In honor of today’s date, I decided to dedicate this whole post to TAXES! Yippie!
Most people think owning a photography business is all about taking pictures and designing pretty wedding albums. NOPE. That’s about 10% of the job! The other 90% is all the other stuff like paying taxes and keeping good financial records. I give a lot of credit to my account who also happens to be my friend’s father… shout-out to Dunlap & Associates in Chalfont, PA! You guys rock :)
I think the best way to learn is by asking questions. When I first started this crazy journey about three years ago I reached out to so many other photographers trying to soak up as much information as possible. How do I START? How do I transition my photography from a hobby to a business? Well, here are some helpful tips that I have found along the way:
+ Become Legitimate
As soon as you receive any form of payment for your photography services, you need to become registered with the state you live in. Personally, I registered Caroline Morris Photography as an LLC through Legal Zoom. It was fast and easy and I got certificates and other fun stuff saying I was a legitimate registered business within the State of Pennsylvania. I choose to become an LLC because if someone came after me (God forbid!) only my business assets would be at stake. An LLC made sense to me, but you have to do what’s right for YOU! At this point my hobby became my career :)
+ Sales Tax
Every state is different with sales tax. In Pennsylvania, I am required to charge 6%. I put this 6% into a separate business bank account and I act like it doesn’t exist. You need to file a sales tax return every quarter (April, July, Oct, Jan). I do this online via E-Tides. I keep track of my sales tax I charge throughout the quarter and enter it on the website. I file online, print out my sales tax coupon and mail that sucker in with a check and BOOM! All done. I also print out a copy of my sales tax return to compare it at the end of the year to make sure I have the correct gross total.
+ Keep Your Money Separate
I have four bank accounts — 2 personal and 2 business. Whenever I receive payment for a wedding or portrait session, I deposit the check into my business checking account and then transfer 30% into my business savings account. I do this to make sure I have enough money set aside for the end of the fiscal year when I have to pay my federal, state and local taxes. Imagine if you work a full-time job for an entire year and no taxes were taken out and you were responsible to pay all those deductions at once? YIKES! That’s what I have to do. It’s really not that bad once you start making enough money and pay quarterly estimates. That lessens the blow for sure!
+ Track Mileage
In Pennsylvania, I received $0.56 for every business-related mile I drive. Awesome! I have a notebook in my car and before I even put my keys into the ignition I ask myself “is this trip CMP related?”. If so, I reset my odometer and record my totally mileage when I get home. I put the date, event name, general location and total miles I drove. I transfer all that information onto a spreadsheet … this makes it easier for my accountant! I have made it part of my routine and hopefully you will too! It saves me so much money in the long run.
+ Track Expenses
I keep every.single.receipt. Some people might think I’m crazy because I wasn’t always so anal about my money before CMP. If I go to Target (which I often do!) and I am purchasing a client gift and a cute top for myself, I ask the cashier to do this in two separate transactions. I keep my client gift receipt and add it to my “CMP Expenses” excel spreadsheet and that’s it! (sidenote: I would have also recorded my miles to and from Target since it was technically a business-related trip). Typical expenses for me are equipment purchases & rentals, client gifts, business cards and promotional items.
+ Don’t Wait
Please don’t wait until the very last-minute to gather all your miles, expenses and income. It’s impossible to think back on where you drove or what you bought throughout the year. WHAT A NIGHTMARE! You will forget things and you won’t get the maximum deductions when you do your taxes. Create a system for yourself and stick to it! You are only helping yourself.
I hope this information was helpful! Again, this system has worked for me so I thought I would share it for any newbie photographers reading this. Do you have a different way of handling taxes? Please share in the comments below! I would love to hear!!