Last year was a whirlwind, to say the least, and it’s hard to believe it’s mid-January already. While time flies, taxes wait for no one, and this year we want to be sure you get back as much of your hard-earned money as possible. That’s why we’ve turned to the experts at Natural Numbers Bookkeeping and Taxes in California, an accounting firm with over 20 years of experience to have them run through must-know tax tips for 2022, and answer your questions on topics that can affect photographers and their bottom line. (Note: The following answers apply to businesses registered in the U.S. only.)
Must-Know Tax Tips for Photographers: Getting Answers
1. What deductions are available to wedding and portrait photographers that they often overlook?
There are several, including the following:
- Classes and Conferences—these include in-person and online education to improve their skills and business systems.
- Photography Equipment—not just cameras, lenses and lighting, but batteries, backpacks and holsters as well.
- Software costs—all software purchases and online tools.
- Advertising Costs—all online and print ads as well as memberships fees to blogs, directories and associations.
- Studio/Home Office Space—these deductions are based on the percentage of space used and must be reviewed by a tax professional.
- Travel Expenses—flights, accommodations and car mileage incurred for work-related meetings and shoots. Good practice requires you keep an ongoing log of your mileage, so don’t let the miles pile up before you record them.
- Props—rental fees on furniture, decor and clothing needed for styled and commercial shoots.
[Read: 4 Crucial Tax Tips for Photographers Who Live and Work in Different States]
2. What shouldn’t photographers deduct?
Entertainment expenses of any kind, and personal clothing (unless it has your business name on it).
3. Can photographers deduct meals from their taxes?
Photographers should continue to keep track of business travel meals and non-travel business meals for deduction purposes. Meal expenses should not be lavish or extravagant in nature, and the client and/or a business associate, such as an employee, must be present and provided with food/beverages. In addition to keeping track of the date, amount and location of the business meal, the photographer should also note who was present and the purpose for the meeting. As tax laws regarding meals deductions are dynamic, we would recommend having a photographer set up three meal-related accounts in their books: “Travel Meals,” “Meals” and “Business Meals with Clients.”
4. How can photographers deduct accommodations when mixing work trips with vacation?
Travel expenses and accommodations for destination weddings can be deducted but only for the days the photographer is under contract.
5. How should photographers track their expenses?
At Natural Numbers, we promote the use of Intuit products, such as Quickbooks Online (QBO). It is a robust accounting software that offers room for artists to grow, and it makes it easy for them to share access directly with their accountant. Because it’s a cloud-based platform, photographers don’t have to worry about backing up their books and/or installing new software updates. They can speed up the data entry process by connecting bank accounts to the software.
[Read: Photography Copyright, Contracts and (Everyone’s Favorite) Taxes!]
Several third-party apps also integrate with QBO, allowing end users the opportunity to customize their financial experience. While we’ve not worked directly with other popular financial software products like Honeybook, we are aware that they do have QBO integration. That said, a photographer could continue to use Honeybook to manage billing, contracts and client communication, and by integrating with QBO, they could have one place to reconcile their accounts to ensure accuracy of their financial reporting.
6. Is it okay to use a personal account for any business transactions?
The hard answer is no. When you start your business, it’s imperative that you set-up separate business checking and credit card accounts. You’ll also want to ensure your credit card and any other platforms you use to accept payment, such as PayPal or Shopify, are created under your business name and point to a business account.
Regardless of how your business is structured, if you’re selling your photos and services, you’re going to owe federal taxes, and potentially local and state taxes.
To ensure you have enough capital on hand when the time comes, we recommend setting aside roughly 30 percent of your income in a separate savings account where it will remain untouched over the year.
If you are a sole-proprietor or LLC, you’ll file both your business taxes and personal income tax return at the same time, and if you’re profitable, you’ll likely owe four estimated quarterly income tax payments as the year unfolds. We recommend working with an accountant to help calculate your estimated payments. Failure to pay estimated taxes may result in surprising penalties when your taxes are due.
Want to keep your business as bulletproof as possible? Create an annual budget and set monthly goals for putting money into savings. Keep at least six months of operating expenses in the bank. Even through these crazy times, you’ll have something solid to fall back on.
Tax tips for photographers: Want more information about filing in 2022? Visit IRS.gov/getready for online tools, publications and other helpful resources.
Meline McWhirter is the founder of Natural Numbers, a bookkeeping, tax preparation, and advisory firm based in Ventura, California which specializes in creating and maintaining efficient and affordable accounting solutions for small businesses. With over 18 years of experience, Meline brings an extensive skill set to her clients who rave about her customer service and solid results.
Kelley Healey is a bookkeeper and financial forecaster who joined Natural Numbers in 2007. She is also a founding member of World’s Best Wedding Photos with over 10 years of experience working with businesses in the photography industry.