Tax Tips For Self-Employed Photographers

While there are many perks to being your own boss, being self-employed creates additional responsibility. Most people who are employed can simply plan to make sure they have enough income tax withholding from their paychecks throughout the year. On the other hand, for those who are self-employed, ensuring that they have paid all their necessary income tax is not so simple. I have met with numerous self-employed taxpayers who are blindsided by self-employment tax and end up owing anywhere from $5,000 to $20,000 in taxes. Trust me,  you do not want to be in the position to experience that burden. To assist in avoiding large income tax burdens we will discuss some self-employed tax tips. While most of these self-employed tax tips will be general, there will be some focus points specific to photographers.

Can I do my own taxes if self-employed?

In most cases I would not even advise the average person who is not  self-employed to do their own income taxes, so you can imagine what my answer is to this question. The reality is that self-employed individuals “can” do their own taxes, but I wouldn’t recommend it. There are just too many things to consider, which is why it’s better to have a professional do the work for you. You want to make sure that you don’t leave any money on the table that you could have otherwise saved in taxes. You need to do this while also making sure you’re not doing anything that might draw the attention of the IRS and cause major financial issues in your world. Check out another blog post that gives more details on why you should not be doing your own taxes.  https://molentax.com/7-reasons-to-stop-doing-your-own-taxes/

What are common self-employment tax deductions?

I am going to list some of the common self-employment tax deductions for all, and then a list that is specific to photographers. The most important thing to remember is that any expense for your business must be ordinary and necessary or common expenses for your trade or business. See the link below for more details like business use of home or business use of your car. https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses

 Common Deductions 

  • Vehicle expenses- Achieved by keeping a mileage log of trips associated with your business. The standard mileage rate for 2020 is 57.5 cents per mile.
  • Office supplies- Businesses usually incur office expenses. Things like pens, paper, postage, and printing are considered office expenses.
  • Phone/Internet expenses – Communication is an important part of business, and internet usage in today’s business world is a must. Only the percentage of your phone or internet for business use is deductible.
  • Advertising –Expenses incurred to promote your product or service are deductible.
  • Job supplies –These are items purchased that you use to produce income in the operations of your given trade or business.

Want more? Follow the link for a list of general business income tax deductions. https://molentax.com/wp-content/uploads/2020/02/General-Business-Income-Tax-Checklist.pdf

 Photographer Specific Deductions 

  • Equipment Expenses –  Things like cameras, camera stands, lights, or props are examples of equipment expenses for photographers.
  • Studio/Venue Costs –  Expenses for studio or venue space that you may rent, or purchase are deductible. Also, any additional expense that arise from the studio or venue space such as electricity or insurance.
  •  Training/Education –  Expenses associated with weekend seminars, tuition for a formal photography degree, a business coach or mentor are deductible. Any travel or lodging associated with partaking in the training or education mentioned is also deductible.
  •  Trade magazine subscriptions.
  •  Software expenses.

 What is self-employment tax?

 Self-employment tax is made up of Social Security and Medicare taxes. The self-employment tax rate is 15.3%. Those who are employed pay their Social Security and Medicare taxes automatically through their payroll and normally never have to consider it. Also, half of the tax is covered by their employer. For those who are self-employed, there is no employer to cover half of the tax because they are their own employer. For the very same reason, self-employed individuals can deduct the equal portion of self-employment tax that an employer would normally pay. The remaining amount is added to whatever amount that was computed for your ordinary income tax. See the following link for more information on tax considerations for businesses, and self-employment tax. https://molentax.com/tax-considerations-when-starting-a-business/

How do I reduce self-employment tax?

 Self-employment tax is computed based on the amount of net business income you have for a tax year. That is, how much income you have after deducting all expenses for tax purposes. Considering this, the way you reduce your self-employment tax is by limiting the amount of excess income remaining at the end of the tax year. Now, if your business is just knocking the ball out of the park, then it is not necessarily as simple as spending as much money as possible.

For situations like this you may need to consider changing your entity classification. I will not dive into the entity election topic now, but I just wanted to mention that self-employed tax tips can go much deeper than just how much did you spend. Ultimately the answer is tax planning. Working with a professional tax adviser throughout the tax year is the best way to make sure you do not get hit with a large self-employment tax burden once the tax year is over. By keeping up with where you are throughout the year, you can make year end decisions on business expenditures that you need or really want to make that will help you decrease your net business income.

How much should I set aside for self-employment taxes?

 The answer to this question is it depends. The most important variables for this question are; how much revenue and expenses you have and is there other income to be considered outside of the self-employed income? As stated earlier you will owe about 7.65% or half of 15.3% in self-employment tax in addition to ordinary income tax on the net income of your business.  If you also have other income such as salary and wages or short-term capital gains, you must consider that income as well because your net business income is added to those amounts increasing your ordinary income tax. An important self-employed tax tip, leave the tax estimating to the professionals. It is better to spend money on a deductible expense for tax planning than to try to estimate the tax yourself and grossly miss the mark. It is worth mentioning that in some cases making estimated payments might be necessary to make sure you are not hit with a penalty when you file your taxes.

I hope that the information I have presented here is helpful for self-employed photographers and other self-employed individuals. The information I have given is not the end all be all, there is much more to be considered on these topics. It is best to consult with a tax professional for the best outcome regarding self-employment tax. Be sure to speak with a Molen & Associates tax advisor or schedule a tax consultation if you have further questions.

Arthur Harrison, EA
Tax Advisor, Accounting

 

 

 

 

The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

How To Accurately Record Commuting Mileage and Increase Tax Deductions

Increase Tax Deductions With the Business-Mileage Rule Using the Business Mileage tax deduction can be tricky. There are lots of situations that count while others do not. We don’t like commuting mileage. You should dislike it, too. It’s personal. It’s not deductible....

Bookkeeping 101

As a new business owner, you will certainly have some responsibilities you won’t be able to avoid. One of those non-negotiable part of your business is producing financial statements. It can be overwhelming trying to master a topic such as bookkeeping but don’t worry...

Bankruptcy – Everything You Need to Know

Everything you need to know Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. Filing for bankruptcy will also put a halt to foreclosure or legal actions against you, and it stops creditors from calling and...

Top Tax Tips for 2023

Tax Refunds May Be Smaller This Year Plan now to learn these 2023 tax tips avoid surprises in the future! If you’re expecting a tax refund in 2023, it may be smaller than last year, according to the IRS. Your annual balance is based on taxable income, calculated by...

What is an EA?

Have you ever seen the title EA next to a tax professional’s name and wonder what it means? Or maybe you’re familiar with the title and you’re curious about the differences between an EA and CPA? Either way, in this blog I will be answering these frequently asked...

History of Federal Income Tax Rates: 1913 – 2021

The United States federal government levies taxes on the income of its citizens and legal residents. The Internal Revenue Service (IRS) is the agency responsible for collecting these taxes.  Federal income tax rates have changed several times since 1913, when the...

Familiarize Yourself With Tax Terminology

Yes, I know, tax terminology feels like a whole new language. For most people all of tax forms can be even more confusing than a foreign language. What’s the difference between itemized deduction and standard deduction? What’s Income tax?  These words and more tax...

Never Too Young To Learn About Taxes

Taxes is a topic that affects us young and old – whether we are worrying about how much taxes to pay if you win the lottery or buying your first item as a kid for $10.00 and realizing sales tax is a thing and it truly costs more than $10.00. While taxes do serve a...

Ten Proven Strategies For Saving Big Money As An S Corp Owner

Are you tired of paying massive amounts of money to the government? Strategy is essential when it comes to anything in life, but especially when it comes to saving money. Many different techniques can be used when it comes to slashing taxes as an S-Corp owner; each...

Change Independent Contractors into Employees Trouble-Free

Independent contractors are a vital part of the American workforce. They work for themselves, usually providing services to other businesses. While this setup offers many advantages to both the contractor and the hiring business, it can also create tax problems.   You...

Request an Appointment Today

6 + 4 =

Call us at

Pin It on Pinterest

Share This