johnnie Walker Blue label.

That’s right sonny boy !

Nice list. Good luck proving any of them either way. With minimal effort you can have a bad business that will allow you a fair amount of deductions. You will still be negative in cash flow to get those deductions, but they will be legitimate.

What the IRS would like is for you to be a good business person, (and pay taxes to support them) there is no law that says you can't be a bad business person and that your business needs to operate in the black. Those guidelines are bureaucratic BS. The irony is if you become a fantastic business you don't pay any taxes.

K Soze wrote in post #18832718
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The irony is if you become a fantastic business you don't pay any taxes.
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I don't understand your thinking here.

The fantastic small businesses that I know of pay a lot of taxes, because they generate a significant net profit. . If it's a fantastic business, that means that income significantly exceeds expenses, which results in a significant tax liability. . At least that's how it works here in the United States.

Would you please expound on your statement, so that I can understand what you mean?


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Tom, there are huge businesses that don't pay corporate income tax in some years because their shrewd accountants exploit features of tax law that aren't available to individuals. It's been in the news.

OhLook wrote in post #18833721
Tom, there are huge businesses that don't pay corporate income tax in some years because their shrewd accountants exploit features of tax law that aren't available to individuals. It's been in the news.

True indeed.

Tom referenced small business. Some tax avoidance is available to small business but the net result tends to be small,

Years ago after a particularly (choose one this is not a political forum: egregious/wise) tax bill passed I enjoyed telling passengers that boat they were enjoying was funding by capital gains changes. I also enjoyed mentioning that many of the mega yachts we were passing in harbor were financed by similar means.

I was referring to mega sized companies, not small business.

https://www.cbsnews.co​m …ral-income-tax-last-year/

K Soze wrote in post #18834747
I was referring to mega sized companies, not small business.

https://www.cbsnews.co​m …ral-income-tax-last-year/

Oh, ok. . I get it now.

I didn't understand at first, because given the topic of the thread, I wasn't even thinking along the lines of big corporations when initially reading your post.

I know a local guy who has a pretty big corporation, employing a couple thousand workers seasonally. . He complains that in order to avoid paying significant corporate taxes, he has to keep spending the money and re-investing it back into the corporation. . So even thought his business does great, he can't just keep the profits and use them as he pleases, or else he'll have to pay a lot of taxes. .He has to use the money to keep growing the corporation bigger, even though he doesn't want it bigger, just to avoid paying corporate taxes. . At least that's the way he explained it to me.


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K Soze wrote in post #18832718
Nice list. Good luck proving any of them either way. With minimal effort you can have a bad business that will allow you a fair amount of deductions. You will still be negative in cash flow to get those deductions, but they will be legitimate....

This philosophy can/will lead to an audit where you will have to prove every deduction possible going back several years. If you plan on running a loosing business (or you have been showing losses for 2 years running) and claim lots of deductions, your records better be impeccable (and provable) which is definitely not minimal effort. We ran a business from our home for over20 years (not photography) and very quickly surmised that neither of us has the skill set needed to navigate the ever changing tax code. We relied on a tax accountant as well as a business financial planner to help us make sure that things were running smoothly.

Tom Reichner wrote in post #18834773
Oh, ok. . I get it now.

I didn't understand at first, because given the topic of the thread, I wasn't even thinking along the lines of big corporations when initially reading your post.

I know a local guy who has a pretty big corporation, employing a couple thousand workers seasonally. . He complains that in order to avoid paying significant corporate taxes, he has to keep spending the money and re-investing it back into the corporation. . So even thought his business does great, he can't just keep the profits and use them as he pleases, or else he'll have to pay a lot of taxes. .He has to use the money to keep growing the corporation bigger, even though he doesn't want it bigger, just to avoid paying corporate taxes. . At least that's the way he explained it to me.

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Presumably, he is paying himself a salary as an expense to the company.

He can give himself a raise or a bonus. He'll pay personal income tax on that, but not corporate taxes.

A corporation can pay its employees well, provide lots of benefits, and thus run with very thin profits.

Tom Reichner wrote in post #18834773
I know a local guy who has a pretty big corporation, employing a couple thousand workers seasonally. He complains that in order to avoid paying significant corporate taxes, he has to keep spending the money and re-investing it back into the corporation. So even thought his business does great, he can't just keep the profits and use them as he pleases, or else he'll have to pay a lot of taxes. He has to use the money to keep growing the corporation bigger, even though he doesn't want it bigger, just to avoid paying corporate taxes. At least that's the way he explained it to me.

That is an excellent example of how capitalism is supposed to work.... the trickle down effect. Companies earn money and get to choose between...
1. Paying their fair share of taxes to support infrastructure and taxes for society, or
2. Re-investing that money to create more jobs for people (the money trickles down to them).

Sadly the giant corporations instead prefer to use avoidance techniques to remove the money from the system by funnelling it to the territories with the lowest/no corporation tax.

Not sure how shareholdings work in the US but in the UK company owners/founders can reduce their personal tax liability by paying dividends from company profits instead of salary.

So along these lines, my wife and I are looking into running an online print business (thru a hosting site like ShootProof) which we wouldn't expect to be a sole source of income. We are also taking over her fathers Mississippi River Tow-Boat image library and accompanying documentation (she has a dedicated PC just for that purpose).

Is it possible to run a side-business under those original criteria from the OP?

goalerjones wrote in post #18844733
So along these lines, my wife and I are looking into running an online print business (thru a hosting site like ShootProof) which we wouldn't expect to be a sole source of income. We are also taking over her fathers Mississippi River Tow-Boat image library and accompanying documentation (she has a dedicated PC just for that purpose).

Is it possible to run a side-business under those original criteria from the OP?

Yes, you certainly could. One of the early preparations would be talking with a professional in business tax to learn if that would be a good move and, if so, what to do. If you have a SCORE chapter in your area that can be source of advice that's both valuable and free of charge. https://www.score.org/

Thanks for that, there's 2 chapters near us.

Tom Reichner wrote in post #18834773
Oh, ok. . I get it now.

I didn't understand at first, because given the topic of the thread, I wasn't even thinking along the lines of big corporations when initially reading your post.

I know a local guy who has a pretty big corporation, employing a couple thousand workers seasonally. . He complains that in order to avoid paying significant corporate taxes, he has to keep spending the money and re-investing it back into the corporation. . So even thought his business does great, he can't just keep the profits and use them as he pleases, or else he'll have to pay a lot of taxes. .He has to use the money to keep growing the corporation bigger, even though he doesn't want it bigger, just to avoid paying corporate taxes. . At least that's the way he explained it to me.

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We have to do this with a couple of farms that we own. In the years when there is a profit, we sometimes need to plow that back into the business ( new equipment, pre-pay for seed/fuel etc.) to avoid paying a large chunk of it to the government.