3 ways to prepare for tax season
The dreaded time is upon us! Tax season! The time when you thought you had everything in your business running smoothly; but then you start to second guess it all when your accountant asks for your numbers. I know that feeling, and I have been right where you are! But now, I may be crazy when I say this…I actually really enjoy when tax season comes around!
Honestly, I get a little excited when a new year begins!
Hi! I’m Heather, with Heather Marie Photography. I am a wedding and senior photographer based in Lancaster, PA but serving up and down the East Coast. I started my business back in 2018 with the little hope that this would give me a creative outlet now and then from my 9-5 desk job! Little did I know, I would go full-time in 2021 and already be fully booked out in 2022.
I could not have imagined it.
A huge reason I can link back to that success was being very careful and aware of my expenses. I loved to calculate out my profits and losses each month and to make sure I was keeping track of all of my numbers for tax season. In the beginning, I did it all on my own. It allowed me to understand what to be aware of and what to save for. Now, I have a bookkeeper that keeps track of it, but I wanted to give a few inside tips that I learned along the way!
Here are 3 ways to prepare for tax season:
1. Keep track of your income and your expenses in your business.
This is one of the biggest pieces of advice I can give. If you do this on a regular basis, either monthly or weekly, you will be well-prepared for tax season. As mentioned above, I used to track all of this on my own. I created a Photography Budget Spreadsheet that broke down monthly how much I was bringing in and how much was going out in my business. It was broken up into different categories that related to different tax breaks such as advertising, education, contract labor, dues & subscriptions, equipment, supplies, insurance, cost of goods, etc. I would touch base with your accountant to see which categories they need things broken into. You can also grab my free guide that breaks down the 15 most common tax categories and what expenses fall under each of them! Click this link to grab it for yourself!
This made it very easy to see throughout the year if my business has profitable. I could also keep track of where most of my money was going and if there were any ways to cut back on the expenses. In addition, the spreadsheet allowed me to quickly submit my numbers to my accountant. I didn’t have to go rummaging through all of my receipts from the year, figuring out what I spent and what it was for. I actually have a copy of this exact Photography Budget Spreadsheet in my shop in case you need help getting your numbers set up!
2. Set aside money for taxes.
This is a very simple task but extremely important. Set aside 30% of all income you make for taxes. I would even suggest putting it in a separate account, so you are not tempted to spend it at all. Then, you won’t be hit at the end of the year with a huge number to pay in taxes that you were not prepared for. Also, pulling it out with each payment you receive makes it a little less noticeable because you aren’t seeing a drastic drop in your account in one lump sum.
Thirty percent may be higher than what you will actually owe. Which would be amazing. It is always better to be more prepared than to be surprised when the numbers come in. Plus, if you have saved more than necessary, then it will feel like a bonus once you have paid off your taxes and can transfer the remaining balance back into your account. It’s a win-win!
3. Track Your mileage!
Please, please, please do this! Your miles that you put on your car can be a tax write-off. If you don’t take the simple step to keep track of this, you are losing out on money that you can write off when it comes to your taxes. There are several apps out there that can even keep track for you. I use an app called Mile IQ that works in the background of my phone and tracks whenever I go for a drive.
Then, all I have to do at the end of the month or week is go back through those drives and swipe if it was a personal reason or a business reason. At the end of the year, I receive a spreadsheet from the app that breaks down how many miles I drive and how many were for my business. It is a simple way to cut down on the amount of taxes you owe!
So there you have it!
Those are my top 3 ways to prepare for tax season! I hope this was helpful! If you have any questions at all, please feel free to reach out! I would be happy to help answer any of them! Just a reminder, if this overwhelms you, feel free to head over to my shop and grab my Photography Budget Spreadsheet to help get you started. I promise taxes are not as daunting as they seem. Just keep up with it, and you will breeze through tax season!