by guest contributor Shannan Painter
We all brush our teeth, eat our vegetables and do the dishes. Why? Not necessarily because we enjoy it, but because there would be serious consequences if we neglected our bodies or our houses. Neglecting the accounting and tax portions of your business could also result in serious consequences, and yet I constantly come across people that stick their heads in the sand and wait until the mess is so big, it has to be dealt with. In their defense, many photographers are simply not well-informed when it comes to what the government requires in regards to bookkeeping. Whether that lack of information is due to not having any formal business background or not knowing where to look for it, no excuse will get you off the hook if you ever get audited!
There are a couple very simple steps you can take to ensure that not only are you in compliance with government requirements, but in addition, that you understand your business finances.
Establish a routine
The government requires you to keep a set of books for your business – but the records themselves are not enough proof for deductions. You have to keep receipts, invoices and other documents to support your purchases (always make sure to ask for a receipt). What do you do with these receipts?
- My routine is to keep each receipt in my wallet.
- Once my wallet gets full, I post each transaction to my profit & loss spreadsheet.
- After each transaction is posted, I file the receipts into an accordion file sorted by month. They are readily and easily accessible if I need to go back and find one. More importantly, I have the documentation to support my business deductions. Records must be kept for a minimum of two years.
You don’t need to be a CPA, have an MBA or any letters after your name for that matter, but you do need to understand the basic principles of tax consequences. For example, you need to know that you will likely have to pay self-employment tax, depending upon how your business is organized, on any profits you make. Our Business 101: Setting Up Shop e-Guide is an excellent resource to gaining a basic understanding of financial organization, business deductions, and tax consequences specifically for photographers.
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About the Author: Shannan Painter is a newbie photographer who has spent the last 5 years working with the left side of her brain helping small businesses organize their accounting and taxes. She decided to take the big step and pursue her dream of becoming a professional photographer in 2013 after adding a third boy to her house that was already full of super heroes, trucks, and sports equipment. She and her husband, who is a local TV meteorologist, play pick-up games of basketball in their free time and like to take road trips to Lake Minnetonka with all 3 boys, and their dog Growler.