tax questions

Ok, I use Turbo Tax. I do photography on the side and have no intention of ever quitting my regular job to do photography full time. I think of it more as a hobby. Thing is friends have had me do shoots and paid me small amounts. Nothing compaired to what I have put into my equipment. But I accept the money and want to start doing more shoots to help pay for the upkeep and more stuff I want/need. I have been trying to look on the tax.gov website and found a few things but they are vague. How do I tell what I can deduct for hobby reasons vs. business? When does it turn into a business in the eyes of the gov't? should I just go to a tax person/place? This year I have spent way more (in the thousands) on equipment. By taking money for shoots does it mean I am a business? Any help appreciated.

First off, you should talk to a tax professional just to be safe. If you're charging money and selling product, you should be licensed (through your state) and have a tax ID. Depending on your state, you'll most likely need to collect sales tax and claim money made as income. As far as equipment goes, you can't claim the total cost of equipment bought, instead, you can claim the depreciation of the equipment you own (and you can't deduct anything for a "hobby" therefore be very careful that your deductions are business items only). I'm far from a tax professional, so please refer to a real accountant before making any decisions

Is this your first year of showing income and losses as a side hobby?

Usually you can show losses and minimal income as a side hobby without being an "official" business, but only for a certain number of years and income. In other words if you keep showing income the IRS is going to start asking questions, if you keep showing a loss year after year the IRS is going to start asking questions, if you're collecting sales tax without having a tax ID the IRS is going to really perk up, basically if anything seems off the IRS is going to start asking questions - especially right now! Doing it as a side hobby does not make you a business, though it seems many think it does. I'd personally talk to a tax expert on that, TurboTax is an OK program but can't replace someone that will and can answer these specific questions.

Thanks for the comments. People have given me money for pictures but I don't have a set price or anything. Since I am "still learning" I tell them if they want to give me something great, if not no big deal. Of the three people I have done sessions with they all gave me something and in different amounts. I tell them to look at the finished product and if they like them then they can give me a "donation". All I want to do is make enough money to pay for my equipment. I was just hoping I could deduct some of the expenses. I can try can't I lol.

Sales taxes are a state issue. The IRS doesn't care whether you're collecting sales taxes or not, they're looking at your income. The IRS doesn't care if you're registered as a business with the state, but if you are registered as a business they do care about the format of your business. The state is looking at both things. The state does care if you're registered as a business, and if you're doing sales they want you to collect the taxes for them.

From what you're saying, you're not a business (for tax purposes). You're not soliciting for jobs, are you? It doesn't sound like it. You can collect money on a hobby to help pay for the hobby, and you must declare that extra income on both your state and federal tax returns, but you can't deduct expenses unless you're a business.

You can make sporadic money on a hobby for decades without it ever turning into a business. You do, however, always owe both the state and the feds income tax on that income.

Meant to say state, not the IRS for sales tax. State will ask questions about sales tax without a certificate to collect or if you don't pay it on time or they question the amount, but you need a tax ID from the IRS before you can get a certificate. Personally I'd just get to an appointment with a tax expert, it's one reason I don't do my taxes and literally just hand over numbers and run.

RD has good advice.

RDKirk wrote in post #11507282
From what you're saying, you're not a business (for tax purposes). You're not soliciting for jobs, are you? It doesn't sound like it. You can collect money on a hobby to help pay for the hobby, and you must declare that extra income on both your state and federal tax returns, but you can't deduct expenses unless you're a business.

Actually, for a hobby activity you can deduct the expenses UP TO your gross income IF you itemize deductions.

"Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category."

http://www.irs.gov …icle/0,,id=1694​90,00.html

It's stated a little clumsily in the article; but that's really the upshot.