Tax Tactics November 1997 Issue

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Julian Block, a former IRS agent and tax attorney, is the author of "Julian Block's Tax Avoidance Secrets," $29.95 p&h included, 560 pages; (mention you are a PhotoStockNotes subscriber and receive the book for $24.95); 3 Washington Sq, Station 5, Larchmont NY 10538-2032). Julian can be reached on PRODIGY (EXPT16B).

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Self-Employment Taxes

Q. I photograph for several magazines. One magazine's 1099 form reports not only the fees they paid me for the year in question, but also includes sums that compensated me for out-of-pocket expenses. Of course this doesn't agree with my records: I don't count those payouts as expenses (since I know that I'm going to get them back), and I don't count expense checks as income; it's just a wash. Suppose I receive a 1099 form that shows $2,587.53, the sum of $2,500 for photos and $87.53 reimbursement for telephone calls. On line 1, of schedule C of Form 1040, should I list $2,587.53, adding in the reimbursed calls, or just $2,500?

A. Contrary to what many photographers and other self-employeds mistakenly believe, it's not "just a wash." Include $2,587.53 on line 1. And don't overlook the calls, though they were reimbursed. Deduct the $87.53 on line 25 of schedule C (utilities), so as to avoid an overstatement of net profit and overpayment of self-employment taxes, as well as federal, state and city income taxes.

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