Just like in any kind of business, you need to file for taxes and claim expenses for your photography business every year. This is why you need to have an accurate record of every single cent that you have spent in operating your photography business. For this, you need to conscientiously keep each and ever business related receipts to verify your business expenditures.
Maintaining the accuracy of your data when claiming expenses for your photography business is very important if you don’t want to get snagged into something unpleasant with the authorities. You’ll find yourself in hot water if you claim the wrong expenses because of your bad record keeping. To avoid this, you need to have a solid system for storing and reporting the money you spent on your equipments, supplies, and other expenses.
To keep your finances and its records in order, you need to have a tax resale number and a system for saving and recording all of your expenses. For the latter, you should have a 12-column account pad or you can use a special software to do and keep your records. Aside from these, there are also other things that you may want to consider doing to ensure that the expenses you claimed for your photography business are correct:
What of your business-related expenses can qualify for tax breaks? There are certain business-related expenses that can qualify for tax breaks so you need to be aware of them. Usually for photography businesses, the list would include cameras, studio lighting systems, lenses, paper sweeps and other kinds of backdrops, light meters, dark room equipments, films, props, backup systems, and batteries. Find out also the other expenses that can give you a write-off. You just need to have all the pertinent receipts ready for the tax bureau.
Keep tabs on your business-related expenses. You would need to establish a system of recording all your business-related expenses for you to be able to keep tabs on them effectively. You can choose using the traditional 12-column accounting pad or you can use a special software to do the capturing, factoring and tallying of your list of expenses. Your option would depend largely on what you are comfortable in using. More and more photography businesses are using software like Quicken or QuickBooks nowadays to make things easier. Using MS Excel can also help.
Not everything is deductible as far as the tax bureau is concerned. Thinking that everything in line with your photo business is deductible can make you make some errors when claiming expenses. One good example here is travel where you would need to prove that the travel expenses you accrued are legitimate. If your client requires you to travel to certain location and you happened to need to buy film or rent a car or eat lunch on location, keep all the receipts to verify every cent you spent. To simplify things when verifying claimed purchases and other expenses, bundle your travel receipts with your client’s invoice.
What about retainers for pre-booked jobs? For pre-booked photo shoots, most photography businesses ask for a retainer from clients. This is quite a common practice and there are certain questions that usually arise about when to claim the said retainer regarding a photography business’ tax account. For instance, it is not unusual for a photographer to receive a check, for example, in December as a down payment for a photo shoot that is scheduled for next summer. Just include it in your accounts of income in that year. When you claim the deposit, claim it in the year it was given.
Trust tax professionals for photography equipment depreciation matters. When computing for your photography equipments’ depreciation, more often than not, it is better to let a professional handle this task. When computing the depreciation of certain photography equipment used in photography businesses like strobes, cameras, meters, and other sophisticated equipment, you would need to calculate it with the use of complex depreciation tables. The law or the regulations here are constantly changing but tax professionals are well aware of these changes and they can do the job a lot more accurately. If you do it yourself and you are using old depreciation tables, there is a big possibility that your tax write-off will be less than what you are entitled to receive.
Keeping track of your business mileage. Tracking correctly your business mileage can be quite tricky so it is very important to keep a detailed and accurate mileage log. Before you start calculating your driving expenses, visit first your tax bureau website or visit their nearest office to get the current rate. If you have a vehicle used exclusively for your photography business, the expenses that you incur for its maintenance, upkeep, and depreciation can usually be written off on your business return.
More often than not, photographers who take the per mile reduction instead of writing off oil, gas, and the rest fare better. A photographer who travels at an average of 15000 miles a year and uses the per mile calculation gets a bigger tax break than business owners who itemizes car upkeep costs.
Accounting for reimbursed expenses. If you don’t want to be caught inflating your write-offs, always account for your reimbursed expenses. Many photographers and photography businesses usually receive reimbursements for lodging, mileage, food, and travel expenses that they incur while on a photography job. To help you separate these from the fees that you received from your client, bill it out in a separate invoice. If you have already billed your client and have already been paid for travel, you can not reclaim it as your expense because you can not ask for reimbursement for the same expenses twice. There’s a little more on this in basic format in my eBook about how to start a photography business.
Take into consideration state and local taxation. With due consideration with the state and local taxation laws, you can clearly know where your photography business fits. You should also know whether your state or locality requires you to collect sales tax on a full contract amount or if only expenses outside the actual photo shoots should be considered for such. Your kind or line of photography also matters when doing your taxes. If you are doing wedding photography, for example, find out whether the purchase and resale of the albums, where photos and proofs are part of the wedding package, are subject to state taxes or not. You should be vigilant and track such expenses accurately.
Keeping tabs on the various money and tax matters of your photography business requires patience and attention to details. To be able to keep an accurate and updated record of your business expenses, be sure to note every expenses as soon as they are incurred and keep all the receipts. Organize your files so that you can easily find what you are looking for when you need them. If you can not do it, find someone who can do it for you. By keeping a detailed record of all the money matters in your photography business, not only will you find it easier to do your taxes, you will also have a clear idea of the financial status of your business.
Like anything related to tax, things change so always clarify these points with your accountant.
..hope that will be of some help to you,