 Kristi Eckberg |
invoices and record keeping I'am starting my portrait photography business and would love some help as to what kind of invoice do you all use to give to clients and to keep for your records. For tax purposes on my records do I need an invoice that shows what I charged the client, then what the photo company charges compared to what I charge to figure the difference on what portion I pay taxes on?? Any samples any one could email me?? Any help would be great!!
|
|
|
|
||
|
John Rhodes |
Kristi, I cannot specifically answer all of your question; but, I don't think you want you costs and the sales info on the same document. You need to keep good records of your expenses. I would use a spreadsheet and back it up to a separate drive. The sales invoice is something you should give the customer a copy of and they shouldn't see your cost of doing business. Don't forget your equipment and suplies are also business costs, so keep good records. I recommend, at first, to have a tax accountant help set up your business documentation. John
|
|
|
|
||
|
Kristi Eckberg |
Thanks John. I don't mean that the clients invoice would have the lab costs on there though. I mean for my records for tax time do I need to have a copy of every order, what they ordered and payed and then what the lab costs actually were?? I assume I don't send any of this in with my taxes but need it on hand in case of an audit. I just need to know an easy record keeping system that photographers use when just starting out. I called a CPA but they charge $150 per hour and she said it may take over an hour. Can't afford that yet.
|
|
|
|
||
|
BetterPhoto Member |
Kristi, Hope I can help here. I don't know which tax you are referring to so I will address both. You need to do two separate things. First, keep track of your expenses (supplies, equipment, & lab fees). All of these fall into a type of "cost of goods" category. It is what it is costing you to run your business. Then you will keep track of your sales & the tax you collected. Which you will have to report too! You will pay sales tax based on your profit. Keep them on hand and easily accessible. You will need them come tax time. I do not know if you are set up as business or sole proprietor, but one way or another you will need them to prepare your taxes come January. In a nutshell it will be your PROFIT - BUSINESS EXPENSES & if you are in the RED your tax won't be much - but if you make a large profit when expenses are subtracted - you will pay tax. That will be Income Tax. The sales tax in most states is done throughout the year. Generally based on volume you might pay sales tax quarterly, monthly or maybe even just yearly. Hope this helps. I'm kind of rough on trying to explain things, so if this isn't clear, please ask me to clarify. Thanks! Brigitte
|
|
|
|
||
|
Kristi Eckberg |
From what I understand here in oregon if I'am a sole proprietor/independent contractor then I just register with the city and I'am to pay self employment tax for social security and medicare but don't pay federal income tax.?? Oregon not having a sales tax I imagine I will pay state tax as well. What about any deductions for working out of the home? Can I deduct anything here being self employed? Thanks for the help Brigitte.
|
|
|
|
||
|
BetterPhoto Member |
Oregon doesn't have sales tax? Wow...I should move!! : ) If you are just a sole proprietor then the way it works for me is that I file a "Schedule C" with my 1040 come income tax time. Once your income from your business hits a certain level you *might have to pay that self employment tax up to 4 times a year based on estimations. yes you should be able to take deductions for working out of your home. I am not familiar with Oregon, but for federal you will be able to deduct even some of your utilities and such that can be attributed to your home, mileage you drive for your business, etc... You might be able to go to your state website and get info for new businesses. Just keep everything...receipts, paperwork, etc. If you do something a certain way..continue to do it that way. I say this b/c if you do it incorrectly...at the very least you are doing it consistently wrong and can be fixed easier than if you keep changing your record keeping habits. You really should talk to a local CPA. Where I live they offer small business advice/seminars for new businesses through SBA. I'm sure there is somewhere you should be able to get more info. Have you requested any forms from the state level? They could most likely direct you where you need to go. hth brigitte
|
|
|
|
||
|
Jean DeKraker |
Photography is my avocation but tax accounting is my vocation. I'm a CPA with a tax specialty. My first recommendation is to have a separate checking account for your business - where all of your collections are banked and from which you pay all of your business bills. If you use a credit card - use one for business ONLY - no personal expenses at all! This makes record keeping much easier! And, will make collecting everything for taxes much easier. I would also urge you to consider using a program for your books - like Quickbooks. You can enter all of your income and expenses into Quickbooks - and quickly see your profit. You should have someone knowledge look over your QB file an least twice a year. QB has an invoicing piece in their program that is very easy to use. Your self-employment tax is based on the profit of your business (income less expenses). You will pay social security and medicare about 15% total - and income tax on the profit (usually about 25% if you have another source of income) The social security, medicare and income tax - all projected - must be paid in April 15, June 15, Sept 15 and Jan 15. Projections are a pain - and mostly inaccurate but everything comes together on the income tax return. You need to look at your business as a whole not a specific job (for tax purposes - for pricing you must look at your profit on each job) - you will have income from jobs and expenses. Some expenses will relate solely to one job - some expenses will relate to multiple jobs. What the IRS cares about is how much did you make and how much did you spend. Now because of IRS rules - I have to tell you that you cannot rely on this advice and that I am not responsible for its content and that you sould seek professional advice. And, I whole heartily agree with the last part - $150/ hour sounds like a lot of money but from my perspective it is worth every penny. I see businesses fail for 3 reasons: 1. poor management 2. owners that didn't reinvest in their businesses - and lived on all the profits 3. embezzlement. Most successful businesses start small but that is the time to work on your business - not just your photography. Jean
|
|
|
|
||
|
Michelle Andersson |
I went to my bookstore and picked up a book on Small Business Taxes. I found it very helpful. I agree with the advice above. Having a seperate checking account and credit card is a must. I also went to office depot and bought a check file which I use to organise and keep all my reciepts for the year. Whenever I purchase prints I like to write at the top of each reciept which shoot it was for. This helps me for later to reconcile my books. I use microsoft money for my books and have it set up to download all my transactions from my business account which I then reconcile to my reciepts. The system works well. I also created a master invoice in microsoft publisher. I use this to create my invoices for each client and have a folder where I save their invoices. I think that having a invoice set-up in excel would be even better though, because you could use formulas to do all the math for you. Anyway I'm rambling now. I hope this makes sense. I am always happy to help so please let me know if you have any questions. BTW Did you know about the IRS and the hobby issue?
|
|
|
|
||
|
Kristi Eckberg |
Thanks for all the info. Michelle, I have read a little about the hobby thing but I find this all very confusing as I read one thing and then I read it somewhere else but it's written differently or states other issues so I'am lost and will go to the book store and then call some CPA's. What was your thought about the hobby thing and is there something I should know???
|
|
|
|
||
|
Mark Feldstein |
Greetings Kristi, as a lawyer who has worked as a photojournalist for umpteen years, I agree wholeheartedly with what Jean said. In addition, however, I should point out that most small businesses fail at the start-up stage primarily because the entrapreneur has no business plan which includes budgets for equipment, marketing, professional fees like CPAs or accountants, etc. There are lots of sources on the net for how to draft your own tailormade biz plan. I also strongly recommend that you take a class in business law, usually available at the local community college and even an introductory course in accounting principles. I think you'll find that the IRS hobby rule is essentially that you can start-up a biz and with proper documentation, run at a loss for three years before the a IRS concludes that it's a hobby and therefore no further deductions would be allowed for what you're claiming is a biz. Again, check with a an accountant AND most of all, be aware of your tax liabilities, local, state AND federal. Photographers, tending to be what I refer to as a mostly carefree lot, tend to neglect paying the IRS their due and run into very shallow water. Both the IRS and Small Business Association have lots of good, basic publications without charge, that will help you stay open and above board with taxing entities and help you efficiently run your business. Also, you can probably find lectures given by members of SCORE in your local community (Service Corps. of Retired Executives), on how to start and run a small business.
|
|
|
|
||
|
Jean DeKraker |
Kristi - The SBA frequently has local chapters. In Phoenix they offer many classes on starting a business - including a business plan, local tax issues, etc. If you have friends that have started a business or own a business (esp if in the same state and city) they can offer a great deal of help. They don't need to be in the same business to explain invoicing - etc. When I started my business I knew nothing about marketing - but had several friends that agreed to meet on a Saturday morning to discuss the challenges I was facing. It was a wonderful opportunit to start a network of support. I used that netword extensively the first few years I was in business. And, I always agree to do the same for others. You will be shocked at how many local government offices offer support for starting small businesses - SCORE is a great resource. Jean
|
|
|
|
||
|
This old forum is now archived. Use improved Forum here
Report this Thread |
||