Three things you can do now to prepare your photo business for tax season
Taxes might be the last thing you want to think about as we head into the end of the year — especially THIS year. But with a bit of organization and planning now, you can save yourself stress and time later. Here are three things you can do now to get yourself and your photography business ready for tax season.
1. Learn what expenses you should track for tax deductions.
You probably know you can deduct business expenses like your camera and insurance on your taxes. But you can also deduct website hosting, client gifts up to $25 and many other things. The LawTog website has a great list of photography deductions. Wedding photographer Lin Pernille’s website also has a tax deduction cheat sheet for photographers.
2. Gather all your receipts/expenses and organize them into the proper tax deduction categories.
Cataloguing your expenses into the right category makes it easier for you (or your accountant) to do your taxes. You can use Excel or an app like Shoeboxed, Quickbooks, FreshBooks, Expensify or Wave. Some of these apps have free trials or even free versions. Full disclosure: I use FreshBooks and I love it!
3. Ensure you’ve paid enough estimated quarterly taxes to the U.S. government and your state.
First things first. If you’re not sure how much estimated tax to pay to the IRS, then start with this simple and cute quarterly tax calculator. (I’ve never called a calculator CUTE before but it’s true in this case.) Because the calculator is so simple, the amount it tells you to pay is a very rough estimate. It’s not necessarily 100% accurate. But it’s a good place to start.
If you haven’t paid enough quarterly tax to the federal government, then you could owe a penalty — and no one wants that. Honestly, I usually pay a little more than I think I should, just to be safe.
You can register with the IRS website to create an account for paying and tracking your taxes. Or, if you’d rather make your tax payments without creating an account, you can do that on the IRS DirectPay site. You’ll have to input information from one of your recent tax returns to use this site. Then you’ll be able to pay your taxes with a bank transfer from your check or savings account (no credit card, debit card or PayPal payments).
Here are the dates when estimated quarterly tax payments are due to the U.S. government.
For your state tax (if your state taxes income), find your state’s online portal where you can register to pay and track your tax payments. I file and pay taxes in Maryland, which has a so-so tax payment site; the interface is early 2000s but it’s easy enough to navigate. Just like with the IRS website, on the Maryland website I can make payments only from a checking or savings account, not with a credit card, debit card or PayPal.
Note that different states might have different deadlines than the U.S. government for paying estimated quarterly taxes, especially this year because of Covid-19.
The bottom line
Would you rather feel relaxed and calm come April 15, 2021, aka Tax Day? Or would you rather wake up worried and stressed that you’re still not ready to file your taxes? You can definitely be the relaxed and calm person. All you have to do is plan ahead and organize a bit.