Love Your Customers…Unconditionally

Leo 11.7.181-3

This is my dog Leo. He is full of unconditional love for me every day.

“…What it boils down to in terms of your business is that you have to love your customers more than you love your product or service. By making their needs your primary concern, you’ll be able to anticipate their desires, satisfy them and build a business that isn’t disruptable,” (Jane Gaboury, Director of Publications, describing Scott Stratten’s article in the November 2018 PPA Magazine, Page 8).

This idea really resonates with me in terms of my accounting business for photographers. I truly do love photographers and their creations – definitely much more than my accounting service. This slight shift in thinking in terms of my accounting business fills me with energy to go out and serve photographers with my CPA business. I’m looking forward to talking to helping photographers alleviate their accounting and tax worries and fears!

Guest Author on Fstoppers

I’m excited to be a guest author on Fstoppers, an amazing site for photographers. Please check out my article there when you have a chance, ask questions, comment, and share! You can find the article through the link below, Articles, Originals, and Tips From a CPA: Nine Critical Items to Consider Before Starting Your Photography Business, published March 18, 2018.

FStoppers

Outer Banks Family Photography-30

Guest Author on Cole’s Classroom

I’m excited to be a guest author on my photography mentor’s blog/website! Looking to make an impact on this industry that I love, photography, in all the ways that I can. Please comment, ask questions, and share the post if you find it valuable! Here’s a link to Cole’s Classroom, where you can find my post, 12 Critical Tax Tips for Photographers.

Photography Accounting-11

10+ Essential Tax Tips for Photographers

It’s that time of year again. I don’t think anyone really likes it – tax season. Partnership and S Corp tax returns are due next week, and individual and C Corp returns are due on my birthday, about a month later. I have good news for you though! This post is full of useful and practical information regarding taxes and your photography business. I hope you find it very useful!

What are the most critical things you need to do?

  1. Keep the filing process as simple, effective, and fast as possible.
  2. Proactively minimize your tax liability to the greatest extent possible.

How can you do this? Here are some tips.

(1) Use Accounting Software – PLEASE

My preference is Xero. It’s relatively inexpensive and easy to use, and intuitive, Family-14particularly for those who do not have an accounting background. It uses live bank feeds to pull in your bank transactions, and you can “teach” it to remember how to code transactions, so that in a lot of cases, all you have to do is click a button and your transactions will be properly categorized. Dedicate 15-30 minutes per week, and your tax preparation will be simple, effective, and as fast as possible, whether you’re doing it yourself or providing your information to your tax preparer. You can use Excel, but I guarantee you will save time (remember, it’s your most valuable asset) and effort with Xero or another accounting program. And you will be less likely to miss transactions, aka tax deductions.

Did you know that if you have been using a separate bank account for your business, it’s not that difficult to go back to January 2017 and pull in and categorize all of your transactions for the entire year? If you haven’t done anything in terms of your accounting, please do consider this option.

If your transactions are co-mingled in your personal account, first, please stop that right now:) Second, you’re going to have to spend time and effort to pull out your business transactions. It’s your responsibility and no one can really do it for you. Set yourself up for an easier time in 2018!

(2) What Is My Taxable Revenue?

This sounds obvious, right? However, for photographers, it can be less simple than it seems. Here are the questions you need to ask yourself?

  1. Do I take deposits/retainers?
  2. If so, are the deposits/retainers non-refundable?
  3. Am I a cash basis or accrual basis taxpayer?

Most of us do take retainers and are cash basis taxpayers, and most of us make these retainers non-refundable in our contracts. If that’s the case, the answer is fairly simple. Take me for example. For weddings I take a 35% retainer upon contract signing, and collect the remaining 65% two weeks before the wedding. So, for a wedding in October 2018 that I booked in December 2017 for $4,000, I would collect 35% ($1,400) in 2017 and the remaining 65% ($2,600) in 2018. Even though I had the $4,000 contract signed in 2017, I would recognize $1,400 of revenue in 2017 and $2,600 of revenue in 2018, for tax purposes. This would be true even if I were an accrual basis taxpayer.

If the retainer is refundable, however, which I don’t think is often the case with photographers, you don’t have any control over whether or not it’s due to be refunded, and you’re an accrual basis taxpayer, the retainer would not be included in taxable income when received. If you’re a cash basis taxpayer, it would be included.

What is cash basis versus accrual basis? It’s a box you check on your business tax form (i.e., Schedule C, 1120S, 1065, or 1120). Cash basis means that you recognize income and expenses when received or spent. Accrual basis means you recognize income when earned and expenses are matched to earned revenue.

In summary, for most of us that receive non-refundable retainers, include the income in the year it is collected.

(3) Deductions – Equipment (Not Just Your Camera)

Family-11Equipment deductions can really add up and reduce your taxable income. Assuming you make the proper election, you can deduct as an expense, any equipment purchases OR ANY EQUIPMENT YOU ADDED TO THE BUSINESS DURING THE YEAR, under $2,500. Equipment is technically a capital asset (meaning it would go on your balance sheet and be depreciated over time, based on the estimated life of the asset), but tax law allows you to deduct equipment as an expense as long as it’s under $2,500.

That said, even if it’s $2,500 or more, you will still most likely be able to deduct it using Section 179, depending on your overall tax situation. There are some restrictions on the overall Section 179 deduction you can take, and more restrictions around certain assets such as automobiles, but you can use that depreciation deduction in most situations applicable to photographers. Just remember that Section 179 cannot create a loss. Any loss created would be carried over to the next year when there is taxable income from which to deduct it.

Please notice the capitalized words in two paragraphs above. I want to remind you to deduct any personal assets you use in your business, that you may have purchased prior to starting your business, e.g., your computer, monitor, cell phone, keyboard, mouse, SD cards, cables, SD card readers, tablets, etc. If you use these items for both business and personal use, you should only be deducting the business use.

(4) Deductions – Automobile Expenses

There are lots of rules around deducting vehicle expenses, but that shouldn’t stop you from deducting what you’re allowed to deduct. Basically, you can deduct the expenses attributable to your business, and you have two methods of doing this. You can deduct actual expenses by tracking all of the expenses such as fuel, oil changes, any maintenance and repairs, etc., as well as the depreciation associated with the vehicle. Or, you can take the simple approach and deduct the standard mileage rate multiplied by the business mileage you drove over the course of the year. I like this method because I like to keep things as simple as possible.

Just remember that a portion of that standard mileage rate, which can change from year to year, is attributable to depreciation. That depreciation should be calculated and tracked so that you don’t continue to deduct that portion after the vehicle is fully depreciated. In my experience, most people don’t actually do this, but that is the rule.

Also, remember that you cannot switch back and forth between the two methods. Generally speaking, once the actual method is used, you cannot change to the standard mileage rate. You can switch from standard to actual.

If you deduct automobile expenses and use your vehicle for both business and personal use, please keep a log of business trips that includes business purpose, date, people involved, beginning and ending odometer readings, and total mileage. If you’re ever audited (which isn’t likely, but possible), you may be asked to produce this log. If you can’t, the deductions may be disallowed, which means you would owe tax, penalties, and interest. You can avoid this by keeping a log. There are lots of great apps out there to track your business mileage. I use MileIQ.

Finally, commuter miles are never deductible. An employee can’t deduct his vehicle expenses when he drives to and from work. A business owner can’t deduct her vehicle expenses when driving to and from her office. That said, if you’re driving to a photo session, you can likely deduct those costs.

(5) Deductions – Home Office and/or Studio

If you have a home office and/or studio in your home (or even your garage), and that Family-7space meets the following two requirements, you can deduct it:

  1. It must be your principal place of business AND
  2. It must be used solely for your business.

If you have an external office or studio space and your home space is a secondary office, you probably don’t qualify. If you’re like me and you have a desk in your dining room, that doesn’t qualify. However, my upstairs fourth bedroom that is used entirely as an office does qualify.

In terms of what to deduct, you have two options, similar to vehicles. You can deduct actual expenses (including mortgage principal or rent, based on square footage of the office), or you can take the simplified option for the home office deduction ($5 per square foot, with a maximum of 300 square feet). Again, I like to keep things as simple as possible, so I prefer the latter, but if there is a big tax savings in using the former, of course please use it. With either method, you cannot create a loss from your business with this deduction. It would carry over to the next year if a loss is created.

Also, if you own your home, please remember to deduct the full amount of your mortgage interest and/or real estate taxes on your Schedule A, if you itemize deductions. Those amounts are fully deductible regardless of home office status.

(6) Meals & Entertainment

For 2017 and prior, in most cases, you could deduct 50% of business purpose meals and entertainment, including meals you eat while on location and drinks you bought when meeting a potential client at a local coffee or wine shop. In some instances, you could deduct 100% (e.g., company holiday party, or meals on premises for the benefit of the employer, like dinner for staff when they’re working late – not stuff that usually applies to photographers).

Beginning with 2018, entertainment is no longer deductible. What does that mean exactly? That remains to be seen! You can still deduct 50% of your or your employee’s meals while on location or on business travel, but you can no longer deduct coffee shop meetings, lunches, or other meals and entertainment with clients or prospects. We’ll see how this plays out, but that’s the general consensus for now.

If you are deducting meals and entertainment for any year, please keep your receipts and make sure you record the business purpose and who you met with (as well as date, place, and amount, usually printed on the receipt). You can take your dinner receipt, write these items on there, and snap a picture for your records, upload directly to Xero, Receipt Bank, Box, or any storage system that you use. Keep it simple and easy so that you do it.

(7) Deductions – Other Personal Expenses That You Might Forget

You can deduct all or the business portion of the following as part of your business expenses:

  1. Childcare that you pay for while working
  2. Telephone – cell and/or land line
  3. Internet
  4. Home utilities (as part of the home office deduction)
  5. Office supplies – pens, paper, printer toner, labels – All of these items that you might just grab from around your house add up.
  6. House cleaning (as part of the home office expense). Just remember that there are rules about whether or not your home cleaner is an employee or independent contractor, and you need to make sure you file the correct tax forms based on this.
  7. Landscaping and lawn maintenance (as part of the home office deduction). The same conditions that apply to house cleaners apply here.

(8) Deductions – The Usual

I’m trying to highlight the deductions you might miss, but please make sure you deduct the usual business expenses as well:

  1. Business cards
  2. Advertising and marketing
  3. Office expenses
  4. Employee and contractor expenses
  5. Legal fees
  6. Accounting fees
  7. Tax return preparation (If this fee lumped in with your personal return, ask you tax preparer to break it out for you or pro rate it based on a reasonable assumption, and deduct it against your business as opposed to Schedule A – it helps you more if it’s deducted from your business taxable income in most cases)
  8. Business insurance
  9. Supplies
  10. Travel
  11. Meals and entertainment (Please see #6 above)

(9) Do you have kids? You might want to put them to work.

Family-8My daughter likes photography, takes photography in school, and is old enough and competent enough to be a second shooter on some of my photo sessions. My son is good at math and likes repetitive tasks, and would be good at coding transactions in Xero.

According to IRS.gov, “…Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare  (“FICA”) taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child….Payments for the services of a child under age 21 who works for his or her parent in a trade or business are not subject to Federal Unemployment Tax Act (FUTA) tax. Payment for the services of a child are subject to income tax withholding, regardless of age….”

What does this mean? If you’re a sole proprietorship or a partnership with your children’s other parent, you can save up to 21.3% (15.3% FICA and 6% FUTA (FUTA can be reduced if you pay state unemployment tax)) on the wages you pay your children (less the deduction you would get for the employment tax deduction, which depends on your tax bracket). If you paid your child $5,000 in wages, that’s $765 – $1,065 in tax savings (less the deduction you would get for the employment tax deduction, which depends on your tax bracket).

Furthermore, your children may be subject to income tax withholding, but when they actually file their tax returns, they are likely to have no tax liability and get all of that back. At the least, their tax rate is most likely lower than yours. In addition you could contribute their wages to a traditional IRA, Roth IRA, or 529 college savings plan, and potentially reduce income taxes that way. Those options should be evaluated for your personal situation to see which options are best.

Please just make sure your child is actually working for you and that you have a record of the hours and work done. According to the US Department of Labor, there are no age restrictions on minors working for their parents (except in certain hazardous jobs).

(10) Hobby Loss Rules

I must caution you on taking a loss, meaning you lower your overall taxable income based on a taxable loss, from your photography business. The IRS has something called Hobby Loss Rules. They are somewhat vague and often hard to determine when you are just starting out, but basically the IRS doesn’t want you reducing your taxable income from an activity that may be a hobby as opposed to a business engaged in for profit. Unfortunately, photography is one of those businesses that could be easily interpreted as a hobby. If you’re reporting taxable income, there’s no problem. If you reported taxable income in three out of the past five tax years, there’s no problem. But if you’re in your first or second year and have a loss, please consider the Hobby Loss Rules.

Let’s take me as an example again! In my first full year of business as a photographer, I had a loss from my photography business. I had every intention of profiting from this business in the long run, wanted to make it my primary source of income, had a website offering my services for sale, advertised, and received payment for my photography services. All of those factors contribute to showing that I was operating as a business seeking to make a profit. But I did several portfolio building sessions and weddings for no fee, had travel expenses, bought equipment, and my overall expenses were more than my income. My photography business didn’t support my living expenses and I had a full-time, unrelated job that provided my financial support. All of those factors support my photography being a hobby. The truth is, we wouldn’t know for sure until I earned a profit in three out of five years, but how could I be certain about that in Year 1? I couldn’t.

What should you do? It’s a judgment call and you should discuss it with your tax preparer. Much has to do with your intentions and where you are when you actually file your tax return. In my case, I was no longer at my full-time job and was much more focused on my photography business, on track to make a profit in Year 2, by the time I filed my tax return. I would lean towards taking the loss in my case, but again it’s a judgment call. If it were Year 2 or Year 3, I still had my full-time job, and was still showing a loss from my photography business, I might not make the same choice.

There’s another option as well, Form 5213, that essentially allows you to postpone the determination for the first five years of your business. However, there is argument over whether or not this is a good option, that I don’t want to get into it in this post. Just know it is an option that should be discussed with your tax preparer.

Conclusion

So that’s it – hah hah! Taxes are complicated. They can be frustrating. The best things youFamily-1 can do to help yourself are to use accounting software and keep things as simple as possible. I understand that you may want to file your taxes yourself and avoid the cost of paying a professional, but please consider using one if you don’t have the background in tax work. You could save yourself a lot of money in the long run.

Here’s my favorite tax savings story. I had a friend who asked me to review his tax return after he completed it. This isn’t something I typically do, but he was in a unique situation and I agreed. I wound up saving him about $25,000 in taxes with a quick review. He had sold a house that was a rental at the time of the sale, but that he had lived in it in at least two of the five years prior to the sale. That meant that the primary home sale capital gain exclusion applied in his case, and he didn’t realize that. He had a large capital gain on the sale, and thought he had to pay tax on it. As it turned out, he could exclude up to $250,000 of the gain, and that saved him about $25,000 in his case. He was ready to click send on the efile and would have paid about an extra $25,000 in taxes. That’s not something the IRS would likely catch and refund.

Also, one last piece of information to consider if you don’t think you made enough money to be required to file a tax return. Even if that’s true, you may want to file anyway. Particularly if you have dependents and file as head of household (and even if you don’t), you may be eligible for some refundable tax credits, which means you get a refund even if you don’t have a tax liability. It’s worth filing to get those credits.

I’m here if you have questions or need help, and happy to talk to you! And I DO NOT charge by the hour:)

DISCLAIMER: All data and information provided on this site and in this blog post is for informational purposes only.  The owner makes no guarantee as to the accuracy, completeness, timeliness, suitability, or validity of any information and will not be liable for any errors, omissions or delays in information.  It is also not a substitute for legal or professional advice. In addition the information is geared towards federal tax law. State tax law can be different and can vary from state to state.

© Photography Accounting, Kim Crouch, & Kimberly Michele Photography
All Photos Taken by Kim Crouch

 

 

I am a photographer. I am a CPA. I understand and love your photography business.

“Would you rather have a CPA who is passionate about accounting, or a CPA who is an advisor, partner, friend, and photographer who is passionate about your photography business?”

Erin.Alan Wedding Sneak Peek-2Photography Accounting’s mission is to share and leverage 25+ years of accounting, finance, and business start up experience and education with photographers to create exceptional value and help you thrive, so that you can focus on doing what you love, capturing stories for your clients and adding beauty, joy, love, and art to the world.

One of the core tenets of photography is the Exposure Triangle. In order to take a technically correct and potentially outstanding photo, you must have the proper combination of ISO, shutter speed, and aperture. If one of those three elements is off, your photo will be less than it could be. I think a photography business can be viewed the same way, and if one of the corners is off, the photography business will be less than it could be.

When I think about a successful photography business, here is how it relates to the Exposure Triangle:Erin.Alan Wedding Sneak Peek-13

Aperture            – – –        Passion and Drive

Shutter Speed   – – –        Photography Skills

ISO                      – – –        Business Skills

Passion & Drive (Aperture)

I shoot as wide open as I can while still keeping the parts of my subject that I want in focus, sharp. This is my favorite way of shooting, and I know I’m not alone in that. Your passion and drive for photography are what made you start your business, and what will keep you going when you hit road blocks in your business. They are what keep you coming back every day, excited to make progress, regardless of the circumstances. Photography fills you up, and you need it. If you didn’t have passion and drive, you would stop when your business got hard.

Erin.Alan Wedding Sneak Peek-3Photography Skills (Shutter Speed)

Your technical skills make your business possible. Without having the training and experience of a professional photographer, you wouldn’t have clients, and you wouldn’t have a business. You have

put in the work, and continue to put in the work, to be the best photographer you can be. And you continue to improve with every shoot. Your clients seek you out because of your proven technical skills and dependability, along with your passion and style that they are looking for.

 

Business Skills (ISO)

Accounting, finance, tax, marketing, CRMs (Customer Relationship Management systems) that integrate with your accounting system, relationship building, profit and loss statements, balance sheets, invoicing, cash flow forecasts, budgets…

These things might make your head spin, and even if they don’t, my guess is you don’t love them as much as you love photography. But the reality is, if they’re missing from your photography business, you’re missing a piece of the “Exposure Triangle” for your business, and your business, just like the photo with one piece of the Exposure Triangle off, is less than it could be.Erin.Alan Wedding-13

My goal is to take the weight of this corner of the Triangle off your shoulders, so you can make sure it is attended to and accomplished, but you can focus your efforts on the other two corners that you love.

My purpose and the purpose of Accounting Photography is to share and leverage accounting, tax, and financial information and strategies for photographers, so that you can focus on doing what you love, capturing stories for your clients and adding beauty, joy, love, and art to the world.

P.S. I love this too – I completely understand:)

© Photography Accounting, Kim Crouch, & Kimberly Michele Photography
All photos taken by Kim Crouch

10 Critical Items to Consider Before Starting Your Photography Business

I am a photographer. I am a CPA. I understand and love your photography business.

“Would you rather have a CPA who is passionate about accounting, or a CPA who is an advisor, partner, friend, and photographer who is passionate about your photography business?”

Byard Family Photos-34I started my photography journey in December 2016 and quickly determined I wanted to turn it into a business. In addition I’m a CPA. I knew that although I loved photography, it was a business just like any other business, and a variety of factors needed to be considered in order to maximize my success. Did I do all of these things? Nope. It was a side hustle at the time and I had a full time job, a husband, two teenagers, two dogs, and not a lot of time. But I did think about all of these things and make conscious choices.

My goal with Photography Accounting is to share and leverage accounting, finance, and tax experience with other photographers and provide a one stop resource for information. There is so much incorrect information out there when it comes to accounting and tax, oftentimes provided by well meaning friends and fellow photographers. I want to make sure you have a place to turn to in order to get expert advice for a fraction of the cost.

Before you launch your photography business, please consider this list of 10 critical items. You may have thought of all of these questions, or some of them, or none of them. And whichever is true for you, it is okay. You can do this, and you can get all of your questions answered, and those that you haven’t thought of yet. Even if you’ve already started your business, you can resolve anything that you forgot.

  1. My business name
  2. Should I form a separate legal entity (LLC, Corporation, S Corporation are the primary forms) or operate as a sole proprietorship? 
  3. Do I need insurance? 
  4. Do I need an EIN and separate bank account?
  5. Do I need a sales tax account?
  6. What’s my budget – how much money do I want to make and how much will I need to spend?
  7. What’s the best way to track my income and expenses for tax purposes? 
  8. When do I need to pay taxes?
  9. How should I bill my customers and collect payment, and how should I track my interactions with prospects?
  10. What business licenses do I need and where do I need to register? Byard Family Photos-23

(1) My business name

Maybe you have the perfect name in mind. Can you use it? It depends. Here are a few considerations:

  • Domain – Is the domain name available? You can do a quick search on any domain provider site. I use GoDaddy. Once you secure your domain name and start building your business, just make sure your domain stays active, and that you renew prior to the expiration so that someone else doesn’t buy it out from under you. Once you get yourself high up in search engine rankings, you aren’t going to want to change your name without very good reason.
  • Trademark – Does someone else have a trademark on the name you want to use? This could get you in a bind if you don’t check before you start using the name. Even if you’re using your first and last name, like Jane Smith Photography, there could be someone else already using that name. Once you do secure your name, it would be a good idea to trademark it. Here’s a link to search the data base: Trademark Search
  • State Entity – If you are planning to create a separate entity like an LLC or a corporation, you should check the name database in whatever state you plan to set that up in. You can go to the state’s Secretary of State website to check this.

(2) Should I form a separate legal entity (LLC, Corporation, S Corporation are the primary forms) or operate as a sole proprietorship? 

It depends! I’m a big fan of keeping things as simple as possible. The most simple option is to operate as a sole proprietorship. This is the default and means you don’t have to set up a separate entity. However, before making this decision, you should understand the implications. Aside from simplicity and complexity, there are two things to consider:

The Legal Side – Please remember that I am not an attorney and am not licensed to give legal advice. If you’re new to all this, you should really consult with an attorney to get legal advice specific to your situation. That said, generally speaking, forming a separate legal entity may provide you with legal protection above that of a sole proprietorship or general partnership.

This is a topic that deserves its own separate blog post, but basically, if you form an entity, any liability that is incurred by the business is limited to the business’ assets (assuming you aren’t personally negligent or personally guaranteeing a debt). If you have outside assets, this offers some protection of those assets if you were to be sued in the course of your business. Of course there are lots of conditions on this, such as maintaining the business as a separate legal entity, but that’s the general idea.

Taxes – This one deserves a separate blog post too!  There may be tax benefits associated with the different types of entities, and the benefits depend on your overall tax situation. There may be instances where a C Corporation may save you money in taxes, and instances where it may cost you more. The same is true for S Corporations and sole proprietorships. An LLC’s default taxation is that of a sole proprietorship (for a single member LLC) or partnership (if there is more than one member), but you can elect to be taxed as a C Corporation or S Corporation.

Basically, as a sole proprietorship or partnership, all of the taxable income from your business flows through to your personal tax return, and you pay self-employment and income taxes on all the earnings, whether you take them out of the business or not. A sole proprietorship is filed on Schedule C on your personal Form 1040, and a partnership (unless it’s a husband and wife who have elected to be treated as a Qualified Joint Venture), gets filed on a separate Form 1065.

An S Corporation is filed separately on Form 1120S. All of the taxable income from an S Corp flows through to your personal tax return and you pay income tax on that (again, whether you take money out of the business or not), but you only pay employment taxes on the wages the business pays you (and there are rules around what those wages should be).

A C Corporation is filed on a separate Form 1120 and pays taxes on its own – i.e., the taxable income does not flow through to your personal tax return. You may have heard of double taxation, and that applies to the C Corp. The entity pays income tax, and you pay tax on any money you take out of the entity in the form of dividends and wages. But in certain circumstances, this may still be beneficial.

So you can see that it depends, and you really need the help of a professional to help you evaluate the options. Paying for professional advice could save you a lot of money in taxes over time.

(3) Do I need insurance? 

Yes! You should consider:

  • Insurance on your equipment.
  • General liability insurance.
  • If you have employees, you will need workers compensation and unemployment insurance. These two may be handled differently depending on what state you are in.
  • If you have a studio in your home, you will likely need to change your home owners’ insurance or renter’s policy to cover the commercial use. If you have a studio outside your home, you should consider insurance protection on that.
  • Commercial automobile insurance on your car.
  • Disability and life insurance – This isn’t particular to your photography business, but you should consider these two. If you can’t work, how will you pay your bills?

(4) Do I need an EIN and separate bank account?

Probably. An EIN is an Employer Identification Number obtained through the IRS. If you form a separate legal entity, you will need both an EIN and a separate bank account (which can’t be set up until you get the EIN).

If you don’t form a separate legal entity, it’s still a good idea to get both. It’s nice to be able to have something other than your social security number to provide to those you do business with. Customers may need it for 1099 purposes. The separate bank account just makes tracking your income and expenses easier.

Getting an EIN is easy – follow this link and the instructions will walk you through the process. Apply for EIN

Byard Family Photos-28(5) Do I need a sales tax account?

Probably! Sales tax definitely deserves a separate blog post and one will be following in the near future. For now, just know that sales tax laws are set at the state level and you can read about yours on your state’s Department of Revenue website. In most cases, digital photographs are considered tangible property for the purposes of sales tax, and are taxable, assuming your client lives in the same state as your business. If your client lives in another state, you may not be responsible for collecting sales tax.

Take my photography business for example. I live in NC in a destination resort beach town about an hour south of the VA border. My client base consists of local families, visiting families, and weddings. My clients may come from NC, VA, MD, DC, PA, NJ, OH, NY. If my client lives in NC, I need to collect and pay sales tax. If my client lives out of state and I deliver her photo gallery after she gets back home, the sales are not subject to sales tax. It took me a lot of reading and a long phone call with the state to figure this out.

It’s not always easy and you may need help, but a good place to start is TaxJar. This product helps you file sales tax, and you may or may not need that, but it has good information on state requirements regardless.

(6) What’s my budget – how much money do I want to make and how much will I need to spend? 

This deserves your time and careful consideration. What do you want from your photography business? Is it a hobby that will bring in a little extra money for luxury items like vacations? Or do you want to replace your six figure income and quit your day job? This is something that needs to be decided on up front, because if you don’t know where you’re going, you could end up anywhere.

Start with your expenses. What are your start up costs such as licenses, legal entity registration, legal fees, accounting fees? What equipment do you need to buy – cameras, lenses, carriers, Speedlites, tripod, SD cards, batteries, computers, monitors, space heaters, infant bean bags, wraps and blankets? What are your ongoing monthly expenses such as phone, internet, education, insurance, travel, WPPI and other trade association fees, automobile expenses, taxes? How much money do you want from the business to support yourself and your family? Add all these up plus a 10%-20% cushion. That is what you expect to spend over the course of a year.

Next, think about how you are going to fund your expenses. Will it be from the operations of the business, savings or gifts from family, or debt? Personally, I would stay away from debt, and if you want to read a good book about this, please consider Dave Ramsey’s The Total Money Makeover.

My goal was to fund my business expenses entirely from the operations of the business. If that’s the case, your total spend as calculated above will be the revenue you need to bring in from your business. If you are using external financing options, just subtract that amount from the total expenses, and that is the revenue you need to generate.

Next, break that revenue down into parts you can see and understand. How much do you charge for your sessions? How many sessions do you need to complete in a year at your average rate in order to earn your revenue number? This might make you raise your prices!

Finally, consider cash flow – When does the cash from your customers come in and when do you have to pay your expenses? You can keep track of this in a simple spreadsheet or use a more effective option such as Futrli to forecast your cash flow and sync it to your actual numbers so that you can revise your forecast with real, live data throughout the year.

(7) What’s the best way to track my income and expenses for tax purposes? 

Xero. There are a lot of options out there, but Xero is my favorite. It is relatively inexpensive, built for the cloud, and intuitive. I used Quickbooks for years – Xero is my favorite. You can use a spreadsheet for free, yes, but I guarantee you you’ll save so much time and be far more effective if you use an accounting program. Xero pulls in your bank transactions automatically and all you have to do is code them, which you can teach it to do on its own for the most part. Set aside 30 minutes per week to do this, and the end of year and tax time will be no big deal.

(8) When do I need to pay taxes? 

It depends. I know it’s annoying right? “It depends” is so often the answer. You may need to pay quarterly estimated tax payments to the IRS and/or your state, or you may just need to pay once per year on the annual deadline. It depends on your overall tax situation, how much you owed last year, and what you expect to owe this year. Here is a link that gives you some information on the federal side. Federal Estimated Taxes

(9) How should I bill my customers and collect payment, and how should I track my interactions with prospects?

Currently I use Xero to bill my customers, and include a link right on the invoice that allows them to pay via Paypal or credit card. I use Hubspot to track my interactions with my customers and prospects. I’m looking into 17 Hats or Honeybook or Hey Ned for the combined invoicing and Customer Relationship Management (“CRM”) functions.

I highly recommend you use accounting software CRM to bill your customers and keep track of your interactions with them. Again, this saves you time, and time is your most valuable asset. You can get swallowed up in the minutiae of running a business, or you can automate as much as possible and spend your time doing the part that you love.

There are so many excellent options available today to help you, and most are not terribly expensive. CRMs will allow you to set up email templates, schedule automatic, personalized emails, and help you keep track all of your follow ups and leads. They will also take you through a sales pipeline so that you can more effectively move prospects through your sales process.

(10) What business licenses do I need and where do I need to register? 

It depends🙂 This is usually determined by the county and/or town you live in. I live in Dare County, NC and don’t need a business license for photography in my town. However, I do need a privilege license which is obtained by paying an annual fee to the NC Department of Revenue. Start by searching your town, then county, then state.

So that’s it! Your 10 critical items to consider before starting your photography business. This is meant to give you information, not to scare you, and to show you that you have a resource to get all of your questions answered. If these questions make you think of more questions, please join the pilot version of my Closed Group on Facebook – Photography Accounting. You won’t be charged for the first 10 days, and you can post your specific questions there, and get an answer from me within 24 hours. Or feel free to message me for a one on one consultation.

I would love to talk to you and answer any questions you have! You can find me on Facebook and Instagram as @photographyaccounting and on Twitter as @photoaccounting. I look forward to hearing from you!Byard Family Photos-5

DISCLAIMER: All data and information provided on this site is for informational purposes only.  The owner makes no guarantee as to the accuracy, completeness, timeliness, suitability, or validity of any information and will not be liable for any errors, omissions or delays in information.  It is also not a substitute for legal or professional advice.

© Photography Accounting, Kim Crouch, & Kimberly Michele Photography
All Photos Taken by Kim Crouch

Welcome to Photography Accounting!

Based on my experience with photographers (and myself because I am a photographer), there are some basic accounting needs that you have, that I am in an excellent position to help with, because I am both a photographer and a CPA. Whether you have the experience or not to properly execute the accounting side of your business, you should be spending your most valuable asset – time – on photography, not accounting.

I’m not the right advisor for everybody, but for the photographers I choose to work with, and who choose to work with me, I can deliver exceptional value. Would you mind if I share some of my thoughts with you so? If not please keep reading…

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What do you need from your accounting advisor? I would love to talk to you and hear directly from you the answer to that question. What I have learned from listening to other photographers is that you need:

  • Someone to accurately answer your accounting and tax questions. For a list of questions that need answers, please visit my Packages page and scroll down to the 5th paragraph.
  • Someone to help you make sure you’ve done everything you need to for your business and that you’re on track to meet your goals, so that you can rest easy when you’re not working.
  • Someone to track, or help you track, your income and expenses ACCURATELY for tax purposes.
  • A strategic partner to help you make business decisions, such as pricing and packages.
  • To know how much cash you have today, and how much you expect to have in 30 days, 90 days, 180 days, and 360 days.
  • To be able to determine how many photo sessions you need at what price to be able to generate the income you need for yourself and your family, and buy the equipment you need.
  • A way to see how your business is doing, right now, with metrics (key performance indicators or KPIs) that are up to date daily, that you understand, and that help you run your business and make decisions.
  • A workflow system that is effective so that you aren’t spending time manually completing tasks that could be automated (like invoicing, tracking customers, and getting contracts signed).
  • A community to share ideas, information, successes, and failure.
  • A fee for these services that you can afford.

Currently, I’m taking a handful of clients that I can work with closely to provide advisory services (strategic planning, accounting, tax, cash flow forecasting, overall accounting system workflow design, etc.). This will be a partnership to help you grow and focus on your photography, while I help with the business and accounting side. Since I am a photographer, I know the business from the inside out and can really add value.

For those that are just getting started and not ready to have a one on one relationship with an advisor, I’m starting a closed group that will offer expert accounting and tax advice for a low monthly cost (as low as $19).  I want to leverage 25+ years of accounting, finance, and business start up experience with photographers to create exceptional value and help you thrive, so that you can focus on doing what you love, capturing stories for your clients and adding beauty, joy, love, and art to the world.
If you have any accounting questions, please message me. I’m offering a free pilot program for my closed group that will share and leverage expert accounting advice, as well as free consultations for those that are seeking more of an ongoing one on one relationship.

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My overall goal is to spread beauty, joy, and love throughout the world, through photographic art. I am doing that in two ways, using my skills and experience as an accountant and advisor, as well as my passion and skills as a photographer.

Am I passionate about accounting? Honestly, no. I’m passionate about photography and art. I’m passionate about my family. I’m passionate about dogs and the ocean. I’m passionate about living an authentic life, and continuing to grow and learn what that means to me. Part of that is accounting and the 25+ years of knowledge that I’ve accumulated, in accounting, finance, investment banking, commercial lending, and starting and running my own small businesses. I am passionate about sharing and leveraging that bank of knowledge with like minded photographers that I know can benefit from it. That is the use of all these years I’ve spent building up all this information – that is how I can use it, add value to others, and stay authentic to me.

Would you rather have a CPA who is passionate about accounting, or a CPA who is an advisor, partner, friend, and photographer who is passionate about your photography business? Please visit my About page to learn more about me and my businesses.

I’m so excited about this venture and can’t wait to talk to you! Please message me with any questions. You can find me on Instagram and Facebook as @photographyaccounting and Twitter as @photoaccounting. I look forward to getting to know you!

 

© Photography Accounting, Kim Crouch, & Kimberly Michele Photography
All Photos Taken by Kim Crouch