Most photographers pay more taxes than they should
by Andrew Jordan, Big Picture CPA
“What do you mean I was paying $3,000 a year more in taxes than I had to?!”
My new photographer client was mad, and I couldn’t blame him. I don’t want to pay a dime more in taxes than I have to, either.
The good news for him is that I actually specialize in working with photographers. I knew something my client’s former CPA didn’t know, and that one thing saved my client $3,000 a year in taxes.
Before we dive into that advanced tax strategy, I want to show you things you can start doing today. Here are three tools I use daily that can save photographers like you a lot of money on taxes with minimal effort.
1. Accurately calculate your mileage to increase your deduction.
Keeping track of mileage can be killer. Most of us find monotonous tasks like tracking mileage such a hassle that we put it off until the end of the year, and by then, we’ve forgotten exactly what trips we took. Those small trips that you forget to log can really add up. And, if you’re just guessing at your mileage, you are probably missing deductions and risking losing an IRS audit.
MileIQ is the best mileage tracker I’ve used. It’s an app that runs in the background of your iPhone or Android, knows when you get in your car, and logs your trips without your even noticing. Swipe left if the trip was personal and swipe right if it was business– not too burdensome, right? You can add tolls or parking expenses and make notes to remind yourself which client the trip was for (if that info isn’t already on your calendar). You can pull reports however you want, making it a breeze to hand your mileage to your tax preparer. Even better, here is a discount code: AJOR776A. This code allows you to save 20 percent on an unlimited plan. Follow these instructions to use your promo code since you are unable to add promo codes through iTunes or Google Play. Enjoy the discount with no strings attached.
2. Stop bleeding your profits – keep track of your receipts!
Doesn’t it feel ridiculous to keep track of wads of paper receipts? I’ve always thought paper receipts were clunky and easy to lose. However, keeping track of receipts is not only important in case you get audited, it’s also important so that your business expense report is accurate – you don’t want to sacrifice any deductions just because you lost a receipt and can’t substantiate your expense.
For this, I use Expensify - an app that tracks your receipts electronically. All you have to do is open the app on your iPhone or Android, snap a picture of your receipt, and Expensify will do all the data entry for you. Once you’ve taken a picture of your receipt, you can toss the paper copy – super easy! It’s free to download, but to get full functionality, you may need to pay a small fee each month—the $5 plan is usually a good fit for my small business clients. Click here for a discount.
3. Make sure all of your expenses are captured.
We don’t want any subscriptions or recurring expenses that you don’t get a receipt for falling through the cracks. Also, wouldn’t it be handy to have easy to use reports at your fingertips that can show you if your business is making more or less money than it did last year (or help you get a business loan)?
Quickbooks Online helps ensure all of your expenses are captured. It will import your credit card and banking information and alert you if you fail to classify a purchase. And, even better, the software isn’t as expensive as you might think! Quickbooks Online is my preferred version for most of my photography clients, and it can be accessed on your iPhone or Android. Because you pay a monthly fee, the software will be updated regularly; you will never find yourself with outdated software again or worry about backing up your data. I like QuickBooks so much that I am a reseller for it. If you buy QuickBooks through me for the normal full retail price, I will help you convert from a different software or from the desktop version or walk through setting up the automatic bank and credit card imports with you.
Act now, save taxes later.
Implement each of the tax-saving suggestions above and you will see the huge impact they have on your tax bill without requiring much effort on your part. Time and energy are something we all want more of. Next week I’ll share my suggestions for maximizing your time and getting rid of things that drain your energy.
Until then, please feel free to contact me if you have any questions or you’d like to chat about your business accounting/bookkeeping needs.
Big Picture CPA