Tax and Accounting Tips for Photographers
Whether you’re a professional photographer or just dabbling in photography as a hobby, it’s important to understand a few basic concepts when it comes to taxation and accounting. A basic understanding will help you avoid issues with the authorities, maximize your take home revenue, and plan for long term financial success. In this article, we’ll provide some tips on tax and accounting for photographers. We’ll discuss the different types of deductions that are available to photographers, how to keep track of your income and expenses, and other important considerations.
Note: the author is not a registered investment, legal, or tax advisor. All information and opinions expressed in this article are from personal research and experience of the author and are intended for educational purposes only. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.
When it comes to taxes, organization is key. Staying organized throughout the year can make tax season much less stressful, and it can also help to ensure that you get the most out of your tax return. Having a system for tracking receipts and expenses can help you to take advantage of deductions and credits, and it can also help you to spot errors or discrepancies. Additionally, staying organized can help you to keep tabs on important deadlines, such as the due date for filing your return. By taking a few simple steps to stay organized, you can make tax season much easier on yourself. Here are a few tips for staying organized.
Organization Tip 1: Use a Good Studio Management Software
Good studio management software will help you keep track of your clients, sales, invoicing, and much more. If you run everything through a single system, you’ll be able to see all of your data in one single place, making it easy to pass on to your accountant or to input into your accounting software. Having to pull your revenues from multiple places, like Paypal, Venmo, Cash App, Checks, etc can lead to a big headache and cause potential errors.
Organization Tip 2: Create a Separate Bank Account and Credit Card for your business
Most bank accounts and credit cards are 100% free to open up. While it can take some time, this is one of the most important tips we can offer when it comes to staying organized. Again, it comes down to having a single place to find all of your revenues and expenses. Otherwise, you might find yourself digging through your bank and credit card statements to find all of the business income and expenses.
Consider Accounting Software
If you hire an accountant and you stay organized, you may not need a dedicated piece of accounting software. However, if you file your own taxes, you’ll definitely need one. Research and consider software like Quickbooks, Freshbooks, Sage Accounting, Wave Accounting, Zoho Books, or other to see which is the best fit for your budget, your location (some specialize in specific countries), and more.
The next tip is to hire a professional to help or at least consult you on your taxes. A tax professional can ensure that your return is accurate and complete, and they can also help you maximize your deductions and take advantage of any tax breaks that you may be eligible for. In addition, a tax professional can provide peace of mind by taking care of the stressful details for you. So if you’re feeling overwhelmed by the thought of preparing your taxes, consider hiring a tax professional to help ease the burden. This will save you lots of time and potentially lots of money if they can help you take full advantage of all of the deductions available to you. Also, you can find tax professionals for a wide range of budgets and a wide range of services, so you don’t have to break the bank every year.
Save for Retirement
Even if you’re in your 20s or 30s, you can benefit from putting away money now for your future. The sooner you start saving, the more time your money has to grow. Photography can be a physically demanding profession, and you may not be able to do it at the same frequency as you age. Knowing that you’ve put away money for your later years can help reduce stress and anxiety about the future.
There are many ways to save for retirement, such as 401(k)s, Traditional IRAs, Roth IRAs and annuities. Talk with a financial advisor to find the best option for you. But don’t wait too long to start saving — the sooner you begin, the better off you’ll be in the future.
To maximize your take home, make sure you are taking full advantage of all of the deductions that you qualify for. You can generally deduct the business portion of the following as part of your business expenses. First, let’s discuss a list of common, straightforward expenses and deductions, then let’s get into some of the more complicated ones.
Talk to your accountant to make sure you’re taking advantage of each of these.
- Equipment – Cameras, lenses, accessories, computers, and other work related purchases
- Office Supplies and Expenses– envelopes, pens, stamps, label makers, paper, printer toner and more.
- Childcare while working – Read more from the IRS
- Phone and Internet used for business
- Business Cards and Other Print Material
- Advertising and Marketing Expenses – paid ads, flyers, bridal shows, etc
- Employee and contractor salary and pay
- Business Legal fees
- Accounting fees
- Business insurance
- Equipment Insurance
- Business Travel
- Vehicle Expenses – Read more from the IRS
- Meals and Entertainment – Read more from the IRS
- Home Office (and related expenses) – Read more from the IRS
Note: Clothes and wardrobe are generally not deductible unless they are necessary and usable only for work. Read more here.
Don’t Forget Sales Tax
Be sure to check with your state about their rules on sales tax. In California, for example, photographers are required to pay sales tax on the entire photography package if any physical product is delivered (not just on the physical product itself). Research the nuances for your state, since they may potentially affect the structure of your packages and pricing.
Understand the Hobby Loss Rule
Losses are understandable for any for profit business. However, losses year after year can present some issues. According to the IRS, “An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses). If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.” Read more about it here.
For some photographers, dealing with taxes can be a complicated and stressful process. There are a lot of rules and regulations to keep track of, and it can be hard to know which deductions and credits you’re eligible for. But the more you know about a topic, the less daunting it becomes. Hopefully the basic information in this article points you in the right direction and gives you a good starting point from which you can make some basic decisions and do further research.