Just returned from Sal Cincotta’s Shutterfest 2014 last week, it was an amazing experience. I met so many great photographers and felt like I was genuinely able to pass on knowledge to help them with their photography businesses. Educating is a great thing, but beyond that, being part of Sal’s mission to help photographers be successful by providing non-bull$hit information, that’s priceless.
When I was first learning wedding photography, I definitely wasted some of my time and money on people and events I thought would help me further my business. I didn’t know any better and I was trusting. After all, these were professionals doing what I wanted to do, carrying on successful businesses just like I wanted to have. The problem was, that didn’t make them good educators. And in fact, some of them really didn’t even know exactly how they achieved their success…
The problem is that everybody wants to make a buck on new photographers, and the number of folks delving out bad stuff continues to grow. One photographer who attended a class of mine told me they liked my no bull$hit delivery of awesome information. That’s the best compliment, seriously.
Keep your eyes open for information about Shutterfest 2015. Sal and his amazing team are shaking things up in our industry in a good way. You won’t want to miss out on this event. Trust me.
One of the classes I taught at Shutterfest was “Sales Tax. Income Tax. Don’t be scared $hitless.” During that class, some questions surrounding preparing a 1099 for second shooters came up. I thought the topic would make an excellent blog post.
What is a 1099?
The 1099 is a way for the IRS to record income from other sources, beyond salaries and wages. There are several types of 1099 forms, such as the 1099-INT which banks issue to be sure you claim your savings account interest as income on your tax returns. The 1099 that photographers are interested in is the 1099-MISC. This is the 1099 that addresses miscellaneous income. If you hire second shooters, web developers, album designers, blog posters, or any independent contractor to provide services for your photography company that equal $600 or more in a single tax year, you will need to complete a 1099-MISC for them.
And guess what, a 1099-MISC should also be given to an independent contractor that is an LLC. And while generally you do not need to send out a 1099-MISC to an S Corporation or C Corporation, there are certain exceptions there as well… [you should consult with an accountant or attorney in your state if you have questions about this]
The whole idea around the 1099-MISC is that independent contractors do not get W-2’s like most employees get from their companies. Therefore, the IRS (or the government) is concerned that income earned won’t end up getting reported. If income is not reported, income tax will not be paid to the authorities. When income tax is not paid, governments are not happy. As I always say, the Taxman wants his money!
Self-employed taxpayers, once they receive the 1099-MISC, will report that income on their Schedule C, which is attached to their tax returns. This also means that business expenses and allowable deductions can offset this income. If the second shooter, for example, only does two weddings a year and sporadically each year, and doesn’t have their own business presence nor intends to, this income may be reported on their tax return as other income.
Again, think about the reasoning as to why photographers are required to issue a 1099-MISC to independent contractors. It is to help document income for the IRS. When a photographer issues a 1099 to a second shooter, they are required to mail a copy of it to the IRS. If the second shooter fails to note that they received 1099-MISC income on their tax return, the IRS will know there is income tax money owed to them. So if you get a 1099, make sure you document that income in your tax return!
Employee or Independent Contractor?
Things can get a little hairy here for second shooters and assistants. Often photographers are not clear on whether they are hiring an independent contractor, or whether they have established an employee relationship with their second shooters. Here are some tips from the IRS to help business owners determine the relationship. And here are some great tips for second shooters to determine their relationship.
Figuring this out is going to be critical for your photography business. If you have an employee relationship, you will then be required to set-up payroll for that person and take out a variety of taxes, as well as issue them a W-2 at the end of year. And actually the list goes on and on once you take on employees. Fess up to this now versus later. The IRS and state governments issue steep fines and penalties to business owners that wrongly misclassify employees as independent contractors. Unfortunately there is no defense to not knowing what was an is required under the law.
Have you heard of the W-9? This is the form the photographer must use to get the taxpayer information of the person they are going to be paying income to. In most of our examples today, this would be the second photographer’s taxpayer information. The second shooter may have an EIN [Employer Identification Number] or may choose to use their social security number for identification. Either one is acceptable on Form W-9.
Many photographers choose to get an EIN which is easy, quick and free to do right here. The purpose of doing that is to protect yourself from having to utilize a personal social security number on form such as these.
** In so many discussions, I have heard photographers who have been asked by business clients for their social security number freak out. Don’t freak out, it’s a part of doing business. Just as you are paying independent contractors for services and getting W-9’s and issuing 1099-MISC forms — folks hiring you as an independent contractor are doing the same.
But be careful here, I have heard stories of business clients trying to claim that personal photos of their family, or a wedding, were 1099-MISC income for the hired photographer. This means they are trying to expense your fee as a business expense for them…and it is quite unlikely that their wedding photography expense is a business expense!
If you are in a situation where you are paying second photographers and assistants for services used in your business and are not sure exactly how to create a 1099-MISC, or whether or not your relationship with that person or company is actually an employee relationship, definitely consult an accountant or an attorney. A professional in your state can help you determine what the requirements are and how to comply with them.