Tax Tips for Photography & Videography

Hello, I’m LaQuitta Jones, a tax accountant with Terrell Tax & Planning, LLC, Atlanta’s premier small business tax accounting firm, where I specialized in maximizing profit and minimizing tax. Thank you for your time, I wanted to share with you some tax tips for the photography / videography industry. Numbers are my passion, however, I do understand that most in any creative environment or business owners as a whole, do not share in this passion, and did not become a business owner to rumble with numbers but to share their gifts (services) and creations (products).

Who Am I

The Photography industry which includes videography, has experienced change after change as digital cameras and postproduction technologies continue to increase.

To survive the tidal wave of technology, photographers have to increase their efficiency and availability, as well as focus on niche markets, such as commercial, weddings, events, fashion, sports, etc. Despite technology, the photography industry is a $10B industry, and is expected to improve slightly in the next five years.

The Business of Photography

Here’s Some Things To Consider…

Your business requires you to “focus” on pictures not accounting, taxes or numbers…

These days everyone has a camera and video recorder, whether via smartphone or personal digital camera. However, owning a camera and snapping shots is very different than creating professional pictures and running a business.

When one goes the professional route, they are no longer fulfilling the desires of their hobby. This is an extremely important fact to consider: Hobby or Business? The IRS states the difference is a “profit motive”, once profit (income – expense), is earned, you are a business. 

HOBBY vs. BUSINESS

Hobby or Business, is not something that is forced on you by Uncle Sam, you are allowed to decide, so ask yourself:

1. Do I earn money by providing services? 2. Do I spend money to provide services? 3. How much time do I spend on my work? 4. Do I possess the knowledge to operate a business? 5. Do I seek ways to earn a profit with my services?

Once you decide to make a profit and do business, whether a freelancer or business / studio owner, you must conduct yourself differently.

Earning a profit is important to a business, however, it should not be the only concern. When you began to make financial transactions, such as purchasing equipment, creating invoices, traveling to photo-shoots, etc., as a freelance photographer, videographer or business owner, you must maintain an accurate account of the details surrounding each transaction, such as receipts, invoices, bills, etc., this is the process of bookkeeping.

Accounting for me is fun, I love it, dealing with paperwork, tons of numbers and analyzing reports, is my passion. However, for you it doesn’t have to be a love but neither does it have to be stressful or exhausting. Accounting and taxes will be a huge function of your business, so getting familiar and comfortable with them will make your business life, well less taxing.

While you will come to love the freedom that comes along with being in business for yourself, the process required tomaintain the business or better yet growit, takes precision, strategic decision making, knowledge of what you are doing in business as well as how you’re doing it.

1.Choose your ownership structure, the next most important step after deciding whether you have a hobby or business. Your choices are:

• Sole Proprietor – Most common for freelancers• Partnership – If you’re operating with another

person • Corporation – to eliminate personal liability

There are pros and cons to each, one of the biggest mistakes a business owner can make initially is choosing a structure that isn’t advantageous to business growth. Please consult a professional, prior to deciding your ownership structure.

Here’s what you need to know about accounting to run your photography business.

Quick note: Once you begin earning a profit of more than $50,000, consider converting to a "S" corporation in order to eliminate your self employment tax, this structure put the responsibility of your retirement, social security and medicare, in your hands. There are pros and cons, of course, more paperwork involved, but the tax savings are enormous and worth the increased complexity. Please consult a professional prior.

2. Next, your financial records provide an accurate picture of your income and expenses, maintain them in an organized folder filing system, while consistently, inputting them into a properly setup accounting system, ideally once a week, for 2-3 hours.

Knowing where your business stands financially is the key to small business success, if you don’t know

your numbers, you don’t know your business. The goal is to know exactly how much you make and

spend each month in your business.

Many photographers underestimate how much money realistically is required to operate a business, understanding the cost and benefit (how much you could earn) from basics such as, equipment, lighting, studio space, travels, marketing, printing, utilities, etc. are often overlooked but are just as essential to your business as your camera.

One bit of bookkeeping that trip many in this industry, is recording deposits or retainers. If a deposit or retainer is non-refundable, it needs to be tallied as income for the year in which you receive it. So for all those summer weddings booked in the winter, make sure you have your years correctly marked.

Quick Note:

In addition to income, your expenses and other spending must constantly be on your mind.

3. Here are typical expenses for photographers and videographers:

• Book, magazines, reference material • Legal and professional fees• Business meals and entertainment• Cabs, subways, buses• Memberships (professional organizations)• Film developing/processing• Messengers, private mail carriers, postage• Gas and electric• Internet/web site• Stylists/makeup• Tax preparation• Telephone

• Business Insurance• Equipment• Film Supplies• Mortgage interest/taxes• Office supplies• Promotion• Props• Software• Staff fees• Studio rent• Studio supplies• Travel

The business portion of these will be deductible, lowering your overall tax payment in the end.

DEDUCTING TRAVEL EXPENSES

Traveling will be a big part of your engagements, expenses incurred, can be written off against the income you earn and will lower your tax obligations. Such as, gas, flights and lodging expenses. Items you pay for but are reimbursed by your client are not allowed to be written off.

As far as your vehicle, there are two ways to record expenses, first, track your miles and multiply them by theIRS standard mileage rate. Then, track various automobile expenses, including insurance, repairs andmaintenance and multiply the total amount by the percentage of business usage. (i.e. you drive your car 80% of the time for personal usage and 20% for business, you would total your vehicle insurance and multiply by 20%). These rulesand laws change annually, seek the advice of a professional prior to preparing your own taxes.

DEDUCTING YOUR OFFICE OR STUDIO SPACE

As a photographer / videographer the world is your playground, from nature, reception halls, to rented studios, your craft is used everywhere. But when you use an indoor space, such as a studio or office it can be expensed at the end of the year, along with telephone and utilities you pay. Yes, even if it is your home, you are allowed to deduct a portion of your mortgage, rent and utility payments.

Meals and Entertainment

One misconception about this expense, is that most business owners think they can deduct all of their meals, any time they have one during business hours.

This is not true, there has to be a direct relation-to and necessary purpose for the meal, such as a business meeting with a client or potential client, traveling away from home, and things of this nature. Also, Uncle Sam does not give full write-off for food, it’s treated differently than other expense, you can get 80% or 50% of the cost as an expense. Please consult a professional to decipher this for you.

4. Taxes for photographers and videographers can be a confusing / tricky situation, where an error can not only be costly but illegal and for that reason, I will not go into the ins and outs, the do’s and don’ts simply because the goal of this presentation is to remove as much confusion concerning your operations as possible.

Some taxes you should pay close attention to are:

Income – (Federal and State)Sales and Use – (In some instances and states)Payroll – If you have employeesSelf Employment – When you earn $400 or more in profitBusiness License – Require to operate as a business

Finally, your main goal is to stay focus and create amazing images…

MAINTAINING THE FOCUS

As a business owner, there are many things to consider, without having to factor in accounting and taxes.

Indeed, as a wedding photographer you want to spend most of your time focusing on what you do best: meeting and coordinating with clients and, of course, capturing beautiful pictures. That sure beats constantly having to look over your shoulder for Uncle Sam.

The above is just the tip of the iceberg whether you are in business as an owner and or freelancer; however, they serve the purpose of providing you direction on being successful in the industry you love.  Small business success, is another passion of mine, you’re success is my success; my company goal is to be of value to you and help entrepreneurs and small businesses do big business.  Thank you again for being proactive with your business and finances, good luck and best wishes with all your future endeavors, now go grow that business…

Call To Action:So if you agree accounting is and should be an important aspect of your business, your next steps should be:

1. Get a “Free Consultation” from an accountantcall (404) 720-4232 or email: laquitta@terrelltaxandplanning.com

2. Keep accurate, timely records of each transaction you make in your business.

3. Select an efficient financial record keeping system (software), that you understand and will keep updated regularly.

“Numbers Don’t Lie, People Do”, You Should Know Where Your Business Stands Financially…

Terrell Tax & Planning, LLCwww.terrelltaxandplanning.com (404) 720-4232