As a self-employed videographer, you’re probably always working hard to grow your business to new levels and achieve new creative goals that you’ve set for yourself. However, when it comes to figuring out the numbers during tax season, that creativity can be put on the back burner due to uncertainty, financial stress, and disorganization. We’ve put together a list of the top 7 ways that you, as a self-employed Canadian videographer, can reduce your tax bill.
#1: Stay Organized and Have Processes
Throughout the year, you’ll want to make sure you have a process or system in place to keep track of all receipts and financial information.
Even if it’s a simple process in keeping track of these things, staying organized throughout the year should be a top priority when it comes to the internal workings of your business. By creating a simple electronic filing system on your computer you’ll be able to have completed records when tax season rolls around.
If you’re missing information and documentation, you’ll miss out on certain tax deductions and will, therefore, have to pay a higher tax bill. So, make sure you are filing and keeping track of all of your physical and electronic receipts using an organizational process that works for you!
#2: File on Time
The next way you can save on your tax bill is to make sure you’re filing your taxes on time no matter what.
Even if paying it is a struggle, you’ll be avoiding late penalties just by filing on time and therefore, saving on your taxes. Those who are self-employed and don’t make the filing deadline will have late penalties that start at 5% and grow with 1% interest every month thereafter.
It’s important to make sure you are keeping yourself organized and have the significant tax deadlines marked in your calendar well in advance so that you don’t miss them. Block time to work on gathering documentation well in advance. Avoiding late penalties is one of the easiest ways to save during tax time as when we file is within our control.
#3: Pay on Time
Sometimes finding the money to pay taxes owed on time can be a challenge, but it’s important that the deadline is met to the best of your ability so that those interest costs can be avoided. With every missed payment and the time that continues to pass without a payment, you’re charged interest. Although it may not seem like a lot to start with, the interest can quickly add up and soon enough, you’ll be paying way more than you initially owed.
Missing or avoiding payments will not only increase your tax bill by a significant amount over time, but it will cause a lot of avoidable stress and potential future financial problems within your business.
#4: Incorporate your Business
If you are making well above what you need to live from your business, it may be a good time to start thinking about the process of incorporation.
By incorporating your business, you’ll be able to save on your tax bill as it allows you to be taxed at a lower rate compared to the rate of an individual. Businesses that operate as sole proprietorships or as partnerships tend to pay a higher tax bill than businesses that are incorporated. Having these lower tax rates would help take off some of the financial burdens you may begin to feel or stress over during tax season.
Although this solution for reducing your bill may not be the right one for you now, it is still good to keep this as a possibility for your business in the future.
#5: Use Rental Houses
If you’re working on a short-term project for a client, or if you’re wanting to try out some new equipment, consider using a rental house!
Rental houses are businesses that allow videographers to rent out specific equipment or gear for shoots for short-term periods so that you have the opportunity to “try before you buy.” This is a great option if you are looking to save money on buying new equipment all the time, or if you are wanting to test-run some gear to make sure it has all of the features you need before making a big purchase.
Some rental houses also have student discounts for videographers in certain post-secondary programs, as well as discounts for certain timeframes, hours, or days of the week!
#6: Lease your Equipment
By leasing a piece of equipment, you are avoiding paying the full amount upfront but rather, you are paying it little by little on each monthly payment.
In regard to your taxes, this means that you can claim a tax credit on the portion of the lease cost for each year that you have the lease. This is a much better use of cash rather than splurging to own a product if money is tight within your business.
On top of this, you’ll have the opportunity to stay on top of technology trends a lot more easily as a lot of products have significant upgrades to their software or functionality within only a few years of release. Meaning, you’ll be able to test out those upgrades and use them for your projects without purchasing brand-new equipment every couple of years.
Not only does leasing your equipment let you have more freedom with the products you can experiment with, but you’re also setting yourself up for a reduced tax bill in the end!
#7: Plan Ahead
Finally, in order to see a reduced tax bill at the end of the season, you’ll want to plan ahead!
We all know the stress that a last-minute rush to gather documents can cause. This year, commit to planning ahead to eliminate as much of that stress as possible. Plan to engage the services of an accounting pro you can trust early on so you can benefit from expert guidance.
No one knows more about what’s needed when it comes to tax time than your accountant, so it’s always a good idea to find one that you trust and work closely with them to make sure everything is in order and that you are getting the best tax bill that you can possibly get.
Tax season can be a stressful and uncertain time for a lot of self-employed individuals. But knowing the best ways to reduce your tax bill is a great start for relieving that stress and feeling like you’re in control of the numbers!
If you’re a self-employed videographer or creative professional and you’d like some help planning ahead for tax season please contact us here to explore working with us. We are here to help!