As a graphic designer, you may have a talent for creating eye-grabbing visual content. However, graphic design accounting and graphic design bookkeeping may be a challenge. Whether you are a freelancer or run a small to medium-sized firm, having a strong grasp of bookkeeping, accounting, and graphic design tax planning may help you avoid losing money or owing the IRS money because of fines and penalties.
Tax Deductions for Graphic Designers
Knowing what you may and may not deduct as a graphic designer may give you a leg up on your taxes. The following are a few things that you may deduct when doing your graphic design tax planning.
Advertising could include things like your website, ads, registration fees for sites where you show your talent, social media marketing, or application fees for contests that increase your visibility.
If you use your vehicle for work, any business-related miles are usually deductible. If you work from home, you may start counting the mileage as soon as you pull out of the driveway. Car repairs and car maintenance might be deductible.
Office Expenses and Office Supplies
General office supplies, like ink and paper, and monthly fees for subscriptions to stock video and stock photograph sites may be deductible.
In most cases, if the license for the software is over $1,000, it may need to be depreciated over the course of three years. However, our team of small business accountants here at Fusion CPA suggests discussing this with an experienced CPA who understands the unique profession of graphic design as there may be exceptions for software that need to be updated annually.
Communication, such as cell phones, landlines, the Internet, fax lines, and phone lines, would be deductible. If you work out of your home, you may want your graphic design bookkeeping to include the percentage of your telecommunication that is used for work and the percentage that is used for personal activities.
Meals, Travel, and Entertainment
This is another area you may want to talk to a graphic design CPA about before claiming a deduction. There are several guidelines dictating what type of travel, meals, and entertainment may be deducted.
Some popular deductions in this category include:
- Traveling for research
- Meeting with clients
- Traveling to seminars, events, or conventions
- Meals that are directly linked to an activity, such as a business meeting, pitch session, or other business activity
Popular accounting software like QuickBooks Online may help you accurately track mileage, expenses, income, and other deductions.
You Shouldn’t Wait until April to Prepare Your Taxes
You may ask, what’s wrong with paying taxes annually? If someone employs you, your taxes, including Social Security and Medicare contributions, are taken out of your paycheck every single week during the year. Part of graphic design accounting for freelancers and small business owners should include the setting aside of between 25 and 35 percent of their net profit on every job for tax purposes.
Instead of waiting until April to prepare taxes, you may want to set up quarterly tax estimate payments. This may allow you to predict your earnings throughout the year and pay the corresponding taxes on a three-month basis. The benefit of this is that when tax time comes, you may not have to drain your account to pay the taxes. Instead, you may be able to manage your cash flow evenly over the 52 weeks of the year.
Here at Fusion CPA, we offer graphic design CFO advisory. We work with small to medium-size companies, and self- employed individuals providing expert-level data-driven graphic design CFO advisory. Our team of financial advisers offers to work with you in preparing payments, analyzing tax issues, and identifying tax savings. We are constantly researching and recommending strategies for our clients to improve their profits. We help to ensure that you comply with government regulations and will forward the required information to local, state, and federal authorities. Our team has experience evaluating tax regulations and recommending policies to diminish our clients’ tax burden. We are committed to helping you reach your short-term and long-term financial objectives. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.