New Accounting Requirements for American Photographers

New Accounting Requirements for American Photographers

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Professional and semi-professional American photographers might soon face a new set of administrative and accounting requirements that could bury them in tax paperwork – unless they act now. As part of the new healthcare reform legislation approved by the U.S. Congress this year, business owners must now report to the IRS on an income tax return any amount over $600 they paid to a company or individual and also submit a 1099 form to that company/individual as well.

In simple terms this means if you purchased a new lens this year that cost let’s say $895, not only will you be reporting that on your income tax return but you’ll also have to submit a 1099 form to the company you bought it from. The new tax rule is meant to track cash payments and cut down on businesses that don’t report this income – and fortunately it excludes credit card transactions – but what it really does is place a massive burden on small business owners. For commercial photographers that might order catering on their shoots or make other similar payments totaling more than $600 in a year, filing a 1099 with each of these becomes excessively burdensome.

Fortunately, the IRS is asking for the opinion of business owners and the American Society of Media Photographers has organized an e-mail protest campaign to protect the interests of small business owners. All submissions must be sent in before September 29, 2010. If you’re an American professional or semi-professional photographer check out the campaign and send in a letter if you’d like to support the ASMP’s efforts.

UPDATE: Please read David McRee’s comment below for a much better explanation from a practicing CPA.

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Matt Dutile is a New York City based travel and lifestyle photographer. He recently launched a Kickstarter campaign to produce a book on Mongolian nomads. Check the page out to learn more. You can view his website or join in on his Facebook page as well.

Some Older Comments

  • Suzanne September 25, 2010 04:33 am

    "mike829 Says:
    September 24th, 2010 at 2:19 pm
    If the IRS would simply go after those whom they already know are not paying their taxes, we wouldn’t even be having this discussion. As for the healthcare legislation, I don’t care how much money the government steals from us, healthcare costs will continue to rise….regardless of which party is in power.

    Read more: https://digital-photography-school.com/new-accounting-requirements-for-american-photographers#ixzz10TP84KDH"

    Mike if they went after those individuals, they would have to put the majority of congress and the federal government in jail and they just aren't going to do that to themselves.

  • mike829 September 24, 2010 02:19 pm

    If the IRS would simply go after those whom they already know are not paying their taxes, we wouldn't even be having this discussion. As for the healthcare legislation, I don't care how much money the government steals from us, healthcare costs will continue to rise....regardless of which party is in power.

  • Stephen September 21, 2010 04:02 am

    I suspect that if this is true that most of the larger retailers would simply issue this paperwork to you along with your receipt as a convenience. It would be much easier for B&H or Amazon to simply automate this process and attach the 1099 to your receipt for eligible purchases. They are always looking for ways to make the purchase process more streamlined and competitive, I can't imagine that they wouldn't include this as a function of the checkout process simply to stay one step ahead of their competitors.

  • Arun September 18, 2010 05:14 pm

    Hello Houston,
    his comment is just 2 spaces above yours.
    May be you can click https://digital-photography-school.com/new-accounting-requirements-for-american-photographers#comment-131391

  • arwena September 18, 2010 04:48 pm

    Hi, I'm new here but I'm little bit confused after reading this topic. What has common buying a photography equipment with health insurance? (hope you understand what I'm asking you)

  • Houston September 11, 2010 01:18 am

    I don't see David McRee’s comment

  • Matthew Dutile September 10, 2010 10:25 am

    Thanks David you explained it far better than I ever could! :)

  • David McRee September 10, 2010 12:33 am

    As a practicing CPA, I'd like to make a few comments about this new law. First, it is true that changes have been made to Internal Revenue Code Section 6104 that covers "information reporting requirements," i.e., 1099's. These changes were part of H.R. 3590 Patient Protection and Affordable Care Act of 2009, specifically in section 9006 of that legislation. You can read the relevant page of the bill here: http://www.stopform1099.org/Page 737 from PPACA.pdf I hope I coded that link correctly.

    Current law is that any business (including sole proprietors) must report to the IRS, via Form 1099-MISC & Form 1096, payments made (cash, check, credit card) to unincorporated persons to whom they paid $600 or more for in exchange for services. This meant that if you paid a sub-contractor for services, you'd need to get a W-9 from them so you'd have their name, address, and taxpayer I.D. number to fill out the 1099 at year end.

    New law creates an expansionary amendment to Section 6104 so that beginning in 2012, businesses will also have to send 1099-MISC to businesses, both unincorporated AND incorporated, to which they issue payments for services AND from which they purchased goods. The law still exempts issuing a 1099 to a charitable organization.

    How will this affect small business? First, this new law affects ALL businesses, not just photographers. If you are a really small business, you will probably only have to prepare a couple of 1099's. However, if you are a bit larger, and have many vendors from whom you purchase $600 or more of goods or services each year, it will add significant additional accounting and reporting requirements. Your accounting system will need to be able to print a report showing how much you paid to each vendor during the year, and you will have obtain the taxpayer I.D. from each vendor (yes including Staples, Best Buy, Amazon.com, Wal-mart, etc) to whom you pay $600 or more for business related items. Most accounting systems, when properly set up, can easily do this.

    It is relatively easy to hand-write up to half-a-dozen 1099's, but if you have to file more, you'll need to buy special forms and you may need to purchase new software to prepare the forms. Either that or you'll have to pay your accountant/ CPA to do it. This could be a significant expense for a small business, especially if there are a lot of forms. If you already have an accounting firm handling your tax filings, you will see an increase in fees.

    One commenter keeps referring to language in the law that say "may," "might," etc., as though the law is somehow in doubt. The only place in the law where that language is used is in the standard provision included in most laws that authorizes the IRS to create regulations to implement and enforce the law. That's the way it works: lawyers write the law in a vague way, Congress passes it and authorizes the Department of the Treasury to write Regulations to administer the law, hence the language "The Secretary (of the IRS) MAY prescribe such regulations and other guidance as MAY be appropriate or necessary to carry out the purposes of this section..." The law is what the law is. There is no MAY or MAYBE or MIGHT about it. The IRS will try to figure out what the intent of Congress is and will write the administrative regulation (due dates, what forms to use, filing threshholds, specific exemptions, penalties for non-compliance).

    However, even though the amendments have passed and are the law of the land, they have not yet gone into effect. They are scheduled to go into effect January 1, 2012, which means that the 1099's would have to be issued in accordance with the new law in January of 2013.

    Several legislators have introduced bills to repeal the law, and the IRS is currently soliciting input from the public. Believe me, they are getting an earful. So the law can still be repealed, or it could be watered down. It has already been suggested that perhaps an exemption could be created for payments made to vendors by credit card. And it has been duly noted the windfall that this would be for banks and CC companies.

    It is, I think, too early to get crazy over this law, but it is important to be aware of, and Matthew Dutile has done the readers of this blog a great service by bringing it to our attention. This is something to watch, as some of the smaller to medium sized businesses who do a lot of their own accounting and reporting may need to make some adjustments and may need to work with an accounting service or CPA to implement any new requirements that end up going into effect. If you want to do something now, visit www.stopform1099.org (I have no relation to them).

    One other point: Matthew made a statement early in the post that seemed to indicate that this new law would change what has to be reported on a tax return. If you are complying with the current law which says you have to report ALL income and expenses, there will be no change. The new law only applies to the filing of Form 1099-MISC. Continue to report your business expenses on your tax return as you always have.

    This law is yet another move by the government toward being able to electronically track all income received by taxpayers in order to stop the under-reporting of income.

  • Ronizel September 8, 2010 02:16 am

    Matthew.... Thanks for the posting. I obviously won't stop here in looking up what's really going on. I think everyone's getting upset because we're all still waiting for the exact implementation of this legislation. Either way, it's good to be prepared. Worst case scenario is that nothing really changes. (Actually, worst case scenario is that I'll have to now send 1099's to corporations that I make credit card payments too. Let's hope that doesn't become the final implementation.)

  • Neil Speers September 7, 2010 09:22 am

    It does make one shake their head. If neither person reports the transaction - then what is gained with this legislation? Sure, photographers do like to write off their purchases by depreciation, but if its a smoking deal on the condition no records....

  • Daniel September 7, 2010 03:19 am

    @mark, if you'd check the IRS's own abbreviated explanation (found here), you'd see that it's not limited to cash as they continually use the term "payment". In fact, the exemption of credits is only implied by ancillary legislation.

    I'm not sure how this site's attempts at informing photographers of forthcoming tax changes, which may impact their business, amounts to fear-mongering. I've consistently stated that it's advisable to consult with your tax adviser, or accountant. If you have neither, then you may have other problems instead.

  • Mark September 7, 2010 02:49 am

    I for one am VERY DISAPPOINTED THAT THIS SITE IS SPREADING SUCH TRASH!!!

    This minor change IF IT IS TRUE is not a burden at all. Yet I have not seen a single definitive answer yet that shows this is TRUTHFUL!!!! This appears to be fear mongering and nonsense. Having been a sole proprietorship in construction for years, I am well aware of the 1099 MISC form and it is simple and straight forward. It takes very little effort to fill out and I cannot imagine anyone filling out more than a few of these anyways. LEGITIMATE BUSINESSES DON'T PAY WITH CASH for many years. The accounting is too difficult with cash. I like the way that my Company Visa does all of the end of year breakdown for me!!!! It is an easy double check of my accountant!!!

    Again, IF THIS IS TRUE, it is only to stop the STUPID. If you pay cash under the table to someone for working for you, you should not take the deduction on your books. So if you take the "best of both worlds" and try to pay cash, but also take the deduction then you must use the 1099 form so that the other person pays the taxes. You cannot have it both ways, but most legitimate businesses never tried to do this anyways and always used the 1099 to report cash transactions. In other words, "Nothing new here" for most of us!!!

  • Daniel September 7, 2010 02:44 am

    @TheTodd -- " As for 1099s, they have been done like this for maybe 30 years now."

    No, they haven't been done like this before. As kjp keeps screaming out, read the legislation. The new change requires filing 1099 forms for transactions, which are currently exempt. See Burt, Staples & Maner, LLP's explanation of the changes to their clients regarding the changes.

    As kjp correctly pointed out in a prior comment, "So you would not 1099 your local camera store or Amazon or any such entity..." The change makes this statement no longer true. Don't believe me? Then talk to your tax adviser about the forthcoming change.

    How does this change the way you do business? That depends on the type of business you're currently doing. It may have little to no impact. So, as stated earlier, it's advisable to check with your tax adviser as to how this impacts (if at all) your business workflow.

  • Russell Harrison September 6, 2010 11:00 pm

    I'd just like to thank the author of this post and all of the commentators for bringing this to my attention. Great research guys! Its something I'll absolutely talk to my accountant about before starting on taxes this year.

  • Daniel September 6, 2010 08:53 am

    Geesh kjp, how many times do you have to proclaim that you're leaving the thread before you actually leave it?

  • KJP September 6, 2010 08:44 am

    daniel - wow! still with the 'interpretations' and assumptions... and still people upset over the possibility of a few pieces of paper... lovely links to the legislation - oh, wait... NOT - and lovely elimination of the ambiguity in the legislation - oh, wait... NOT... Read the whole obnoxious piece of legislation and count the times workds like might and possibly and the such are used and then quote links...

    Until then leave this crud to accountants and or accounting packages if you don't use an accountant...

    and yes, Matthew - if you do run a buisiness then you already know that you already do any and all reporting of this type once a year and only once for each vendor and only once for each vendor... and if you have accounting software at all (even Quickbooks) it would do it for you... so AGAIN, if all this pans out and the reporting of a 1099 is demed neccessary you have gained yourself a little pile of paper with vendor addresses on them... and if you do need to report this way and your software and/or accountant can't then you are not keeping very good records and you need someone else running your business... my company already notifies all our vendors of this info every year and we get notified of the same in return... so if you're right and the laws changed then forall of us in business and running legitimately nothing changes!

    and if it doesn't then nothing changes... read the legislation - the whole thing - no cherry picking pieces - no op-eds - no online 'rants' like this or any other...

    I can't even believe that this is still occupying attention and least of all mine... officially 'un-subscribing' to followup comments!!!

  • Daniel September 6, 2010 06:30 am

    Here's a good summary of the changes:

    Gear up for expanded 1099 information reporting starting for tax year 2011.

    A little more detailed information is found here:

    Expanded 1099 Reporting Requirements for 2012 and Call for Public Comment

    And finally, from Tax Lawyer's Blog, we have this:

    Small Business Network Protests New 1099 Reporting Requirement

    Of course, as always, seek the council of your tax adviser to determine to what degree these changes (and yes, these are changes) affect you and your business. You shouldn't be running your business on the advice (or rants) of any comments posted here or ancillary links used by anyone.

  • mike September 6, 2010 05:54 am

    Matthew if you are a legitimate business, you are doing that anyway.

  • Mike Rennick September 6, 2010 05:38 am

    Millions of businesses in the US have been required to do this for years. It has nothing to do with the Healthcare legislation. What's wrong with getting businesses to pay taxes?

  • TheTodd September 6, 2010 04:31 am

    Why was this political crap dragged in here? Why was this not researched for facts before you posted it as well. What I see here is nothing more than fear mongering. The actual text of this is written on the house.gov site, and is not even CLOSE to what was posted. As for 1099s, they have been done like this for maybe 30 years now. Like I said, this was an underhanded attempt to spread fear where it shouldn't have been done. I really wish some people would grow up and read facts.

  • Matthew Dutile September 6, 2010 03:41 am

    KJP - for many commercial photographers, it represents substantially more than a "few pieces of paper." Many will easily pay out over $600 to multiple vendors in one shoot. Think location fee, make-up, hair, assistants, stylists, rentals, set construction, etc. It can build up very quickly. Now multiply that by dozens of times a year. That's a lot of paperwork.

  • KJP September 6, 2010 01:40 am

    truly - this is getting rediculous! I'm done - no more - go bicker amongst yourselves over the 'possibility' of writing a few addresses on a few sheets of paper as if you've just been sent to teh depths of hades!!!

  • KJP September 6, 2010 01:39 am

    again - that is an interpretation - not language from the 'actual legislation'... is this sinking in yet - you are all quoting things other than the actual legislation and claiming it is the actual legislation!!!!

    STOP! Please get your souces right!

    the 'Independant Sector' is NOT the government and did NOT write the legislation!!!!

    Is this sinking in yet!?!?!?!?!

  • Matthew Dutile September 6, 2010 01:01 am

    Mike, it doesn't mean voting this down changes the healthcare bill. It just means we can strike this rule down.

  • KJP September 5, 2010 10:22 pm

    "Might" - "Maybe" - "Could"... and the biggie... "CASH"...

    Read people... Read... Don't just assume...

    http://taxes.about.com/b/2010/06/15/expanded-1099-reporting-starting-in-2012.htm

    All aspects of this 'New Legislation' are littered with the words might, maybe and could... the 1099 has a very specific set of purposes and you are all panicing over the words 'might', 'maybe' and 'could'....

    Truly - I repeat - if you are a business you report a breakdown already - and if you don't then you are not a business... you're a person with a hobby using coroprate tax benefits...

    truly - think people... Yes, MISC can mean anything, but if they use the word 'might' in the legislation or these arlicles (or quotes from the actual IRS for crying out loud!!!!) one more time then the sound of laughter will litterly shake the planet on its axis...

    I'll do the hypotehical again -

    how many 'vendors' do you have?
    how many do you pay in cash?
    how many of those do you give over $600 a year in cash?

    the answer to that final question is how many times you'd need to right an address and dollar amount - that is the whole stupid 1099 form... so if you want to panic over this then you are panicing over the possibility (based on this interpretation) that you'll have to wirte one or two copmanies addresses on one or two sheets of paper... WOW!!! That there is a lot of hypothectical paperwork ain't it!!!!!

    So if I'm right you have nothign to do - if you're right you have to write an address! Truly! That's what this is all about!

    I can't think of a photographer that would have 1000's of vendors whom they each of they pay over $600 in cash to every year! Can you? Multibillion dollar coporations would have accounting systems to print the forms - so don't even try to defend the panic from that angle...

  • Daniel September 5, 2010 01:30 pm

    From the money.cnn.com site that comes up in the google results:

    "Starting in 2012, that changes. All business payments or purchases that exceed $600 in a calendar year will need to be accompanied by a 1099 filing. That means obtaining the taxpayer ID number of the individual or corporation you're making the payment to -- even if it's a giant retailer like Staples or Best Buy -- at the time of the transaction, or else facing IRS penalties.

    In essence, the 1099-Misc is having its role changed from a form for tracking off-payroll employment to one that must accompany virtually any sizeable business transaction."

  • KJP September 5, 2010 01:17 pm

    Presumably? that is what you are basing this on!

    My business already reports what we pay - there is already a page to do that on my tax return... you are still all misreading this... businesses already report what they expense and where it goes!!!! A 1099 is for very specific things - and most frequently used for things like subcontractors that aren't incorportated!

    You 'quote' the words 'backup withholding of federal income tax' right in your little rant there - so you ADMIT IT IS IN RELATION TO 'INCOME TAX'... backup withholding of federal income tax!!! think about that for a moment and then with any luck your lightbulb will come on!!!

    I'm done. go ahead and fill out 1099s until the cows come home...

  • mike September 5, 2010 01:09 pm

    If doing alittle paperwork will help tens of millions of people be healthy...big deal. I bet there are more than one of you "pro" photographers that will benefit.

  • fortunato_uno September 5, 2010 01:08 pm

    It's true. Any business that does more then $600.00 will have to submit a 1099 form to the irs. Now this has nothing to do with healthcare, but it is part of the plan. While everyone was worring about the thought that they would get free health, they were actuallt Not told how this supposed free health care would be payed for. There will be more surprises (like the tax's on your preexisting insurance). Like Nancy Palosi said, We Will Have To Pass This Bill To Find Out Whats In It !!!
    Hate to see this sight deal with polatics, but thats what we Americans get for wanting something for nothing.
    My advice? if you can't write the tax's pff at the end of the year, have someone else by what you need (so they won't have to deal with the tax's that would otherwise be charged).

  • Brooke Meyer September 5, 2010 01:04 pm

    I Googled. This is speculation, written in Jello.

    "Starting in 2012, if your business pays a corporation $600 or more in a calendar year, you must report the total amount on an information return. Presumably, Form 1099-MISC will be used for this purpose, or the IRS will develop a new form." - Presumably? This is the current reporting limit and the rules for 2011 aren't done let alone 2012.

    "Another burden: Your business must also obtain a TIN from each affected payee to avoid the requirement for backup withholding of federal income tax." - Same as now!

  • Daniel September 5, 2010 12:47 pm

    Google "new 1099 reporting requirements" and see that indeed there are new requirements, and they do result from the new health care legislation.

  • KJP September 5, 2010 12:45 pm

    Exactly - the 1099 has existed for a very long time and has nothing to do with anything mentioned in the article - the only way it could possibly apply via healthcare would be if you paid a doctor $600 or more in cash and the doctor was maybe a partnership and not a corporation - MAYBE... but never for products like lenses or any other product...

  • Brooke Meyer September 5, 2010 12:40 pm

    This isn't new. Any incorporated entity ie our Homeowners Association or a family owned Machine Shop is supposed to report payments of over $600 to vendors. This is a decades old requirement. This has nothing to do with purchasing a lens or health care legislation. That is simply wrong.

  • Jake September 5, 2010 12:09 pm

    Because credit card purchases are exempt, many businesses will respond to this new law by making most or all of their purchases by credit card. It's almost as if this law were created precisely to benefit the big credit card banks! Additionally, a repercussion may be even more price increases across the board on all goods and services because merchants will ned to compensate for the additional loss of revenue to credit card merchant transaction fees.

  • Daniel September 5, 2010 10:24 am

    @kjp -- Yes, read the new rules, because it does apply to things being stated here. The rules are changing and it includes reporting on corporations.

    Here's a quote from the Independent Sector's New Reporting Requirements - Form 1099:

    The recently enacted health care reform law will expand the reporting requirements for Form 1099-MISC business and nonprofits must file annually for individuals and partnerships to whom they paid a total of $600 or more in the calendar year for rents, services, and financial transactions. The new law, which will take effect in 2012, will broaden the requirement for filing a Form 1099-MISC to include all corporations (except tax-exempt organizations) from whom a business or nonprofit has purchased $600 or more in goods, as well as rents, services, and financial transactions.

    Also check out the following:

    Get Ready for Onerous New 1099 Reporting Rules (Accounting Web)

    IRS starts mopping up Congress's tax-reporting mess (CNN Money)

    1099 Filing Requirement in Health Care Reform Law

  • KJP September 5, 2010 09:59 am

    Please, please, please everyone stop panicing over this - read the IRS form/document - it does not apply to the things being said here... it is for very specific purposes and those purposes are basically for our purposes here for income paid to persons for services rendered when the person providing the services is not incorporated...

  • Matthew Dutile September 5, 2010 09:55 am

    It doesn't cost you more. It's simply a lot more paperwork for cash and check transactions. Which can be quite a lot.

  • KJP September 5, 2010 09:53 am

    a 1099 is simply notification to the recipient of the money that they are responsible for paying taxes on the income and for notifying the IRS that you gave the person said money - it does not cost you anything and you are responsible for no taxes if you are the person issuing the 1099... it is simply a reporting document...

  • pz September 5, 2010 09:39 am

    What is the source of this nonsense? Daniel, my health insurance premiums could not be any higher than they are already. Maybe now they will actually pay for something.

  • KJP September 5, 2010 09:38 am

    1099's have always existed, but have never been required to be issued to other incorporated organizations (though some places do anyway) - they are really meant for if you for instance hire an independant contractor who is not incorporated to do work for you or if you purchase from an individual or DBA for instance... it is to make sure that they report the income that they got from you... so if they are for instance not a corporation then the government wants you to submit a 1099 to make sure the government knows about the person's income and the person reports and pays taxes on it...

    So you would not 1099 your local camera store or Amazon or any such entity (though you could I suppose if you wanted to but what would you possibly have hired Amazon to do for you) because they are incorporated and registered... unless the rules changed drastically as to the 1099... but as I understand it if for instance you hire your neighboor to do work for you and pay him $1,000 then you must 1099 him as you are paying him and not a coproration and he is not your employee so you are not giving him payroll and therefore not doing all the witholding and reporting that would be associated with payroll...

    I've never seen the 1099 used in regard to purchase of a product at all... and can't image how the 1099 would apply to the purchase of product...

  • Jenny September 5, 2010 07:05 am

    Wait, so if I, as a sole proprietor/part-time photographer, purchase any piece of photographic equipment (or spend money) over $600, I have to 1099 the business I paid? Is this only if I buy with cash? What if I buy from, say, B&H online using a credit card or debit card? I'm confused by this.

  • TheresaZ September 5, 2010 07:03 am

    So photographers have to go through these extra steps so that camera companies can be monitored? Why can't the government monitor them? And will this effect photographers when they write the new equipment off on their taxes because it's used for their business?

    Thank you for the info.

  • Daniel September 5, 2010 06:00 am

    This should come as no surprise to anyone in the U.S. as there were many, many voices proclaiming what a burden the new health care reform legislation would place on small businesses. This is just the tip of the iceberg. Americans might get another surprise when they find out how much their health insurance premiums rise next year.