A recent anonymous social media post is being spread like wildfire all over many photography groups and pages. In it, a woman claims she has had all of her accounts frozen, has a lien on her home, is being held liable for over $45,000 in delinquent taxes, and might possibly be banned from doing business in her county, because for five years, she has failed to report income she has made from photography.
Ignorance of the Law Is Not a Legitimate Excuse
The anonymous poster says she didn’t think it really mattered, that it was just a hobby, and she didn’t think she made enough income to be paying taxes after buying props and equipment, and honestly, I can relate to that way of thinking. I think many of us have been there in the beginning. When I first started taking portraits of people, they were my friends, and I photographed them for free. Later, when I began to charge money, I really didn't know what my legal responsibility was. I certainly didn’t want to pay taxes on the very small amount I was charging. It was very easy for me to want to just stick my head in the sand and avoid the subject of taxation, but I was uneasy.
After a few Google searches and a letter from my county seeking a rendition of my business property values, I went from uneasy to a terrified, angry mess. So I sought the advice of a tax professional who helped me set up a legitimate business as a sole proprietorship, and my whole way of thinking of my business began to change. As a result, I had to work harder, my work got better, my prices got higher, and my business began to prosper. Now, when I pay tax on my photography income, it hurts a little less, because it’s proof that I made a good profit.
The Pros of Setting Up a Legitimate Business as a Professional Photographer
I really was so angry about having to pay taxes. And I was truly terrified that I would do it all wrong. That’s why I sought the help of a professional. Once you decide to just bite the bullet and go legit, it’s like a weight is lifted. You're a professional now, running a professional business. When you pay taxes, you don’t have that monkey on your back, you don’t have to worry that you’ll get caught, or that someone will turn you in.
And if you think that kind of thing doesn’t happen, think again. I have heard tales of competing photographers turning in other local photogs whom they suspected weren’t paying taxes. A representative at the county tax office where I used to live point blank told me that they troll Facebook looking for people who advertise as a business, and send out tax rendition forms accordingly. There are even accusations of the IRS watching Facebook to see if people are spending tremendously more than they are reporting as income. Don’t take for granted that nobody is watching. Someone is bound to see you sooner or later.
Being in business is not only about paying out taxes. There are also tax breaks you may get for running a business. You likely will get to reduce your taxable income when you make purchases like camera equipment, props, backdrops, software, computers, and other necessities that you need to be up and running. A good tax professional will make sure that you are taking advantage of all of the tax breaks you qualify for. You may be eligible to write off mileage, memberships, cell phone usage, and many other things that your tax pro can advise you on.
The Possible Disasters That Await if You Fail to Go Legit
Besides being on the hook with the various taxing entities in your area, failure to run your business the right way could also land you in hot water if you are running an uninsured business. You need to be insured for not only your own equipment losses, but also for liabilities when it comes to the physical health of your clients, and the liability you take on when you agree to produce the work that you contracted to do for them. Do you have a studio? What if one of your clients takes a bad spill over one of your light cords, and breaks her ankle? Do you shoot only outdoors? What if one of your clients steps in a hole or is bitten by a rattlesnake? What if you lose a memory card full of wedding photos, or your computer crashes and you have no backup? These are all real-life examples of things that photographers have been sued for. The good news is, being insured against these things is not super costly, and many of these insurance programs are included with memberships in some professional associations.
The Cost of Running a Legitimate Portrait Photography Business
Of course, all of these costs do add up. This is why any photographer worth their salt will charge a premium for what they do, and why it’s so easy to spot the tax evading photographer who is charging $100 for 150 images on a disc. There is no possible way to sustain a legitimate business on that kind of income. Other photographers know it, the IRS knows it, and deep down, that photographer knows it, too. If that photographer is you, it’s time to up your game, up your professional standard, and up your prices so that you can afford to pay what it takes to protect yourself and your clients.
Believe me, when I first started out having to do all of this business just to be in business, I was totally against it. I just wanted to take beautiful photos and be compensated for my time. But what it boils down to is this: if you are going to advertise as a business, quote prices to potential clients, charge said prices, and accept payment for work done, that means you are making a taxable income, on taxable products, with taxable equipment, and each taxing entity that is entitled to their cut will be coming after you if they see you advertising online, on social media, or hear about you from somewhere else. Be safe, not sorry. Go legit.