The Tax Man Cometh
Ben Franklin once said, “But in the world nothing can be said to be certain except death, taxes, and forgetting your double A Batteries on the way to a big shoot.” Alright, I may have taken some liberties with the whole batteries thing, but seriously, I have to stop at a gas station around 30 times a year to pick up some fresh AAs because I forgot mine.
Here at Totally Rad, we can’t really help you with the bit about death, and right now we just aren’t able to fly around the country dropping off batteries to those in need (maybe one day…a guy can dream, can’t he?). However, with Valentine’s Day now behind us, April 15th is now looming on the horizon, just two months away. Luckily for you, tax tips for photographers totally falls into our jurisdiction.
Here is a list of ten basic things to do to be prepared for April 15th, or as Jeremiah circa 2006 liked to call it, “HOLY CRAP TAXES ARE DUE TODAY!”…day.
1. Get started NOW!
Come April 15th you can either be sitting back drinking a martini, or you can be running around, hunting for receipts, and working on an ulcer big enough for a grapefruit to fall through.
2. Get organized
Once you find all those crumpled receipts, mileage logs, and bills keep them in a folder for future reference. A couple of surefire ways to show Uncle Sam where your money went are to either buy online and use an e-mail account with a searchable inbox, or set up a checking account for all of your business expenses.
3. Don’t Forget Self Employment Tax
When you’re working for the man in the city, he pays half of your Social Security and your Medicare taxes. That means when you’re self employed, you’re liable for the full amount!
4. Two Things About Sales Tax
You owe on everything you bought and didn’t pay sales tax on (especially if you’re deducting it), and you’re going to owe tax on any tangible items that you’ve sold. You really should be collecting sales tax from your clients at time of purchase, because no matter what your state is going to be collecting that money from you. Unless of course you live in Oregon…bastards.
5. Have A Plan For Deductions
Go ahead and write off your beautiful new camera and set of prime lenses, but keep in mind that the government is going to expect your business to eventually become profitable. This means that if after a few years your business hasn’t been making any money, and has just been a way to write off awesome gear, they could open your old returns, disallow your deductions, and make you liable for back taxes.
6. Remember Depreciation
Don’t forget that any equipment you buy that you expect to use for more than one year needs to be depreciated over the life of the item. That means you need to estimate how long you’re going to be using that awesome new camera body, and how well it is going to keep its value. If it is a Canon, go ahead and write it all off, it probably won’t see next years tax return, ZING!
7. Be Careful Deducting Personal Space
Do not fall into the trap of writing off personal space as a deduction for your business. If you run your business out of a home studio, report an accurate percentage of the space your business takes up. Few things are better at triggering audits than if you tell the IRS 80% of your apartment is actually your studio.
8. There’s No Free Lunch
You only get to write off meals where you actually conducted business. That means that time you locked yourself in a car for lunch to avoid a bride’s mother doesn’t count. Also, unlike most deductions, you’re only allowed to write off 50% of the total cost of a business meal.
9. …Or Free Gas
Yes, you can deduct mileage, but only for the miles that are not part of your daily commute. Those ten miles you drive to and from your studio between 11 am and 4 pm don’t count (to that one photog who just nodded because those are your actual hours and commute, I hate you). However, deduct every single one of those 200 miles you drove for that early morning shoot in the middle of nowhere.
10. …Or Free Long Distance
Go ahead and deduct your iPhone and its data plan, but only if you just use it for business, and already have a phone for personal use. Uncle Sam just isn’t ready to give us a tax break for playing Angry Birds.
This list could have easily been 1,000 tax tips, and still not have covered everything you need to know. My best bit advice for you is to hire someone. With tax law changing every year it is hard for easy filing programs to keep up, and oftentimes tax professionals more than pay for themselves with the money you save on deductions you could have missed.
I hope these tips help, and I would love to hear some of your top tips either by @gettotallyrad on Twitter, or commenting on our Facebook Page. One last thing, if you’re a Canon shooter from Oregon, who works at a studio 10 miles from his house from 11 to 4, I am in no way sorry for picking on you.
Postscript, Disclaimer, and General Legal Babble
We’re not attorneys or accountants – just normal people who like to be in the know about these kinds of things. If you have questions about these things, seek professional assistance. We make no warranty about how this article’s advice applies to your specific situation, or its accuracy in any particular case. If you do go out and act directly on anything in this article, then you agree to hold Totally Rad Inc. harmless for any mayhem or misfortune that may occur. Seriously. When in doubt, ask an accountant. xoxo –The Legal Dept.