accounting

A Taxing Situation

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Now that it’s tax time and many folks are doing, or at least thinking about doing, their income tax, professional photographers might want to refresh their knowledge of allowable business expenses.

This list of business expenses and their brief explanations provide the starting point for completing tax form T2125.

This is only a starting point because “you can deduct any reasonable current expense you paid or will have to pay to earn business income.” The key word is “reasonable”.

The word “reasonable” is not defined in (tax) law but it has been shaped through Canada Revenue Agency rulings and technical interpretations. If your tax situation is even slightly complex, a good accountant can come in handy.

 

Pre-invoices and Prepayments

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If you need a deposit or a prepayment before the photography takes place, you simply ask the customer for it. Easy, right?

With retail customers, this is a straightforward process. But with some corporate customers, it might require slightly more paperwork.

Some companies can’t, or won’t, issue a prepayment based only on a photographer’s estimate or quote. They may need an invoice. An invoice is a legal request for payment, a quote is not.

How do you invoice a customer for work that hasn’t been done?
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Accounting for yourself

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If you haven’t learned this by now, you must have organized records for your business and these records must be kept for at least six years.

Here’s a brief, alphabetical list of software for accounting, small business management, estimating and invoicing that may be of help to photographers. Some of these are expensive and some are free.

Acclux
Blinkbid
Fotobiz and Fotoquote
Freshbooks
Light Blue
Minutiae
Quickbooks
Studio Cloud
Studio Plus
Tave
Wave
Xero
17 Hats
Zoho Books

 

Mileage for Canadian photographers

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Most folks still use the word “mileage” even though we’ve been metric for a long time. The correct word seems to be “kilometrage.”

When calculating what to charge for kilometrage, the operating expense portion is easy to figure out. Add up all your operating expenses for a year, (e.g. gas, repairs, maintenance, etc.), and then divide by the total number of kilometres driven that year. If you had $10,000 in operating expenses and drove 20,000 km, then it cost 50¢/km to drive the vehicle that year.

But what about the ownership expense portion (i.e. cost of vehicle, insurance, licences)? If your car cost $35,000, how do you factor that expense into your kilometric rate? Vehicle depreciation depends on what car you own and how long you keep it.

Possible ways to help determine a suitable kilometric rate:

• The federal government publishes a list of kilometric rates for government employees. These generic, one-size-fits-all numbers are the bottom end of what you should charge.

• The government also publishes “acceptable” auto allowance rates for company employees. These more realistic numbers are higher than for government employees. You can charge even higher if your situation requires it.

• The CAA has a somewhat limited driving cost calculator. If you can’t find your vehicle when using “By Brand” then try the generalized “By Category.”

Remember that your mileage rate, (it’s easier to say than kilometrage :-), covers only your vehicle expenses. It does not cover your time. If driving to/from a job takes hours, you should be compensated for that, too. Your time is worth a lot more than, say, 75¢ per kilometre. Your travel fee should include compensation for both vehicle expense and your time.

Also remember that you can claim only the business portion of your vehicle expenses on your tax return. You need to record the kilometres you drive for business purposes each year. For example, if you drove a total of 18,000 km in a given year and that included 9,000 km for business purposes, then you can claim 50% of your vehicle expenses.

 

Capital Cost Allowance for Photographers

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Who doesn’t love talking about income tax?

A photographer uses form T2125 to calculate the capital cost allowance (CCA) of their equipment when doing their income tax return. Each class of equipment has a different rate of depreciation.

Most camera gear goes into Class 8, most computer equipment goes into Class 50, and other business property, such as a vehicle, goes into other classes. Be sure to read the description for each class. The Income Tax Regulations have the official rules and good luck reading it.

And then there’s CCA Class 12.

Class 12 is a very desirable class because it has a 100% depreciation rate and often no half-year rule. (Some Class 12 items, like non-system software, are subject to the half-year rule.)
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Chequing and Saving

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Some professional photographers may still have to write cheques to pay bills, models, stylists, assistants, etc. When your customized business cheques run out, there’s no need to buy refills through your bank. Purchasing cheques from a third-party printer can be much less expensive.

There are a few companies in Canada that produce cheques which meet the same standards and have the same security features as the cheques purchased through your bank.

Although cheques are becoming obsolete, if you need custom business cheques, consider ordering from a third-party printer, (very often another small business), rather than automatically buying from your bank. I recently purchased a bundle of cheques for 53% less cost than from my bank.

 

Penniless Canadians

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Starting tomorrow on February 4, the Canadian Mint will no longer be distributing pennies. The once copper but now mostly steel coins will be taken out of circulation, melted down and the metal recycled. The last one-cent coins which were minted on May 4, 2012, cost 1.6¢ each to make.

After tomorrow, banks will not distribute pennies to their customers but the public can still use the pennies they have. Businesses which accept cash are being asked to change their pricing policy to accommodate our new “penny-less” world.
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