5 Tax Organization Tips

If you're getting ready to work with a CPA, or do your business taxes by yourself (which I don't recommend), here are a few things you'll want to start gathering and organizing to make the process easier.  Disclaimer: I'm not a CPA, just a small business owner who pays taxes every year. Always take final consultation from a professional CPA with regard to your situation.

1. Do you have an assistant or contractor you paid over $600 total last year?
If they aren't on payroll as an employee, and have been working as an independent contractor, you'll likely need to send them a W-9 form request for their tax filing information and then a 1099 Misc. form with the total fees you paid them during the year.  This information needs to be gathered and shared with your contractors before January 31 to allow them proper filing time as well (you can still file late, you just pay an additional fee).  This helps you legitimize the expense for the independent contractor and it helps them document received income from your business.  If you paid them via an online service like PayPal or Venmo, you can likely easily search all payments made to an individual according to year.
Official IRS information on documenting independent contractor payments:
https://www.irs.gov/businesses/small-businesses-self-employed/forms-and-associated-taxes-for-independent-contractors

2. Did you travel to any of your jobs or clients last year?
If you're an on-location photographer, you likely traveled for almost all of your jobs.  The good news is that you most likely can expense that cost to your business.  If you took Taxis, Uber, Lyft, Car Rentals, or Airlines - you likely have records of all those purchases in your bank accounts or in the apps you used.  If you don't claim a car as a business asset & expense because you also use it regularly for personal and family travel, you can still claim the mileage you drove to meet and serve clients as well as any parking fees incurred during the job.  If you weren't tracking this all along with an app like Expensify, perhaps you have the addresses on your contracts or in your calendar that can help you determine the mileage you traveled for each business meeting, job, networking event, or on-site project, coupled with any debit card records made to parking structures.
Official IRS information on documenting & expensing Business Travel: https://www.irs.gov/publications/p463/ch01.html#en_US_2016_publink100033773

3. Did you entertain or buy meals during business meetings or travel?
If your work required you to eat away from your home office location, or if you bought meals for clients, vendors, or contractors while doing business,  you may be able to deduct those as well.  This is generally only a 50% tax deduction, even if it was a 100% expense to your business, so it would be best to talk to your CPA with regard to what is considered a Meals & Entertainment expense.  If you usually use a debit or credit card for these transactions, you likely have evidence in your monthly statements of what you've purchased by date while on a job or meeting.  If you haven't been tracking it all along and need to do it retroactively, an online financial organizer like FreshBooks or Mint can help you pull multiple credit and debit cards together in the same place to organize expenses.
Official IRS information on documenting & expensing Meals & Entertainment:
https://www.irs.gov/publications/p463/ch02.html#en_US_2016_publink100033862

4. Did you buy equipment for your business last year?
New computer?  New software?  Online services?  Cloud storage?  Paper and ink to print contracts on?  Office desk & chair?  Currently, the IRS allows $500,000 in business equipment deductions, up from $25,000 in previous years.  For many freelancers, the overhead expenses of keeping equipment updated are often the sleeper costs that surprise them year to year, so it's important to consult on which business expenses are considered deductible.
Official IRS information on documenting Equipment Expenses:
https://www.irs.gov/publications/p946/ch02.html

5. Did you use any home utilities or home office space to run your business?
You probably needed a faster than normal internet connection to deal with all of those file uploads and deliveries to clients.  You probably needed a cell phone and/or business line to manage phone calls with clients who panicked at the last minute about their project.  You probably needed electricity to charge your phone and keep your computer running to deliver projects to your clients.  All of these things can be considered in the appropriate percentage for how they are used for business versus personal use.  Make sure you're keeping tabs on all of these expenses as they apply to your business so that you can properly deduct what's used to keep your business running.
Official IRS information on documenting Home Office expenses:
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

Again - always consult with your local CPA to make sure your record keeping and tax deductions are relevant to your situation.

Anne Ruthmann is a professional photographer in New York City. She has been a small business owner since 2004 working as a photographer in weddings, portraits, editorial, and now architecture and interiors. She spends any extra time she has helping others find smart solutions to business problems. Stay in touch on Instagram, Twitter or Facebook.

How to find a great CPA

After moving my business several times, I've had a lot of experience looking for a CPA to help with my business and personal filing, and whenever I found a great one, it often took me a while before I was willing to move on and find another one in my new state after moving.  Hopefully sharing this wisdom will help speed up your search!

1. Start Searching Locally
The importance of having a CPA you can sit face to face with is very important if you ever need to work on a complicated tax situation or work through an audit together.  Likewise, the ability to enjoy working with your CPA is huge when it comes to something that may be stressful or difficult.  All of my favorite CPAs have a sense of humor and lightness about difficult tax situations that have helped ease my concerns, while still remaining professional and demonstrating that they will get the job done.  You only get to see this lighthearted but professional approach by meeting in person.
- Personal Referrals: 
The best places to begin your search are with personal recommendations from other small business owners.  Even better if they have a similar business model to you and can share what they love about working with their CPA and how long they've been with them.
- Local Chamber of Commerce Website:
Next best place to search is your local Chamber of Commerce website, where they will likely have a directory of CPAs looking for business.  The people who work for the Chamber can tell you if they know the CPA personally or anyone who has worked with them as well for additional referral information.
- Business Networking Group: 
Third best place to search is a local business networking group - BNI is one of the more famous ones, but ask around and see what is available in your area.  Rotary may be the second most common networking group for business owners, while it has more of a philanthropy mission than a networking one, it's a group of people who believe in giving back to the community.

2. Define Your Tax Situation
Being able to describe your tax situation will help you with the phone screening process before setting up a meeting.  For example, here are a few ways you may want to practice describing your tax situation over the phone before deciding who you'd like to meet with in person:
- Personal Tax Situation:
Married?  Single?  Dependents?  Live-in parents?  Investments?  Multiple homes?  Personal property in multiple countries?  Inheritance?  Haven't paid taxes in 10 years and may need a payment plan?  Need to figure out if it's better to file separately or jointly with spouse?
- Business Tax Situation:
LLC?  Sole-Proprietor?  Corp?  Employees?  Health Benefits?  Online business?  Out of country sales  to manage?  Import/export business?  State to state sales tax transactions?

3. Create a List of 3-5 Places to Call
If making phone calls is scary to you because you prefer email - I suggest practicing the questions you'll be asking on the phone and preparing your statement about your situation.  A phone call can really help you rule out a company you don't want to meet with.  Was it easy to get the answers you needed in a timely way?  Were they sloppy and unprofessional in how they managed your phone call?  Do they have an office with multiple people and an admin to help them manage their clients?  You don't get to learn these things when emailing- only when calling on the phone.
Things you need to ask:
- Do you have a Certified Public Accountant in your office?  Will they be handling the return, or will it be a tax preparer?  Who would I be meeting with for the first time?
- Do you have experience with clients in my situation?  (State the personal and business situations you have.)
- When can I come in and speak with someone in person?  What should I bring with me?  Is there any fee for an introductory meeting?  What would someone with my situation expect to pay for their tax filings?

4. Meet at Least Two Different CPAs
If you only meet with one, you'll have nothing to compare the experience to.  If you only have time to meet with two about your situation, than meet with two.  If you can meet with three or more, great!  The more info you have, the more you can find the right person to work with.  Remember that investing more time into this choice up front means that you're less likely to need to invest that time again later because you'll feel comfortable knowing you made the best choice for you and your situation.  A great CPA relationship can be one you can carry well into the future of your business, so it's worth every bit of time you invest up front to find someone you enjoy working with and feel you can trust.

Anne Ruthmann is a professional photographer in New York City. She has been a small business owner since 2004 working as a photographer in weddings, portraits, editorial, and now architecture and interiors. She spends any extra time she has helping others find smart solutions to business problems. Stay in touch on Instagram, Twitter or Facebook.

Filing Taxes & Finding An Accountant

With taxes on the mind for many small businesses and other productive procrastinating perfectionists, I'm happy to share this guest post from Kathy Rappaport...

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It’s almost April 15th! Whenever the tax due dates fall on a weekend or holiday we get extra time to procrastinate on filing our taxes. When you need more than than a couple extra calendar days, you do have the option of filing an extension. That would make your due date October 15th and once you file it’s called an Automatic Extension TO FILE. Sadly, that doesn’t mean you get more time to pay.

NEED MORE TIME?
You would file Form 4868 but you must include how much tax you have paid and how much you estimate you will owe. And you might need help from an accountant or tax preparer to figure that out. As a business owner, it’s recommended that you actually have an accountant review your profit and loss quarterly to coincide with your quarterly estimated payments so you have no penalty and won’t owe when it comes time to file your actual return. Doing this actually eliminates that “heart attack” when you hear the actual amount of tax. If you do have a review before the year end, you can actually plan ways to reduce your tax obligation by opening a retirement account, spending money on tax deductible expenses and grouping deductions into one year to maximize deductions. Often, you can save whatever amount you might pay for the service to have it figured for you.

And this assumes that you are filing as an Individual. You may have a small business return that you file with your personal tax return called a Sole Proprietorship and you file a Schedule C for your business return.

NEED AN ACCOUNTANT?
To choose an accountant that is right for your business you should have an idea of the different designations of people who can prepare your tax return and why they are qualified:

1. Certified Public Accountant (CPA): This is the most educated person regarding business and tax; they’ve gone to school for a Bachelor’s Degree, taken a multipart test and done a two year internship in various types of accounting. Most have a specialty like working with Closely Held Businesses or Entrepreneurs or Corporate Tax Work or Audits or Financial Planning. Highest Caliber of Tax Knowledge and business knowledge. Licenses by state and can represent you in front of the IRS for tax matters.

2. Enrolled Agent: This person has studied tax and accounting and passed a test administered by the IRS which allows them to represent you at an audit. No degree or formal course of study required.

3. Enrolled Return Preparer: This person may have just worked down the street for that national chain that is well known for filling in the blanks. In some states they must complete annual testing and limited studies in Tax Preparation to know what to fill in. They may not represent you in front of the IRS or actually give you advice on what to do with your taxes.

How do you choose the right tax preparation for you?
First ask people in the same line of work you are in if they are happy with the person they use; You need a professional who can guide you in important choices for your business like whether to incorporate or become an LLC or S-Corp you would want a CPA who can recommend what is right for YOU; one size doesn’t fit all. Interview them. There are many options to select from and what is right for your friend is not right for you. Education is important but you should also be comfortable with the person you choose. They should never “pat you on the head” and tell you not to worry about it any more; you should be educated and informed so you know what is going on. After all – it’s you who is ultimately responsible if they make an error in your filings. Do you have bookkeeping issues you might want help with? Then you may want someone knowledgeable in QuickBooks or other accounting software who can help you. If their office is messy, will they lose your paperwork? Do they pay attention to you as a client? Are they listening to your concerns? All of these questions are just as important as the one question everyone wants answered – How much do you charge and how much will I owe?

Kathy Rappaport is a full time photographer with a studio in Woodland Hills California. Her first career was banking for 17 years when she opened a Bookkeeping and Tax Business which she now consults exclusively with Photographers. She is married to Frank – a CPA with a tax practice specializing in small businesses and entrepreneurs. Both Kathy and Frank are Certified QuickBooks Advisors.

Haiti Donations & Tax Relief

I received this informational email from Grazier Photography and their accountant today about deducting donations for Haiti relief and thought the info was so good it needed to be shared on PhotoLovecat!

This month Congress passed a law that the President signed, giving taxpayers the choice of deducting donations for Haiti relief on their 2009 tax returns – even though the donation actually happened in 2010.  If you made Haiti relief donations and wish to deduct them on your 2009 returns, be sure to let [your accountant] know!

Here are 10 important facts the Internal Revenue Service wants you to know about this special provision.

1. A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
2. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
3. To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.
4. In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.
5. The new law applies only to cash contributions.
6. Cash contributions made by text message, check, credit card or debit card may be claimed on your federal tax return.
7. You must itemize your deductions in order to claim these donations on your tax return.
8. You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.
9. Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development ( http://www.irs.gov/app/scripts/exit.jsp?dest=http%3A%2F%2Fwww.usaid.gov ).
10. Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.

For more information see IRS Publication 526 , Charitable Contributions and Publication 3833 , Disaster Relief: Providing Assistance through Charitable Organizations . To determine if an organization is a qualified charity visit IRS.gov, keyword “Search for Charities”. Note that some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov.

 Thank you Matt & Enna for sharing!