Wedding Videos + Taxes = Headache!

[Jennifer Graves]

I guess it's that time of year and I'm going to have to start contacting tax companies to see if someone can explain this all to me. This is my first year filing taxes for my video business and I'm looking for someone who can maybe help make it a little easier. I'm a sole proprietor, I'm in Indiana, and the only form I got was the sales tax form. My questions is, do I only claim what is taxed (the dvd itself) and can I only deduct what I can charge taxes for (dvd's, labels, shipment)? What about the money I made from labor, can I claim that on my personal taxes? Or all the equipment I bought, can I deduct that anywhere? Maybe this is just a rant and I need to find an accountant, but they're expensive so I'll see if anyone around here can help......

[Chris Davis]

TurboTax handled it fine for me. But it sounds like you may need an accountant. Yes, they're expensive, but tax mistakes are more expensive.

[Mike Oveson]

If you're a sole proprietor any profits (or loss) you made with the company will just be handled on your personal tax forms. TurboTax should handle it fine, I don't see why you'd need an accountant. There's nothing that complicated. Just add your income (or loss) in as additional income that hasn't been taxed and you should be fine. Tax mistakes MAY be expensive, but if you are adding it in as untaxed income then TurboTax should be able to calculate the tax and make the appropriate changes to your refund. You'll probably owe money, especially if you made a good profit with the business.

Also, even if you were to make a mistake on the balance owed (which I doubt will happen as its rather straightforward) the IRS would simply recalculate it and tell you what you owe. And if they miss it and somehow come looking for you later (which is highly unlikely) they're likely to just have you pay the amount that was not paid earlier. Stiff fines and penalties are generally for two categories: fraudulent individuals who are trying to evade taxes, and fraudulent corporations who are trying to evade taxes. If you make an honest mistake you probably won't face high penalties, if any at all. I think people are more afraid of the IRS than they need to be.

[Mike Teutsch]

In the most basic terms, every dollar of income, whether it is from DVD sales or labor is taxable, and should be declared. You bill it and get paid, it needs to be claimed as income.

All of your expenses are deductible, like tapes and DVD blanks, rent, utilities etc.. The exception is your expensive equipment that it not an expendable, like cameras.

Items like cameras, computers, and such are considered capital expenditures, and are not directly deductible, but have to be amortized over a period of years. Meaning, that only a percentage can be deducted each year. And if you do it, you will be taxed on them when you sell them. Big hassle, but that is the way it is.

It is not a bad as it seems, and many tax programs could probably handle it, but when I was in business I used the services of an accountant or bookkeeper. It only cost me about $30.00 a month, and she handled all fed and state forms etc. It is well worth it for your peace of mind.


Hope that this helps some.

Mike

[Tom Tomkowiak]

Jennifer, I usually do our taxes, but a few years ago for a different reason I was in a similiar situation.

Rather than spend a lot of time researching what forms, etc. I needed for federal and state, I just turned all my documentation over to accounting tax pro. Yeah, it cost a bit, but it was a one-time (tax-deductable) expense.

The following year (and thereafter), I was back doing the taxes myself using the previous year's return as a guide.

[Dan Minor]

Jennifer,

I run a wedding video business and have over seven years experience as a tax accountant. This issue has not been answered correctly in the above replies nor can it be. I would be more than happy to steer you in the right direction. Call me @ 941-266-6029. I know longer prepare taxes except for family and friends but I do upkeep my IRS certification and Electronic Return Originator #.

[Dan Minor]

Originally Posted by Mike Teutsch

Items like cameras, computers, and such are considered capital expenditures, and are not directly deductible, but have to be amortized over a period of years. Meaning, that only a percentage can be deducted each year. And if you do it, you will be taxed on them when you sell them. Big hassle, but that is the way it is
Mike

You amortize your startup expenses and depreciate your capital expenditures and you don't have to depreciate and deduct over several years. You can elect a Section 179 and deduct all of the capital expenditures in one year in most cases. It all depends on your situation for the current year.

[Mike Teutsch]

Originally Posted by Dan Minor

You amortize your startup expenses and depreciate your capital expenditures and you don't have to depreciate and deduct over several years. You can elect a Section 179 and deduct all of the capital expenditures in one year in most cases. It all depends on your situation for the current year.

Dan,

I researched your info on Section 179, it took effect in 2003 from what I found, after I sold my business, and that is great! I used to have to write off my equipment over about 7 years, $111,000.00+ machines. About $100,000 in one year, doing smaller stuff in one year---great!!!!!!!!! :)

Time to open another business! Thanks for the info.

I knew someone would know more, I always accept that!

Thanks---Mike

[Waldemar Winkler]

A good tax accountant is well worth the cost which, by the way, is a legitimate deduction for your 2006 tax return. I personally feel very comfortable with using a tax accountant. A professional relationship with a tax accountant will be a worthwhile learning process for you as well. You should receive good advice, clear explanations, and (initially) lots of questions regarding how you have structured your business. Shop around, however. Of the three accountants recommended by our financial planner only one offered a sense of trust as well as a reasonable price. The other two were asking three times the fee and projected too much of a corporate attitude for our liking.

[Stephen Jackson]

I've been in business for three years and have used an accountant from the beginning.

My accountant has been a trusted advisor, a good professional and a center of influence who has referred business to us.

That's one of the perks of not trying to do everything yourself and enlisting the services of other professionals.

[Mike Teutsch]

I still think an accountant is a good choice, and will get you on the right path. If you can go on from there on your own then fine. At least let them set it up for you.

mike

[Bob Harotunian]

If you don't mind taking the time to record your business transactions, you can save the high cost of a good accountant. I can't say enough about Quicken and TurboTax as tools to ease the pain.

[Richard Alvarez]

I'll weigh in in favor of hiring an accountant. Personal experience has shown they have saved me more money than they cost, and they have caught things missed by computer programs.

Absolutely worth the peace of mind.

You can help keep costs of an accountant down, by going in prepared. Have your receipts and costs and income and expenses seperated, not rattling around in a shoe box.

Accountants will ask questions that programs won't. At least the good ones will.

[Mike Teutsch]

I mentioned before that I used an account in my business. I think it is a very wise investment. And, by the way, you don't have to use an expensive CPA, a bookkeeper and tax preparer will do most all the same things for a more reasonable price. The company I used was a lady with two to three employees. She handled probably 200-300 small businesses in the city and prepared taxes at tax time. The cost of this peace of mind was $30.00 per month, and about $45.00 for quarterly months, because of the state and federal forms. When you grow and have hundreds of thousands of dollars, get a CPA or financial planner to show you ways to invest and shelter your income.

But, in addition, I kept complete books for myself on Quicken. It tracked thousands of transactions, items for sale, costs and many other things, and your banking account balances and the printing of checks, statements, etc. which makes you look professional.

I truly believe that the reason I have never been audited my entire business life, in addition to not cheating, is that I hired a bookkeeper or a CPA to prepare my taxes. Their company names and signatures were at the bottom of every form! If you work for someone else and prepare your own taxes and have basic deductions, then fine. If you have a business that you wish to grow and expand then I would suggest at least starting .with a good bookkeeping firm.

When I sold my business and provided financial information to the buyer, every business and financial statement was done by a professional. There were no questions of legitimacy.

Just MHO, but I would start with a professional, and learn your financial program, Quicken or whatever, then go on your own I you have the time. Hopefully, you will be so busy shooting and editing, that you will not have time to do boring bookkeeping tasks.

Keep shooting-------Mike

[Tim Borek]

Originally Posted by Jennifer Graves

I'm in Indiana

Hi, Jennifer.

I operate in Westfield. Any relation to Hal Graves in Indianapolis?

T.J.