Darin wrote:
>Hi, I'm contemplating submitting some images to a stock agency, and I want to
>determine how this will affect my taxes before I do it. Any advice would be
>greatly appreciated!
>
I'm no expert, but none have answered you, so..
If you either already have to file an income tax return or earn $400 or
more from self employment, you must report that income on Schedule C or
C-EZ attached to form 1040.
Perhaps the simplest way to understand it is to know that the IRS is
charged with collecting the taxes on every $ you acquire, including
income, Social Security and Medicare taxes. In the case of employees,
employers are responsible for collecting and remitting the employees's
share of all these taxes.
When you have income from any source that doesn't collect these taxes,
you must report it on a separate form because of the Social Security and
Medicare taxes that need to be collected in addition to income taxes.
Just to be confusing, they call these taxes when charged on self
employment income "Self Employment Taxes". That makes them sound like
some special, additional tax for the priviledge of not working for
somebody else, but they are in fact just the same taxes that employers
withold from paychecks for Social Security and Medicare.
From all this comes the definition of self-employment income. It's any
income that somebady else hasn't already withheld taxes from.
So if you sell images, individually, or through a stock agency, and
Social Security and Medicare taxes are not withheld, you must report
that income on Schedule C or C-EZ and pay the taxes with your income
taxes. The other reason to file Schedule C is so you can deduct expenses
incurred in generating the income. For something as simple as you
propose, the forms are dead easy to fill out. I make it even easier by
using TurboTax.
If you make very much self employment income, you will be required to
pay quarterly estimated taxes the following year or possibly pay
penalties for underpayment, depending on taxes due for that year.
If all this makes your head hurt, just use TurboTax or one of the other
tax prep programs. You just fill in the blanks as they ask you questions
and they do all the rest. If you buy a tax program only because of the
self employment income, you should be able to deduct it as a business
expense.
Moose
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