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The Portrait System Podcast
Tax Tips for Photographers: Deductions, Mileage, and Year-Round Prep (with Heather Lacey)
00:50:15
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- [00:00]
A
Hey there, it's Nikki Klosser and I want to let you know about an awesome free giveaway for people on our email list. If you haven't already, click the link in our podcast description or go to theportraitsystem.com signup to get on the list. If you sign up, you'll get a free posing 101 PDF to jumpstart things. It's an epic PDF, so you'll definitely want to get this. Also, just by being in our email community, you'll get deals, sales and information about any of our upcoming events and activities. So head over to theportraitsystem.com signup and and sign up today. You're listening to the Portrait System podcast.
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B
Look at your numbers monthly instead of waiting till the end of the year. If you're waiting till February or March to make any decisions, you're too late because the year is already done. You cannot affect anything.
- [00:50]
A
Welcome to the Portrait System Podcast. I'm your host, Nikki Klosser and this show is here to help you succeed in the world of photography and business. To help you learn to become financially free, doing what you love and so much more. With over 1 million downloads, countless photographers have taken what they've learned from both our episodes and from theportraitsystem.com and they have grown their businesses, quit their day jobs and are designing a life of their dreams. We keep it real and share stories about the ups and downs that come with running a photography business. You'll hear real life stories of how other photographers run their business and you'll learn actionable steps that you can take to reach your own goals. Thank you so much for being here. And let's get started. Hi everyone, I'm Nikki Klosser and on the Portrait System today we're talking about that one thing that so many people avoid but we all have to deal with and that is taxes. But Heather Licey is here with me today and she breaks things down so it's so easy to understand. She talks about what you can deduct, what you definitely shouldn't, and how to legally reduce your tax burden. She also tells us about the things we need to do to prep all year round so when April comes, we are not stressing out about our tax return. So if you want to keep more of the money you're making instead of giving it to the tax man and doing it the right way, this is the episode for you. Okay, let's get started with Heather Licey. Hi Heather. Welcome to the Portrait System. How you doing good?
- [02:21]
B
I'm excited to be here.
- [02:23]
A
Yeah, me too. You know, when your application came through, and I thought, this is something that photographers need. Everybody needs, really, especially entrepreneurs, so badly. I know I need it. And it's all about taxes and. Okay, I will say we were chatting earlier. You are a photographer. You shoot weddings and is that. Is that all you shoot at the moment?
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B
Weddings and high school seniors?
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A
Okay. Okay. So you're in it. So not only are you, you know, kind of a tax expert, but you. I mean, you're in the game. Like, this is. This is what you do.
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B
Yeah, I do it every year.
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A
Yeah.
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B
Gosh.
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A
Have you. Were you. What's your proper title when it comes to taxes?
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B
Yeah, so I'm a tax prep educator. And then last year I also became a bookkeeper as well. So I help people, like, throughout the entire year too.
- [03:14]
A
Right. Okay. Do you. Is it mostly photographers who are your clients?
- [03:17]
B
Yes. Yep. I have just started in that niche, and it's correlates really well because I'm doing it as well, so I know a lot of the expenses that they have. And so, yeah, I do a lot of work with photographers.
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A
Okay, awesome. Now, were you a photographer before? A tax prep educator?
- [03:37]
B
Yes.
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A
Or. Yeah.
- [03:38]
B
Okay. Yeah. So I've been doing photography since 2018, and the tax side of things came, like, 2021, 2022 time. And like, I'm a co host of a group called the Conquer community. And back when clubhouse was a thing, like Covid hit and we all went to clubhouse, everyone kept asking me questions about taxes and finances. And that was really what started me ever becoming a tax prep educator, because I always did it in my business and really enjoyed it. And I didn't realize that other people despise it or just didn't know what to do. And so it was those questions that I was like, hey, I could help
- [04:17]
A
people with this, right? Absolutely. And I kind of like that it's been like, what, five years since you've been doing it? Because I had a tax person before and he was getting ready to retire, and I always had to ask, are you up with the new laws? Are you where I feel like coming into it, you're learning what's new and what's happening now. Because it changes a lot, doesn't it?
- [04:42]
B
Oh, absolutely. And because I'm in the tax prep side of things, I always tell people, make sure you're talking with yourself, CPA and your accountant too, because they'll know even more than I do because they're the ones Doing the filing and filling out the forms and stuff. But, yeah, I feel like I try to every year catch up on things, and I have an email that comes to my inbox with any updates that are happening throughout. So I try to get on top of it.
- [05:09]
A
Right. Before we get into things, I think full disclosure, it's important for people to know that tax law changes from state to state, country to country. So, like, I think for. For the purpose of this, we'll do more general.
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B
Yeah.
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A
You know, general discussion around it. But I want to make sure people like you just said, make sure you are fully consulting with, you know, a CPA in your state or your country.
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B
Yep.
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A
Just to make sure everything's lined up. Because, like, the IRS can be such a bitch to deal with and, you know, you want to make sure you get it right.
- [05:47]
B
Absolutely. Yeah. You completely said it. Like, I want to help you get ready for your appointment with your accountant or cpa, but they're going to know your business inside and out, and they're going to know your state and your county and your country and all those laws inside and out. So anything should be run through them before you make any decisions, too.
- [06:07]
A
Right. Okay. All right, so let's get down to the gist of it. I. I love saving money. I love taking deductions whenever and wherever I can, like, because it's. It's so tricky, like, doing what we do. We get the freedom, you know, of our life and to design it how we want and work when we want and all those things. But it's not like. Like, when I was a school social worker, it was. Taxes were just taken out of my paycheck.
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B
Yep.
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A
And I typically got a refund at the end of the year, where now I have to, like, brace myself when my CPA tells me what I need to pay. And I'm like, any other deductions we could throw in there? You know what I mean? It's like. So, yeah.
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B
Yeah. It always hits you quick at the end of the year when that email comes or the form comes or your invoice, and you're like, whoa, okay, I
- [06:59]
A
have a bunch of questions. And I won't lie. I used ChatGPT to generate some of these because, again, this is not my expertise. I. You know, I don't often know what I'm doing. There are. I'm curious if you'll say some of the deductions that. That my CPA has me do things that I would never have thought about, like paying my kids, who are 7 and 9, which is really strange. Or, like, renting. You can, like, rent out your house for, like, so many days. Like, anyway, we'll get into that. But okay, let's start with what should people kind of be doing year round to avoid a giant tax bill? Like, if you could give us some tips and sum that up.
- [07:43]
B
Yeah. So first one that I always recommend is look at your numbers monthly instead of waiting till the end of the year. If you're waiting till February or March to make any decisions, you're too late because the year is already done. You cannot affect anything that already happened that previous year.
- [08:00]
A
So you mean, like, the following year. So, like, for now, I should not be looking at what I could have done in 2025, because there's literally nothing I can do about it.
- [08:10]
B
Yes. Yep. So many people wait until. So, like, let's give an example right now, in 2026, it's February, and they're like, oh, my taxes are coming up. How can I save money? No, you should be thinking about that before December 31st of 2025. Like, that already happened. So I always recommend for people to look at things monthly that can be reviewing, like, a profit and loss statement. If you get one from a bookkeeper that you work with or you have a spreadsheet and just looking at your income and expenses. And you can make a lot of decisions off of that. It can be, oh, do I need to make more money? Or are there deductions that I'm missing out on that I can start implementing? That is helping my business, but also helping my taxes. The other thing that I highly, highly recommend is set money aside automatically. So anytime money hits your bank account, go. Go ahead and set a percentage of that aside just for taxes. Like, I have my own account. That is only tax money, and it only comes out when a tax bill comes. And that is a game changer so that you're not getting that sticker shock when April comes around or March comes around and you have to pay your annual. And you're like, what in the world? Like, where do I have this money? Because you already spent it, so set it aside early when you can.
- [09:28]
A
Yeah, Heather, this is really good advice. And I am the first to admit that I'm not super great at it. I feel like it really does take some discipline. I mean, you know, when I get 10 grand coming in from shoots, I'm like, I'm rich, you know, in the month, during that month. But really, like, 30% of that should be put into an account. And sometimes they do, you know, but being like, like, avoiding this is not gonna help you. Like, if you just avoid, avoid, avoid it. And here's the thing, sometimes facing, you know, your income monthly head on can be like, oh, God, I do need to make more money or whatever. But there's. There's nothing like knowing exactly where you're at instead of avoiding it. Like, back when I used to seriously avoid my finances when I was really in debt and it was like, on the surface, I was pretending like everything was okay, but deep down in my gut, it was always there, was always on the. Like, it was always there and it was causing this stress. And once I faced it head on and created a plan to pay everything off that I needed to, like, God, it was like this weight just came off, you know, it's like just avoiding. If you're avoiding, you're not alone. But I will tell you what, like, hitting it head on and facing it and making a plan is like life changing. It truly is.
- [11:00]
B
It definitely, like, strips out that emotional side of taxes and having to pay and just makes it another thing on your checklist that you check off. Like, when you have the money set aside, you already know that you're prepared for it. And then the bill comes and you're like, oh, let me just transfer that money, make the payment, check it off my list. Like, it just takes out that emotional panic and stress that looms over you. Just like that saying people say of like, the IRS could come knocking at your door at any time. Like, eliminate that. Set the money aside. Do it every single time it hits your bank account so that it's just a system that you have in place and it's not something that comes and attacks you in a sense, when the bill comes.
- [11:41]
A
Absolutely. And I know this is supposed to be a tax conversation, which it, which it is. And we'll get more into it. But since it came up just about the avoidance piece, I think it's really important to look at what you're spending. And a lot of times people will use, like, Starbucks, for example. If you're getting a Starbucks every morning and it's $5.78 times 30, like, that can really add up. And just recently I was like, I really gotta take a look at what I'm spending. And I realize every hockey practice that I go to for my, my son, all of us parents, like, in the rink, you can sit at a bar that overlooks the glass and watch practice. I would get a chicken Caesar wrap and a beer. One beer, one chicken Caesar wrap and plus tip. And Everything, it was costing me like $18 every practice. And I realized, like, that really adds up. I gotta eat first. You know, little things like that. But if you ignore it and think, oh, it's only $5.78, it's not a big deal that adds up over time like this. If you are out there and your budget is stretched and you are just like, you know, not having enough money to pay the bills and all of that, open your eyes really, truly look at what you're spending, because those little expenditures will just completely add up. So I'll get off my soapbox and I'm guilty of it. I'm not saying I'm innocent, but yeah,
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B
it's just like subscriptions. Like, do you think it's only $10 or $12 and then you even forget about using it and then you're paying for it and it is just an expense that you could be saving to use for something else or just keep as profit. Like those ones, I feel like, always come out and get people because you paid it once and set it to like, reoccurring payment and don't even think about it ever again.
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A
That's exactly right. Every so often I'll get this like, Apple subscriptions for $10.20 a month. And I'm like, what's. What is. I don't know what this is, or like $2 or whatever. I. There's like some app or some website you can go to where I wish I knew what it was called, but I don't know what the fees are for it. But they somehow can track all of your subscriptions and lay it out for you so you don't have to go searching and find them or whatever. And then they like, cancel them on your behalf or something.
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B
Yep.
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I feel like I need to do that. It's been. It's been a while since I've really, truly looked at all my subscriptions.
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B
I bet you a lot of people, most people would be shocked by it.
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A
Yeah. And okay. What made me really, like, drawn to the ad is this guy was like, okay. And I'm sure it was actors, but still, I feel like this would be me. He was like, I'm paying 600 and something. Whatever. It was a month. Like, I had no idea. Like, because all of those little things just, they totally add up. Totally add up. And then it's like, it's like really prioritizing. Like, there's like education, for example, like the portrait system membership. Like, that can make your ship go faster. Like, really look at what are the things that you truly need and what you don't, you know. And that actually kind of leads me to one of my questions is, is there any sort of, you know, education that people could look into and apps to track things? Not that we're trying to add on more subscriptions and membership, but sometimes these things can, can really be helpful. Is there, is there any sort of like, app or education that you recommend for people to definitely have?
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B
Yeah, so there's a ton of apps out there. I use one called Evidence and it just keeps track of. Yes, you got it. And so it just keeps track of things like that and makes it really easy. A lot of people also could just start out with like a spreadsheet that you're just entering your subscriptions into or printing out your bank statement can be like step one of it. If you don't want to add another app or you don't want to have to pay for something, your bank statement can tell you a lot. And people just kind of avoid it because they're like, oh, my bank's taking care of it. I don't need to look at this. But it's eye opening if you just print that out and just go through and do a really easy system of like highlighting what are expenses that are actually moving your business forward. And then with a different color highlight ones that are just comfort or convenience for you, where you're just paying for it because you want to, but it's not really helping your business or you personally in life. Maybe it's time to say no to those right now and you could always add them later on. But if you're in a crunch and you need to be saving money, those are things that you can get rid of because they're not really moving the needle in your business.
- [16:20]
A
Yeah, there are. Something that my, my CPA told me from, from the start was you need to track your receipts. And I, Heather, I used to, I'm not even kidding you. I used to have a bag stuffed to the brim with receipts. It was obnoxious. And he's like, what are you doing? Like, there are apps. There's, I just googled. There's a bunch of them. There's expensify, there's Zoho expense. There's just a bunch of them anyways. If you just look at, you know, just do a quick search for apps. Every time you get something that can be considered a business expense, all you do is take a picture and it scans in your receipt and it classifies it or you Classify it, and then it's good to go. My husband's so good at this because he has his own electrical, he's an electrician, he has his own business, and he's so good at it. So it just makes like this kind of technology makes life so easy so that you're not like me with a bag of crumpled up receipts. And I'm the first to say I'm not the most organized. So technology like that has just been like, I'm trying to really embrace it because it. It just makes life easier.
- [17:26]
B
Yeah. Even if you use QuickBooks, they have an app that you can just take the picture and load it right into your expenses, which makes it really easy because you're already bookkeeping and tracking things. You can track your mileage in there and you can track your receipts. So it's like a win, win, win, win, win.
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A
Yeah. Speaking of bookkeeping, so when I. This was in like 2013, and I didn't have a bookkeeper yet, and someone reached out to me, they wanted a photo shoot and. But she said she just did not have the money for it, but she was starting her own accounting, you know, bookkeeping business. And I reached out or she asked if there was, like, if I could let her know if she had any. If I ever had any, like, specials or, you know, a deal or whatever. And I was like, wait, what did you say? Your business, you're starting your business as. And, you know, she told me again, and I said, I need a bookkeeper. Like, would you be willing to trade with me? And she was like, absolutely. So she did the whole, like, setting everything up in QuickBooks, got everything dialed in, and then I think we did three or four months where she did it for me as a trade. And then I started paying her, you know, her monthly fees or whatever it was. And so being photographers, we are so lucky that we have this skill that we can trade with pretty much anyone. I have traded Heather with massage therapists. Oh, yeah, for sure. I've traded with a dental company. I was doing their whole team photos or whatever, and I threw in some bonus photos and they gave me teeth whitening. Like, there are so many different people you can trade with. So just think about that. If it's something that you're looking into, A bookkeeper is something I can't live without. I have paid anywhere from like 75 bucks an hour to. I pay a lot a month now. A lot a month. But it's also combining my husband's business and my business and our personal taxes and that sort of thing. If you could say, like, on average, and you might not even know this, but, like, what can someone expect to hire, you know, to pay to hire a bookkeeper if they don't have one?
- [19:41]
B
Yeah, there's a huge range on just, like, how many your bookkeeper takes in a year, like, how many clients they take. But if I had to give like an average on what you could look towards, I would say like 150 is, like the starting out range for bookkeepers. They're just getting kind of their toes wet and stuff. And then it could go up to like 400 or more. It also really depends on what you have them do for. For you. So that lower range can be that they're just categorizing your deductions and then creating the monthly reports for you. But your bookkeeper can do a lot more. Like, they can get your 1099s ready at the end of the year. They can give you financial advice, and all of those things add up because it's really based on how many hours they're working for you throughout the month.
- [20:27]
A
Right, right. Yeah. I'm paying way more than 400. But again, it's. They're doing a lot for us. It's, you know, it's. And they're really good. Like, I got a letter, Heather, from the irs, and I was like, what is this? It like, said I owed a bunch of money. And I was like, freaking out. So I'm like, damon, you know, and I just like, texted him the thing and he was like, oh, no, that's completely wrong. And I can show you why. And he. He knew what to do, what to say, what letter to print for me to send back or whatever. And I was good. So, like, having that. Just that. What's the word? Comfort or just, you know, it's just nice.
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B
Yeah.
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A
Like, I can sleep at night.
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B
It's like an extra person in your pocket for your business. Where you ever have questions, you can easily just throw it at them and they won't think twice about it. Like, they'll give you the answer you need. And it, like you said, it's comfort in knowing that you don't have to figure it out or Google it or panic on your own. Yeah.
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A
Because if I didn't have him, I probably would have just paid it. I don't know. It's em. I assume they're, you know.
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B
Yep.
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A
You don't want to mess with it. It's like, good Lord.
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B
Yep.
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A
Okay, so let's talk about. Well, okay, there's two I wanted, I was going to ask you what are the things that people truly can deduct? But I also want to know what are some commonly maybe missed deductions for photographers that they might not realize. So maybe start with like the general. What are some things that you can write off?
- [21:56]
B
Yeah, so like easy things to write off is education your client gifts, which this one is kind of tricky, so I want wanted to make sure to like touch on it a little bit more. Client gifts has like a maximum threshold of how much you can spend per person per year. So like you can give a gift of up to $25 per person per year. So there's ways to kind of work around it and have some of your expenses for it fall under marketing, such as if you have your logo or any branding on a piece of your client gift that you're giving away, that automatically makes it under marketing because you're promoting your business or talking about your business. So then that $25 threshold is put under marketing. And so you can spend a little bit more on the client gift side of things. So there's like tricks around it. But if you give gifts for someone who books you, or if you're a wedding photographer and someone got married, or branding, like anything that you give gifts for, that is a really good deductions. Your software, software like Gallery systems, you use CRMs, Lightroom, Adobe, all canva, all the subscriptions. Those are also really easy deductions that are really beneficial to your business, but then also are saving you money on your taxes later on. Website hosting, your domain fees, really everything like an umbrella of it is if it's ordinary and necessary for your business, the expense is most likely a deduction that you can use to SA on your taxes. Also gear, I like, that's like a dog.
- [23:40]
A
Definitely gear. Yeah. And even like if you are like having coffee or going out to eat. And correct me if I'm wrong, this is just what I, what I'm aware of from what I've been told. Like if I'm having coffee with my client and we're talking about a photo shoot, like that can be written off or drinks or dinner or whatever, or alcohol can be, I think alcohol is a little bit trickier. But the other thing is my phone, my cell phone, it's through my business and I get to write off my cell phone something to look into. And again, this varies wildly. So talk to your cpa. But if you shoot out of your home or do sales sessions in your home, okay, again, if I'm Wrong. Please correct me, but you can write off, like, a certain percentage of square footage of your home that adds up to something or other and part of the utility. Like, there's this whole thing. But again, double check this all with your cpa. But. But there are ways that you can make that work for sure.
- [24:41]
B
Yeah. Yeah. So your home office, the big thing, it has to be a dedicated space that you only use for your business. That's like, the big caveat to it. So, like, what I'm sitting in right now is my office that I only ever come into for business purposes. So I can measure this square footage of this room and take it out, my entire square footage of my home. And that percentage that I get, I can then multiply that for any utility bills. Because my lighting or, like, my electrical bill, I need that to be able to work in my studio. I need WI Fi to be able to work in my studio. All I need heat so that I'm not freezing when I'm in here in the winter. All of those utility bills can get a percentage of. It can be used as a deduction. Like you said, your phone. That also falls under it because it's. It's partly used for your business. The big thing on that is you just kind of have to give a rough percentage of how much you use for business versus personal, and then they'll be able to take that out of that bill as well. But, yeah, there's a lot of things that you can use. I wanted to touch on meals because you brought it up. Meals is like, the one tricky. Like, kind of sorta. Like you mentioned, if you're with a client, that meal or coffee can be written off. But if you just. Just go to a coffee shop to, like, work on your business, like you're editing by yourself, that sadly doesn't count because you could just do that at home. There's no need that you had to be at a restaurant because you're not meeting with anyone. So there's kind of like a close thing on that. But definitely mark it down. Ask your CPA and then just be, like, very vigilant on. Okay. Is this actually a business purpose that I need to be here? If so, then you can use it as a deduction.
- [26:27]
A
Okay, let's talk about. This was a big one with my cpa. We kind of went back and forth. Is like my studio wardrobe and outfits that I buy specifically for a photo shoot, makeup that I've bought, things that I so like. And he was like, okay, clothes are really tricky. And I was like, but I'm literally using it for my shoe. And he was like, you're gonna need to like, embroider or, like, slap on something somewhere. Like, he embroiders his company logo into his suit shirts and whatever into his jacket, whatever. And I'm like, can I just get stickers and slap them on there? And I mean, he was like, we could probably fight that one, you know, because if I'm doing especially, like, if I'm doing a shoot that I'm filming for my education, if I'm doing a portfolio building shoot, I'm buying things, I'm buying dresses, whatever. And so, so lame. But, like, I'll just slap a sticker on. You know, you can't see it in the shoot, but it's there if the IRS ever comes knocking. So I don't know. I don't know. God, I hope no one from the IRS is listening to that. I really do try to do everything right. Like, I do. But, you know, is my. Are my dresses technically embroidered? No. Do they have a sticker on them? Yes.
- [27:54]
B
Yeah. It's a fun, touchy subject. You've hit on a lot of the points that people are like. So there's like two sides to it. If you're buying dresses that are going to be used that, like, you have a studio and you let people come and pick out an outfit to wear that they can have for the shoot, and then they leave it on your rack and then leave not with it, that becomes like a prop. And so you can deduct that. But it has to say, yeah, it's got to stay in your studio. You're not wearing it for personal purposes.
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A
Like, it's, yes, I'm good then.
- [28:29]
B
Yeah, but now there's also. Then the other side. There's deductions that people think they can get for buying. Like, for me as a wedding photographer, I wear the same jumpsuit every single shoot I go to. If I don't have it embroidered like you said, like, my logo is not on it. Sadly, you can't deduct it because there's no proof that the IRS can see that. Like, this is only being used for business purposes. Like, I could go and wear that to a wedding that I'm a guest at and it's not a business. But once you have your logo on it, then that means anytime you wear it, someone can see your business name and say, oh, tell me about it. So you're marketing yourself so that it can be a deduction for that. So it's Very tricky and like fine lines. A lot of people, like, bend it when they want to, but that's like the. If you need it cut and dry, that's when you can deduct versus can't deduct.
- [29:27]
A
Right. Okay. What are. Can you think of things that maybe people think they can deduct but they shouldn't be deducting?
- [29:34]
B
What we just talked about. Wardrobe's huge. So people saying that they have a uniform. Another thing that we already talked about is meals. And coffee is a huge one. I'm sorry. If you stop at a coffee shop or a drive through to get a cup of coffee on your way to a shoot, sadly, it's not deductible because it's not actually helping your business. You just wanted it for comfort. So that's a big one that people can't deduct as well. Those are the two, I would say, like, the biggest ones that people try to use as a deduction. Also kind of like just touching on it. Vehicles are another thing that people try to deduct extra on. Like, if you go the mileage route and you track your mileage, you can't then also deduct, like, expenses for. If you need to get your car fixed or you have to get new tires or your gas, it's one or the other. And your CPA will help you figure out which one's more beneficial for you. So, yeah, it's either mileage or it's the actual expenses that you spend on your vehicle for the year.
- [30:41]
A
Speaking of vehicles, we had a really big tax bill last year and. Well, okay, we actually did this several years ago. This was in like 20. 20, 2019. If you. I don't know if this has changed since then, but if you purchase a vehicle that weighs more than £6,000. So crazy. Yeah, you can, like, write that off in your business.
- [31:09]
B
So I don't know the number. It did just change last year or this year to a new poundage, which sounds so weird to be talking about. I don't know what it is now, but it is still in place. But it did change, like, how big your vehicle needs to be, which I don't really understand the reasoning.
- [31:30]
A
Well, I wanted a minivan. I am a minivan driver through and through. I love my minivan. It is, I guess it's 10 years old now. It's paid off. It does the trick. Like, it's big enough for my kids and their friends and their sports gear. I don't have to worry about them trashing a new car. Like, I love my minivan. And we were able to use that deduction when we bought it back in 2020. Well, last year, big tax bill. And our CPA's like, well, Dan could buy a car. My husband could buy a car that's over £6,000. I'm like, I'm not. We're not trying to buy a new, like, SUV right now. Like, because to buy this car would have cost us way more than, you know, both of our cars are paid off. And we like that. We don't have car bills right now. Like, so anyways. But that is, if you are in the market for a new car, pay attention to how much it weighs.
- [32:29]
B
So weird.
- [32:29]
A
Like, no, Mini Coop, Mini Cooper is not gonna cut it.
- [32:32]
B
Nope.
- [32:32]
A
But you never know. Like, that it can save you. It's. It's a pretty big deduction if. If it works out. If you're in the market for a new car. Look at the poundage.
- [32:40]
B
Yeah, there's, like, two things on that. One, don't spend recklessly. Poundage, I love it. But, yeah, don't spend recklessly. Like, don't just try to spend money to get deductions because you still want to make a profit. Like, that's the point of your business, is not to just lose all your money, but also, yeah, just have a good relationship with your CPA or accountant or bookkeeper or all of them, because that's an easy email that you can send to them and be like, hey, we're thinking of a new vehicle. What can I use for a deduction? How can it be beneficial? Is there anything I can do? You can ask them questions like that for everything, like new courses or when to buy lenses or other large items. Like, if you're getting close to the end of a year, they might say it's better to do it in December so that it can help you with this year's tax season. Or they might say, hey, hold off until January and February because it's going to be more beneficial next year. So, like, ask them all those questions. They're happy to help you.
- [33:39]
A
Yeah, I think one of the reasons I pay my. My bookkeeper and cpa, they're in the same company. The big box is anytime I have a question, I just. I text them and I'm like, hey. And within, you know, an hour, I have an answer. Or if they don't know, they're writing back right away saying, let me look into it. And it's. It's amazing for Dan and I both. Dan had a question. The Other day, and he's like, oh, just text. It's just so nice. It's so nice to have that at your fingertips. Now for people who are in a situation, and this was me when I first started, I just couldn't budget it in. I couldn't afford it for people who are still, you know, who are there and not yet, like, one day you'll be able to get that bookkeeper. What software? Like QuickBooks. Like, what do you recommend?
- [34:23]
B
Yeah, so first starting out, if you're in your first, like, couple years of business and you don't have a ton of expenses, I recommend doing a spreadsheet. I have one in my shop that I use when I started out, and it just walks people through every month what your income is, what your expenses are, and it breaks down those different deduction categories.
- [34:45]
A
That is something people is available for. For people to purchase.
- [34:48]
B
Yes. Yep. It's in my shop. It's called the tax prep spreadsheet. And people can use it and it walks them through their each month, and then at the end, it has the entire year. So that that's the numbers that you just send to your CPA and accountant. And you're able to do it monthly so that you're also seeing your numbers in real time and how your business is doing. So you can make decisions, too. But that's where I would start. If you were like in the beginning. Start there. You don't have to have a bookkeeper right away. I also think it's really beneficial to do it yourself so that you know what expenses are happening and what the process is before you bring on a bookkeeper so that you can have conversation with them. So spreadsheet first, then I would say using an accounting software or an app like QuickBooks or Wave is one that I've heard a lot about. There's several of them out there. That would be my next step. And then bringing on a bookkeeper because they can answer your questions, they can do it for you so that you can spend time on your business and they can catch things you may not have been able to catch.
- [35:49]
A
Okay, awesome. Hey, just a quick break to tell you that since you're here listening, you have access to a really great offer for our listeners only. We have a special promo code you can use to get 50% off the cost of membership. Just go to theportraitsystem.com or click the link in the description and use the promo. Promo code. Podcast 50 to get 50% off of a membership. We rarely discount membership, so this is A big deal. As I hope you already know, the membership is how I and so many guests on this podcast reached our success. And it gives you access to countless amazing videos, an awesome community, and all the tools you need to build a massively successful business. So use the code podcast50Now to join the community and to start building the business of your dreams. I'll see you there. Okay, this, I don't know if this is relevant to everyone in the world, but my accountant has me filing as an S corp. I honestly don't even necessarily know what that means, but that's what I do. My business is technically an llc, but I file as an S corp. So for people who don't know what to do yet, or maybe they have an llc, should they file as an S corp? Like, can you just talk a little bit about that?
- [37:04]
B
Yeah. So this one I want to start with, like talk with your cpa because this one is very dependent on every single person and their business's situation. But just to like kind of go over things, there's a sole proprietorship that's like step one, don't recommend doing it for very long because you have no protection over your personal assets. Like if someone would sue you, we hope that never happens. They can come after everything that you have. The next one is like being an llc. I recommend doing that as soon as possible. That just gives you a lot more protection. Yes, they might be able to figure out a way to come after your personal, but it just gives a nice protection that separates your business from your personal assets. That makes it really hard for them to get more than just what's in your business. We hope no one ever gets sued, but like, we gotta be thinking about those things. So that's just your legal protection.
- [37:59]
A
People are crazy. You literally never know.
- [38:02]
B
Yep.
- [38:03]
A
Someone's trying to sue my father in law for it was an auto accident. And it is the most absurd. Like, it's so absurd. Heather, I cannot even tell you. I cannot even tell you.
- [38:16]
B
I can't.
- [38:17]
A
You just never know how people are gonna like, anyway, people are gonna try
- [38:22]
B
anything, which is so sad. We hope we don't have to think about that. But you have to.
- [38:25]
A
Yeah. And thankfully he has his insurance company who has Internet, you know, and they're fighting it. But when we were going through all the documents anyways, it's just an absolute joke. Like we like, who are these people? But you never know. You just don't know.
- [38:41]
B
Nope.
- [38:41]
A
Okay. Anyway, moving on. So the llc.
- [38:44]
B
Yeah. So LLC for taxes, you can either be taxed as a sole proprietor or an S corp, which is like what you said you were taxed as an S corp, but you're an llc, so that is something that your CPA will help you work with you on, like, what's beneficial for tax purposes and where you can save the most from that. So it's very dependent per business. Now then after, like being an LLC for a long time, there is a threshold where you can move your business to becoming an S corp. I just want to say this, like, very frankly, it is not a badge of honor to level up to being an S corp. Like, I don't want anyone to rush to get there because, yes, you then get to do payroll and pay yourself, but there are a lot of taxes and just a lot of other admin that goes along with that and compliances that you have to meet that. It's a certain threshold that you need to get to and stay at consistently. So don't rush to it. It's a math decision that you should work with your CPA for. So, yes, you can be taxed as an S corp, but still an llc. But then there's also an option to be like an S corp and don't rush into it, please. Yeah, I got. I have a lot of people.
- [39:57]
A
Yeah, so I'm what you're talking about where I'm an llc, but I'm filing as an escort. Yes.
- [40:02]
B
Yep.
- [40:03]
A
Okay, Got it.
- [40:04]
B
I mean, I think so. That's how it sounds.
- [40:07]
A
No, that. That is what it is. That is what it is. But I would. But. Yeah, but you were saying that there is that next level of becoming a full S corp.
- [40:14]
B
Yes, correct.
- [40:15]
A
Which I'm not there. I don't. Yeah, I don't want. I don't necessarily want to.
- [40:18]
B
Yeah, there's like, some people are like, should I be that. Should I move up? And I just. Just talk with so many photographers that somebody had them move up way sooner and they have to pay a lot in taxes and it was not beneficial for them. And so don't rush into it. Like, it's funny because when you get there, it's almost like a badge because that means you're making that much money. Like, it is a good feeling, but do not rush to it just to say that you're an escort.
- [40:47]
A
Right. What would make someone, like, if they have a bunch of, like, associate photographers or employees, would that bring you up to S corp level?
- [40:55]
B
It's really dependent on your profit. So not just your revenue, but your profit and what you have year after year, that is the threshold that your CPA will look at. And that's another thing. Like just send them an email if you're at a point where you're like, maybe I should be and I score or maybe it will be beneficial for me. Ask them, email them. They will give you the best advice and they're not going to be like, yeah, let's do it. Just cuts should tell you after looking at your numbers if it's really beneficial for you.
- [41:26]
A
Okay, cool. I have one more question and I feel like again, this will probably vary state to state, country to country, because when I lived in Washington state, there is no income tax. It's very, it's very different. It's really bizarre. It's like, but the sales tax is higher. So it's 10% or might have even gone up since I left. But it was 10% sales tax. But that never made sense to me because I'm like, you could be making millions and paying the same in sales tax as someone who is like a single mom, barely scraping by at 30k a year. Like, I don't know, it just seemed really strange to me. But I was like, sweet. I don't pay income tax. But in Michigan you do pay income. Income tax, but sales sales tax is only 6% anyway, so things can completely, you know, I know it can be all over the place, but what would you recommend percentage wise of the, you know, the, the gross income that's coming in each month that you put aside?
- [42:26]
B
Yeah. So I always say to set aside like 20 to 30%. That's going to help cover your sales tax if you have it. You are very spot on. Every state is different, every county is different. It like, it is crazy how specific it gets to. And so please talk with a qualified professional on what's yours. Don't just go off of like what your friend said because you too could even be different because you're in a different county. So Yeah, I say 20 to 30% is a safe starting point. Then do that, like make those payments, see if it's covering it from year to year and then you can always tweak it. Like I started at 30% but now I've been able to just set aside 20% and be able to cover everything. So your business is going to change, your expenses are going to change, your income is going to change. So you should reevaluate it. But that's a safe place to start at to cover that sales tax, your quarterly taxes, and then also your annual tax at the end if you still have Stuff to pay.
- [43:26]
A
Okay, cool. And then one more, One more thing. I'm curious what your thoughts are on this. And then we'll. Then we can wrap up. But when my bookkeeper was saying that I had to charge sales tax, and I was like, but I do digital only packages for my personal branding. And we finally, we went back and forth about this. I'm like, make it make sense. Like, this is not a physical product. And she finally, she said, this was my old bookkeeper. I have a different person now. But she had said if I write on the invoice that these images will be delivered digitally. Like, and I use Dropbox via Dropbox, then I don't have to charge sales tax.
- [44:11]
B
Yeah. So every state is different. Sales tax is just a pain in the rear because not only is it different percentages based off of state level and local level, but what you charge sales tax on is different per state. Like, some places it's, it's digital, Some places it's services. Some places it's physical. Some places it's a combo of all of them. And like you mentioned, some places don't charge sales tax at all. It's very specific and it's so confusing. Also, if you, like, shoot in different states, there's also, like, laws on what you charge sales tax on based off of the different states. So it. This is the most complicated part, I think, of taxes, because every single person is different, basically. And so you want to be really open with your CPA or your bookkeeper and tell them, like, where your shoots are, what your packages look like, and they'll be able to help you figure out what you should be charging sales tax on and how much it should be and when you should be charging it?
- [45:17]
A
Yep. Okay, awesome. Well, this has been really good information. Thank you.
- [45:23]
B
You're welcome. I love talking about.
- [45:26]
A
Sounds like it. You seem like, like, like you're really good to chat with. You're very energized around it. It's awesome.
- [45:32]
B
People think I'm crazy, which I'm proud of, I guess, for it.
- [45:35]
A
I mean, aren't we all a little crazy? Lord God. Okay, so normally I ask the last four questions at the end of each episode. I normally ask, and I know you're a photographer, so you could answer that, but since we're talking about taxes.
- [45:49]
B
Yep.
- [45:49]
A
Let's chat. Okay, I'm gonna switch up the questions a little bit. So what is one tax tool or app or just something that you think people always should have when it comes to taxes or keeping track of taxes?
- [46:05]
B
So I highly, highly recommend an app like Mileiq. We kind of touched on it very quickly, but mileage is one of the most commonly missed deductions because people don't track it. So get an app like Mileiq, have it run in the background and it makes it, it really easy that the end of the week or maybe the end of the month, I recommend weekly just so that you don't miss anything. And it's like top of mind. But all you have to do is it's basically like a dating app. Like you just swipe right, right or left if it's personal or business. And that's all you have to do. And then it'll create a spreadsheet for you at the end of the year so that you can give it to your CPA that says how much you did personally, how much you drove, business, and then the total of all of it. It makes it so streamlined. And make sure you don't miss those deductions.
- [46:52]
A
I love it. Wait, let me, let me just get this straight though. You said if you do track mileage, like I just had some work done on my minivan.
- [46:59]
B
Yeah.
- [46:59]
A
If I'm tracking mileages, I can't write off that work that I had done.
- [47:02]
B
Correct. Because you got it. Now, I would talk with your CPA because sometimes if it's enough and expensive enough, it could be good that they'll tell you to go down that avenue because you'll get more deductions in it. But nine times out of 10, the mileage is going to get you more deductions on it. And then sadly, you can't write off the expenses as well because then you're like double dipping in a sense.
- [47:25]
A
Right, that makes sense. Okay. All right, so next question is, how do you spend your time when you're not working?
- [47:32]
B
So I have a two year old and I am a stay at home, work, mom, stay, whatever they call it now, that is me. So I am just like wrangling my two year old old and on mommy duty and we go to the gym or gym, do gymnastics. Like that is my life. I love every minute of it. But I sure do love my moments when I can just focus on my business too. So it is a blessing to be able to do it.
- [47:57]
A
I call it mama time.
- [47:58]
B
Amen.
- [47:59]
A
Like kids, they know what mama time is. I'm like, kids, I'm gonna need a little mama time. They're like, really? And I'm like, I swear one day you'll get it.
- [48:07]
B
Yep, it's one day.
- [48:09]
A
But I'm also like, like, listen, little dudes. Or I should say, listen, little bros. Like, I could be at an office from eight to six every day, you know, sometimes, like, anyway, they'll get it one day. But I just try to explain to them that I am so fortunate. They are so fortunate that they have two parents who design their own schedule and we can be there for all the things. Everyone is so lucky, you know? Anyway, I love it. Sorry, I'm going off on a lot of soapboxes this episode.
- [48:43]
B
I am here for all of them.
- [48:46]
A
All right, and then the last one, well, second to last one is what would you tell people who are just starting out on this small business journey? As far as taxes go, I would
- [48:58]
B
say it's never too early to start tracking things and setting money aside for it. Like you might think, oh, I'm just making a couple hundred dollars, I can easily pay taxes. Get the system set up as soon as possible because then when the money starts coming in and the expenses start coming in, you already have that workflow set up and ready to go that you're not even thinking twice about setting that money aside and putting it off and not touching it. Love it.
- [49:26]
A
And then where can people find you online?
- [49:29]
B
Yeah, so you can find me on Instagram. Heather Marie Lycey. L E, I, C Y.
- [49:36]
A
That's my.
- [49:38]
B
That's my personal one where I share all things about weddings and seniors and tax tips. But then also I am a co host of the Conquer community. So@the conquer community.com. it's a space for photographers, oftentimes in their first like three to. I mean, we go up to like 10 years of photographers and it's just a space where we let you guys ask us questions and just come in so that we can help you get over hurdles in your business. And we do monthly calls, we ask questions in the Facebook group, and then we also do a yearly event where we all get together so you can find me there as well.
- [50:15]
A
Fantastic. I just followed you. Well, thank you for your time. I felt like this was, you know, just this important topic to cover and it's, you know, it's February, so I feel like this is a good time to do it.
- [50:27]
B
Absolutely, yeah.
- [50:29]
A
Awesome. Well, thank you again, Heather. I'll see you online soon, I'm sure. And stay warm in Pennsylvania.
- [50:35]
B
I'm trying as best as I can
- [50:37]
A
and thank you for having me too. Thanks again.
- [50:41]
B
Bye.
- [50:42]
A
Thank you so much for listening to the Portrait System podcast. Your 5 star reviews really help us to continue what we do. So if you like listening, would you mind giving us a review wherever you listen? I also encourage you to head over to soubriseducation.com where you can find all of the education you need to be a successful photographer. There are over 1000 on demand educational videos on things like posing, lighting, styling, retouching, shooting, marketing, sales, business and self value. There's also the 90 day startup challenge plus so many downloads showing hundreds of different poses. We have to do checklists for your business, lighting PDFs. I mean truly everything to help make you a better photographer and to make you more money. Once Again, that's Sue briceducation.com.