How to legally offset operating expenses without a Commercial License

[FlyWright]

I had considered gun running and the slave trading. Neither occupations are legal so I wouldn't be bothered by paying taxes. Then, I remembered, even at my advanced age, I am still too pretty to go to prison.

...and you'd need a faster boat.

 

[FlyWright]

Awwww, c'mon! When's the last time you saw two large format photographers go off on a tangent on this forum?!!?

When you start a new thread, I'll be happy to move the OT posts over to it.

 

[johnrupp]

wkbo?

Since we’re off topic didn’t you post years back that you cut your teeth flying for WKBO?

 

[syjos]

I am not sure I saw any intent on writing off more than breaking even which I though was the intent, and withing the IRS laws.

Making a profit from a business is the goal of most entrepreneurs. Paying taxes is not that painful.

 

[OldDan1943]

...and you'd need a faster boat.

Nawwww, faster boats attract attention.

 

[ksanders]

Making a profit from a business is the goal of most entrepreneurs. Paying taxes is not that painful.

Yea right.

 

[FlyWright]

Since we’re off topic didn’t you post years back that you cut your teeth flying for WKBO?

I wondered if that was the reference. I'm flattered you remember.

I did it in 1981-82. Mornings and evenings shared with 2-3 of my fellow pilots at Clark Aviation at Capital City airport. I'd have to sign off as "Al Kroeger, WKBO Air Watch One...Clear!"

We used to get casual and call it "KBO" on the air for short and the station management would have a shlt fit! It became a challenge to slide it into a broadcast without them noticing it.

Those were fun times for a young kid fresh out of college with a pilot's license! I still have lifelong friends from those early years with my fellow pilots. We were starving pilots together at a very poor phase in our lives.

They're both approaching retirement soon...each with boats of their own on the Chesapeake. This ought to be fun!!!

 

[FlyWright]

Al, with your successful fishing experience, perhaps you could operate fishing outings for profit/hire. Not that I recommend it.

No thanks. That's like taking something relaxing and low pressure and making it a job. I prefer my relaxed style of 'comfort fishing' for sturgeon. I fish when and how and if I want to with no one else to pressure me to find fish for them. Just the way I like it.

Bridge photography in the summer in the California Delta is enough work for me, thank you very much!

 

[markpierce]

No thanks. That's like taking something relaxing and low pressure and making it a job. ...

Me either.

 

[BruceK]

Al, imagine you are the IRS staffer considering whether the niche business of photographing the bridges on the California Delta is a genuine business activity? It`s a narrow business perspective which involves using a boat I`m guessing you already use on the Delta for recreational purposes, and have done for years. The boat will likely be used part business and part recreational.
The decision might hinge on how it is performing at the end of year 1 and the lodging of the first tax return covering the business. Will it be a stand alone corporation(?LLC), maybe hiring the boat from AK, or is it AK operated? Year one is startup year unlikely to generate a profit, maybe attracting the ire of the IRS. Maybe you will have press articles about the business,interviews etc, incl sample pics, to wave about. Obviously there will be a business plan, you mentioned that I think.
Unless you go into it "with all guns blazing"(at the risk of starting a gun thread), it might look like an attempt to gain tax deductions, and be treated accordingly.
You have to do something which distinguishes it from the raft of "businesses" trying to gain tax deductions without really being a business. I suspect that involves really being a business, and knowing the hoops you`ll have to jump through to satisfy to the IRS.

 

[ssobol]

I had considered gun running and the slave trading. Neither occupations are legal so I wouldn't be bothered by paying taxes. ...

From Forbes:

Al Capone reportedly boasted, “They can't collect legal taxes from illegal money.” He found that wasn’t true on this day in 1931 when he was sentenced to prison for tax evasion.

 

[OldDan1943]

From Forbes:

So true. The feds want to have the ladies of the evening to pay taxes on their earnings too.

 

[psneeld]

Making a profit from a business is the goal of most entrepreneurs. Paying taxes is not that painful.

....maybe the goal of entrepreneurs...but not all hobbyists looking to offset costs...


In a lot of places running a business is painful (compared to the taxes part) compare to a hobby and I believe the IRS difference is what keeps you out of trouble with the legal requirements of running a business.



https://www.irs.gov/newsroom/hobby-or-business-irs-offers-tips-to-decide

 

[FlyWright]

For those without Facebook, here's a link to a shared folder with a few bridge (and other boat related) photos and videos. These are not the photos on the 2020 Bridge calendar.

https://drive.google.com/drive/folders/1hStokKVlJL5aohvlsjPCylPBGo7DPanS?usp=sharing

 

[FlyWright]

Al, imagine you are the IRS staffer considering whether the niche business of photographing the bridges on the California Delta is a genuine business activity? It`s a narrow business perspective which involves using a boat I`m guessing you already use on the Delta for recreational purposes, and have done for years. The boat will likely be used part business and part recreational.
The decision might hinge on how it is performing at the end of year 1 and the lodging of the first tax return covering the business. Will it be a stand alone corporation(?LLC), maybe hiring the boat from AK, or is it AK operated? Year one is startup year unlikely to generate a profit, maybe attracting the ire of the IRS. Maybe you will have press articles about the business,interviews etc, incl sample pics, to wave about. Obviously there will be a business plan, you mentioned that I think.
Unless you go into it "with all guns blazing"(at the risk of starting a gun thread), it might look like an attempt to gain tax deductions, and be treated accordingly.
You have to do something which distinguishes it from the raft of "businesses" trying to gain tax deductions without really being a business. I suspect that involves really being a business, and knowing the hoops you`ll have to jump through to satisfy to the IRS.

Geez Bruce!! You lawyers always overthink these things. My first year business will be bigger than a lemonade stand and smaller than a paper route. I don't think it'll be a problem.

 

[BruceK]

Geez Bruce!! You lawyers always overthink these things. My first year business will be bigger than a lemonade stand and smaller than a paper route. I don't think it'll be a problem.

I took you seriously. Thinking most write offs come early, how to secure those?
An old lawyer`s failing. My apologies.

 

[syjos]

Unless you charter the boat or give tours, it would be difficult to write the boat itself off. Believe me, if there was a way to write the boat off without raising audit flags, I would be doing it.

If you made enough money selling the calendars after writing off the production costs, I don't see why you couldn't write off actual expenses like the fuel and moorage you used during the photo shoot.

When I drive to a swap meet or someones house to purchase items for resale, I record the distance and write off vehicle expense at 58 cents per mile. You should be able to do the same with boat expense for the prorated portion while conducting your photography small business.

Don't start a business as a hobby. Just call it a small business, get a business license (deduction), open a business checking account, report your income on Schedule C and you will be able to deduct a wide range of expenses not available to hobbyists. As long as you have positive income for three out of five years. You will sell more product for higher prices if buyers perceive your business as a real business, not a hobby. Especially if you plan to sell online and/or to people you don't know. Open a PayPal account so buyers can safely send and for you to receive payments. And process credit cards.

Keep good records of expenses, selling costs, postage, vehicle miles etc. Don't get greedy with deductions. Deducting non qualifying dinners, inflated charitable contributions, padded miles etc is asking for an audit. Underreporting income is what gets most small businesses in trouble.

Hire an accountant or CPA to do the tax return for the first few years if you are not tax savvy - he/she would be deductible.

Turbo Tax is pretty good with small business and their support and tax advice is invaluable. I used a CPA for a long time when I had multiple Schedule C's but since I'm down to one Schedule C, I've been using Turbo Tax and wished I had started using it sooner. I tested Turbo Tax for two years while still with the CPA by doing my tax return on Turbo Tax at the same time as the CPA. Turbo Tax caught a mistake one year and the following year a metal roof energy tax credit that I did not know I was qualified for and the CPA didn't ask.

 

[markpierce]

Al, the income will be minor and you should readily support that costs well exceeded revenue. I wouldn't declare the income (bring up the issue with the IRS) unless you advertise. That is, if you believe the enterprise is not a "gold mine" making a profit.

Will trade an "old guy" T-shirt for a calendar.

Al, at left, and fellow boater Ray, with FlyWright in the background at Napa, California (with its very short dock), in 2014:

 

[catalinajack]

Uh, syjos, your observation that, as long as one has positive income in three of five years, the business deductions are okay. To be clear, that means net income, not gross revenue. And to what you are referring is Internal Revenue Code Section 183; but Section 183 only provides an election that a taxpayer can make once the IRS audits and proposes disallowances. Even then, certain fact patterns can negate the Section 183 presumption. For example, large losses in two years with small profits in three years. This is a simplistic example but the point is there are no "automatics" using Section 183. The bottom line is the taxpayer must be able to prove that he had a bona fide intention to make a profit not just to offset some expenses incurred in pursuing a hobby or casual endeavor. However, one is entitled to deduct expenses up to the amount of revenue.

Unless you charter the boat or give tours, it would be difficult to write the boat itself off. Believe me, if there was a way to write the boat off without raising audit flags, I would be doing it.

If you made enough money selling the calendars after writing off the production costs, I don't see why you couldn't write off actual expenses like the fuel and moorage you used during the photo shoot.

When I drive to a swap meet or someones house to purchase items for resale, I record the distance and write off vehicle expense at 58 cents per mile. You should be able to do the same with boat expense for the prorated portion while conducting your photography small business.

Don't start a business as a hobby. Just call it a small business, get a business license (deduction), open a business checking account, report your income on Schedule C and you will be able to deduct a wide range of expenses not available to hobbyists. As long as you have positive income for three out of five years. You will sell more product for higher prices if buyers perceive your business as a real business, not a hobby. Especially if you plan to sell online and/or to people you don't know. Open a PayPal account so buyers can safely send and for you to receive payments. And process credit cards.

Keep good records of expenses, selling costs, postage, vehicle miles etc. Don't get greedy with deductions. Deducting non qualifying dinners, inflated charitable contributions, padded miles etc is asking for an audit. Underreporting income is what gets most small businesses in trouble.

Hire an accountant or CPA to do the tax return for the first few years if you are not tax savvy - he/she would be deductible.

Turbo Tax is pretty good with small business and their support and tax advice is invaluable. I used a CPA for a long time when I had multiple Schedule C's but since I'm down to one Schedule C, I've been using Turbo Tax and wished I had started using it sooner. I tested Turbo Tax for two years while still with the CPA by doing my tax return on Turbo Tax at the same time as the CPA. Turbo Tax caught a mistake one year and the following year a metal roof energy tax credit that I did not know I was qualified for and the CPA didn't ask.

 

[syjos]

Uh, syjos, your observation that, as long as one has positive income in three of five years, the business deductions are okay. To be clear, that means net income, not gross revenue. And to what you are referring is Internal Revenue Code Section 183; but Section 183 only provides an election that a taxpayer can make once the IRS audits and proposes disallowances.

Yes, I am referring to net income and I understand Section 183.

I am not a tax professional. I am describing tax ramifications of a small business in a simple broad outline without getting into minutiae that may be incorrect.

I tried not to show losses in any of my businesses if possible. Bankers get excited when they see a business loss on tax returns when applying for mortgages.

And as I stated on a previous post, the goal of any small business is a profit. I can buy a lot more boat toys with excess small business income than trying to write off a few items with deductions.

 

[Lollygag1]

A bunch of us are discussing setting up a labor co-op. Everyone would start with 10 credit hours and when someone helped you with a project you would give them some of the credit hours, when you helped someone else you would get some. What is nice is that if you are low on credits and want help you start reaching out to others to work with them. Additional benefit is everyone can bring some unique skills to the table allowing everyone to benefit.

I have done this with other services and it works well. Of course it could end up with a bunch of us just drinking beer on someones boat but we are going to give it a try.

 

[ProMaritime]

Fishing charters, which is what you are talking about, are heavily regulated and licensed activities by both the Federal and State governments, especially in California.

 

[ProMaritime]

What you are talking about may be considered commuting expenses which are not tax deductible. You could drive from home by car to you photo subjects and take the photos but you could not deduct all your car expenses. You might get away with deducting the IRS established mileage rate, 50 cents a mile or so. Don't think they have a mileage rate for boats. Big, big red IRS and state tax flag for this bad idea.

 

[Codger2]

What you are talking about may be considered commuting expenses which are not tax deductible. You could drive from home by car to you photo subjects and take the photos but you could not deduct all your car expenses.

I would think that boating to bridge locations might fall in the same category.

 

[billdomb]

I came home with over 3000 photos of our beautiful California Delta bridges...all visited by boat in the course of 25 days and nights.

My daughter, a pro photog and editor for Getty Images, gave me a BD gift of free editing of my photos for a calendar, so now I'm offering professionally edited 8x11 2020 @DeltaBridges calendars for sale on the side as a hobby. I don't expect to actually make a profit this year but I figured it's worth a shot. (See my link below if you like bridge calendars.)

.

Interesting. We're offering phone consultation and psychological aide to those taking bridge pictures. ONLY $95 an hour with 7% discount over two hours.

Must have phone connectivity and charge card.

 

[Tiffany]

Expectations of profit and deductability

That's a great project! I've always been fascinated by architecture, enjoyed photography and imagined myself doing something similar. I'm also partial to abandoned buildings, especially old barns and such.

But nowadays, everyone's got a camera in their phone and fancies themselves a photographer. Even if they don't know enough to hold the phone in "landscape" mode. YouTube is full of poorly filmed and even more poorly edited "abandoned places" videos. Nobody buys "coffee table books" of photography any more. I think I missed my chance.

Capt Tom,
You're correct about the demise of the coffe table photo book as well as other forms of imagery for sale - over a dozen friends are once-successful travel and annual report photographers. One additional concern I have with this "boat deduction" plan is that - at least in Canada, most deduction are subject to a tax department "expectation of profit", which means that longterm losses without demonstrated potential of profitability do not qualify. Failing that test leaves the tax payer with back taxes owing, coupled with interest, as well as other deductions that may be declined as they then begin going through the totality of your tax returns. Caution, caution!!

 

[boatbrain]

How about starting a nonprofit? Citizens for Bridge Safety. Perhaps you can send inspection pictures to the appropriate agencies.
Thinking of a different angle, not a tax professional, so I don’t know if it would float.

 

[koliver]

Yea right.

Having to pay taxes is the goal of all entrepreneurs. The alternative means you are losing money on every transaction.
Now Minimizing taxes is another goal of every entrepreneur.

 

[BruceK]

How to Illegally Offset Operating Expenses

Might have been more fun.

 

[OldDan1943]

I am happy to write off the interest paid on my 2nd home.