Somewhere around the first of the year, many wedding photographers and other creative entrepreneurs begin to feel a nagging, anxious feeling deep inside. No, it’s not the result of one too many holiday parties, but the dreaded “T” word … taxes.
For small businesses, some of the most significant burdens regarding taxes include:
- The time and paperwork involved in preparing tax forms
- Staying within IRS guidelines
- Concerns over getting audited
However, combining the powers of both a tax professional and a business management software can be extremely helpful to wedding photographers. Staying organized, keeping proper documentation and using a photographer CRM program that actually helps with taxes can keep wedding photographers and other creative entrepreneurs sane during tax season.
1. Get Organized Professionally and Financially With A CRM
Let’s face it: contacting leads, communicating with clients, keeping track of invoices, shooting and editing all take up a lot of time. For these reasons, business management for wedding photographers can often be a tedious, burdensome and challenging task.
Many wedding photographers utilize CRM software and apps that take care of everything from lead management to invoice and tax management. These apps are meant to save hours of work that could be spent on other necessary business tasks. CRM apps help to keep your business both professionally and financially organized and feature tasks such as:
- Lead management
- Invoice tracking
- Workflow management
- Configuring tax settings
Workflow management also assists wedding photographers with the numerous tasks and steps involved in moving clients from leads to completed and invoiced jobs.
Keeping Financial Records for Tax Season
Invoice management for wedding photographers can often be complicated and frustrating. Not only is it difficult to keep track of multiple invoices, but it also usually takes a lot of time to keep after clients and be sure you have received your payment. A good CRM will help businesses keep track of invoices and will even automatically send reminders to clients. With a CRM, you can also accept payments safely and efficiently.
The key is finding a CRM that assists with taxes. This way, you can set up your tax rate based on location and even set whether or not you will include taxes in your prices or take out for them later. Having these types of settings keeps your business on track with taxes throughout the whole year.
2. Be Smart About Deductions
When it comes to tax time, figuring out which items can and can’t be deducted tends to be an area of confusion for many wedding photographers. Deductions can help you save money and offset your other expenses.
While it may be tempting to deduct the expense of the endless supply of coffee that helps you stay awake during marathon editing sessions, just remember you have to be within the tax guidelines. Be sure that your deductions are legitimate and you keep proper well-organized documentation. Here are some items that can and can’t be deducted for wedding photographers.
Home Office Tax Deductions
If you work out of your home, as many wedding photographers do, you may be eligible to claim your home office space. To be eligible, the space must be separate from your living area. A simple formula you can use to figure out the percentage of rent or mortgage, utilities, maintenance and taxes that you can claim is to measure the area of your workspace and divide it by the total square footage of your home. A portion of your internet and phone expenses may also be claimed.
Equipment and Technology Purchase Tax Deductions
As a group that relies heavily on technology, wedding photographers know how important it is to keep their equipment current. Luckily, the cost of these expenses is deductible. Anything from computers to cameras, printers and even business vehicles can be claimed, as long as they are used primarily for business and not personal use. You may also take deductions for equipment depreciation.
Travel Expense Tax Deductions
Wedding photographers frequently travel as part of their service. Travel expenses such as mileage, hotel costs, airfare and car rental are fully deductible, while meals are only 50% deductible. Conference costs for industry-related workshops are also allowable. While you can turn your business travel into a vacation, just remember that your amusement park tickets aren’t considered a business expense.
Insurance and Professional Fee Tax Deductions
Many wedding photographers maintain insurance for their business. These fees, along with business license, attorney and accountant fees, may also be deducted. Subscriptions to industry-related websites and publications can also be claimed.
The most important thing to remember about deductions is to keep your receipts and detailed records of your income and expenses. This usually means keeping a ledger or investing in financial software like QuickBooks, rather than stuffing receipts into a shoebox. The idea is to just hold onto them, as your records are your saving grace should you ever be audited.
3. Prepare for Tax Season Throughout the Year
While many small business owners would rather visit the dentist than deal with their taxes, it’s much easier to stay organized all year rather than wait until the last minute. Some common issues that many self-employed individuals face during tax time are:
- Owing money
- Not filing in a timely manner
- Feeling confused and overwhelmed about the whole tax process
The amount of taxes owed is different for every business and depends on many factors, such as your location, business structure and practices. In most U.S. states, sales tax must be collected and paid for any tangible item that you deliver to your clients, although in some states, digital goods are also taxable. Keep labor fees and delivered products distinctly separate if listed on the same invoice, to avoid being taxed on the entire amount.
The type of structure under which your business operates also determines the amount of taxes that you’re expected to pay. LLCs, S-Corporations and C-Corporations are all taxed at different rates, and the process for filing taxes under each structure differs as well. Incorporated businesses are usually subject to payroll taxes and other expenses but are taxed at a lower rate.
Making Quarterly Tax Payments
Owing money at tax time comes as an unwelcome surprise for many business owners. One way to avoid substantial underpayment penalties is to make quarterly tax payments. You pay quarterly state and federal income taxes in April, June, September and January. While you may still owe some money at tax time, the amount will be much lower than if you hadn’t contributed. Quarterly tax amounts are roughly based off of the previous year’s income.
While not filing your taxes on time doesn’t mean a trip to the big house, it may mean that you need to get more organized. Not filing on time results in penalties and interest if you don’t file for an extension. Keeping organized and accurate records of income and expenses is a great way to be sure that you’re ready to go come tax season.
One way to avoid unpleasant surprises at tax time, and alleviate some of the stress involved, is to use a CRM program that allows you to set your tax rates according to your location and set up tax quarters. Tools such as Profit & Loss Reports and Sales Tax Liability Reports can help you determine the amount of taxes you’ve collected and the amount of quarterly taxes that you owe.
4. Find a Knowledgeable Business Accountant
Another way to significantly reduce the stress of dealing with taxes is to hire a qualified tax professional, who can help guide you through all the ins and outs of setting up your business entity and tax schedule. One of the biggest mistakes a small business owner can make is not hiring a knowledgeable business accountant when they first begin their business venture.
Accountants are priceless to businesses in many ways. From record keeping to managing cash flow, they help keep your finances organized and your business moving forward. Hiring an accountant offers the following benefits:
Allows Businesses to Make Educated Financial Decisions
Making financial mistakes can be disastrous for small and newly founded companies. Forecasting revenue for the upcoming year helps businesses set realistic expectations and stay financially responsible.
Helps You Stay on Top of Tax Items
Business accountants guide you in not only what deductions to employ but also help you to determine how much to set aside for tax time.
Secures Your Business If You Are Audited
This is a huge advantage and one that no wedding photographer should ignore. Should you be audited, your business accountant will have accurate records.
Drafts a Financial Plan for Your Business
Having a unique financial plan for your business helps it run smoothly and lets business owners focus on their craft rather than all of the financial details. This is especially helpful for wedding photographers, who often have seasonal income fluctuations. Ensuring cash flow all year round will keep your business moving forward and keep you growing and planning during the “off months.”
Although small business owners may feel hiring a business accountant is just an added overhead expense, the cost of not hiring one can be far higher. In fact, 82 percent of small businesses that fail blame that failure on cash flow problems. Skilled business accountants pay for themselves by adding to your business’s profitability. They also help you keep organized and accurate financial records and ensure your business follows the proper IRS tax laws.
Like many things in life, you get what you pay for, so investing in an accountant who possesses knowledge of and experience in your industry is a huge advantage. To find a professional business accountant, begin by networking with others in your industry, either in person or through social media or online forums. Accountants will also work with you to be sure your tax settings are correctly configured in your CRM software app.
5. Try a Photographer CRM With Tax Help: Get the Táve Business Management Software App
It’s essential for wedding photographers and other creative entrepreneurs to find a CRM software app that assists with taxes. It’s even better to use a business management software app designed specifically for creative professionals such as photographers, event planners, florists, hair and makeup artists, videographers and musical entertainers.
Táve enables you to view all aspects of your business on desktop, tablets and mobile devices. One of the best features of Táve is that it is entirely customizable and can be uniquely tailored to your business needs. The basic templates are already industry-specific and include options for workflows, questionnaires, contracts, emails — and invoicing so you’re ready come tax season.
Collect payments, keep track of invoices and, most importantly, get paid on time. Keeping a steady cash flow helps your business stay afloat and avoid the pitfalls to which so many small businesses fall prey. This app keeps your client transactions organized and in one place.
Tax time will be no sweat when you have Táve. The program allows you to configure your tax settings and generate sales tax reports and to upload receipts and include sales tax on invoices, so your accountant will no doubt thank you for helping make their job easier. With Táve, you can be sure you collect the proper amount of sales and income tax and keep up with your tax payments each quarter.
Táve features excellent customer support with video and messaging chat available and an impressive Support section, featuring articles, webinars and other tips designed to help you make your small business all that it can be. When you’re ready to strike a steadier work-life balance, get Táve. Sign up for your free 30-day trial today!