As one of three certainties in life, taxes cannot come as a surprise to any wedding photographer, although you can certainly be forgiven if you push the thought of them into the back of your brain. As a creative professional, you'd likely want to devote most of your energy toward honing your craft.
But when the taxman comes, he leaves nobody untouched.
Still, by keeping some basic topics in mind, and adopting some tidy bookkeeping practices, you can help prevent that teeth-pulling feeling that taxes induce.
Essentially, most wedding photographers will adhere to many of the same standards a small business uses when it’s time to pay taxes. Much of the task comes down to keeping track of money coming in and going out.
But there certainly are some facets of tax law that stand out for wedding photographers, and to make sure that all the bases are covered, it may be best to hand the reins to a pro.
Finding a tax preparer or Certified Public Accountant (CPA) to wade through the nuances of tax law, would seem to be the best way to relieve most of the tedium of tax time, as well as to give you the piece of mind that your records will be compiled and submitted properly.
But as wedding photographer Erin Antognoli found out, a cookie-cutter approach to taxes may not serve all wedding photographers well.
After moving to Maryland, she began taking her taxes to a large and well-known tax preparation firm, but in due time she began to realize that the individual she was dealing with had limited knowledge of the photography businesses. The accountant factored in depreciation differently for two years and neglected to calculate her personal property tax payment.
That took her to the WPJA wedding photography forum, where a fellow Maryland member suggested an independent CPA who had several photographers as clients. The CPA was able to clean up the mess left by the chain tax firm, and Antognoli learned a valuable lesson.
"Find yourself a good accountant, someone who knows what they're doing and understands photography businesses," she advises.
Be sure to ask if the tax preparer has any experience with photographers, is willing to spend time understanding the ins-and-outs of your business model, and has the time to assuage your concerns, letting you focus on what truly matters.
"All I can and want to do is take photos so I have to let someone else take care of the taxes," says Jay Reilly, a wedding photographer based in Carlsbad, CA, USA.
It's not enough to just hand over a bundle of receipts and other paperwork to your tax preparer. Some degree of record keeping is necessary.
Computer software programs like QuickBooks or MYOB can easily help monitor your money, or a simple ledger may suffice just fine. In addition to income, be sure to keep tallies on expenses, including costs for travel, new equipment, office and phone, rent, software, Web site, and other promotional items. Most of these will be deductible, lowering your overall tax payment in the end.
One bit of bookkeeping that may trip up some wedding photographers could be recording deposits or retainers from couples. 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 booking summer weddings in the winter, make sure you have your years correctly marked.
The depreciation of equipment—its decrease in value—is one task best left to the tax professional, as the formula is based on tax tables laid out by the IRS in the U.S., or by other similar governmental tax collection agencies worldwide.
When buying a piece of equipment in the U.S., you have a choice of deducting its cost in one fell swoop or spreading it out over a set period of time. This can be done with any purchased equipment that is used over the course of several years, such as cameras, computers and printers.
Michael Fisher, a CPA whose clients include Antognoli and other photographers, notes that depreciating a piece of equipment over time allows you to have less taxable income for several years, while expensing it in one year applies the entire tax deduction at once.
"Unlike a roll of film, which is immediately expensed, larger equipment has life for over a year," Fisher notes.
Antognoli found that larger purchases could be deducted over time. However, as with other issues, you should seek advice from a qualified accountant to assure that you reap the greatest tax benefits with relation to your particular income, current business level and the nature of the purchase.
Any travel expenses you incur in your capacity as a wedding photographer can be written off as an expense, further lowering your tax burden. For cars, there are two ways of recording this expense, depending on what information you keep and how many miles you travel for work.
The first method simply involves tracking the mileage you travel for work, and multiplying that by the IRS standard mileage rate, which for 2006 was 44.5 cents per mile.
Alternatively, you can track various automobile expenses, including insurance, repairs and maintenance, and then figure out what percent was incurred while working. If you log 15,000 miles or more annually for business, simply tracking the mileage would yield the higher deductible. Any traveling you do to get to and from weddings, including flights and lodging expenses, can be written off if they aren't picked up by the wedding party.
And if that wedding happens to be abroad, and is for U.S. citizens, you need not worry about paying taxes in multiple countries. You can simply bring your check home and pay taxes on your earnings in the U.S.
Rented studio or office space is an expense that can be written off throughout the year, along with whatever phone and utilities you pay for the room.
Even if you maintain an office in your home, you can deduct a portion of your mortgage, rent and utility payments, provided you meet the requirements.
The main criteria are that the room is used exclusively and regularly for the business, and is separate from any other rooms in the house. An office space or studio that doubles as a family room won’t qualify, nor will a nook in your living room or other open part of the house used in daily life. A dedicated office or studio behind a closed door is perfect.
The majority of wedding photographers run their operation as a sole proprietorship, if only for the ease of the structure. An incorporated business would mean having to pay yourself a reasonable wage, as well as payroll and other taxes on top of that.
However, once a wedding photography business begins turning a profit of more than $50,000, you may want to ask your tax professional about converting it into an "S" corporation as a means to reduce your Social Security and Medicare taxes. There’s more paperwork involved, but the tax savings can be well worth the increased complexity.
Second shooters and paid assistants should take their money as independent contractors, unless you have them on payroll, which introduces a host of other taxes and expenses. For any independent contractor you hire for more than $600 in one year, you'll need to fill out a 1099 form for distribution to both that person and the government.
Of course, your services are subject to sales and income taxes, governed by regional tax law (state, province or foreign), as well as your corporate setup and business practices.
In many states, you are required to collect sales tax from the customer on the full contract amount, with no exclusion for the “shoot.” Generally this tax is based on the state, province or country to which the album is delivered; where the customer resides, so check the local laws.
You can also elect to include sales tax in the basic quote you provide to customers, but you must still calculate it when determining your income on returns.
If you operate as a sole proprietor, you can include all of your income on the tax return for your home state. You may also be required to file returns in the other states in which you do business and have a “substantial presence.” If you have an office in another state, you are required to file in that state. On the return for your home state, you are allowed to take a credit for taxes you pay to the other states.
If you operate as a regular corporation, income will need to be allocated across those states in which you do business.
Given all of the twists and turns in the tax code, not to mention the sometimes vague terminology, all three of our WPJA experts agree—without hesitation—that a professional tax preparer is a “must” to guide you through your tax management throughout the year.
"Sometimes it doesn't make sense to spend time on taxes when you should focus on your business and clients," notes Reilly.
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, taking beautiful pictures. That sure beats constantly having to look over your shoulder for an IRS agent.
—by Paul Ziobro for the Wedding Photojournalist Association