The tax year is now at an end and I finally signed off on my income taxes for the year. Since this is my first year wherein I had income to declare from the photography business, I was understandably interested in how things would play out with Revenue Canada. Funnily enough, it was only within the last few days that I could actually come to grips with how our tax system works and why it is so hard for anyone to improve their life situation due to taxes. Now my family never really had tonnes of income to declare and the complexity of my own income was never enough to need to do more than plug a few numbers into QuickTax. Everything changed last year, and I wisely decided to hire an excellent accountant to help me make sense of the crazy numbers game.
One fact was made clear: due to my income earned as an educator, any profit made from my photography would be taxed at that 40% level. Therefore, it makes no financial sense for me to do work that I do not really want to do – hence, why Chandler takes pictures because he wants to. Chasing small contracts becomes even less beneficial, as I can only take in 60% of what I charge, which is seldom worth my time if it is only done for financial gain. What about the tax benefits of writing off business expenses and the such that everyone whispers like they are The Secret? Certainly, this year has worked out well in my favour simply because I have been justly able to claim a series of legitimate initial start-up costs to “write-off” in this first year of business. However, those claims are legitimate only once, so in the future I need to be acutely aware of how taxes affect my business income.
Perhaps this is the most difficult part, because no one really ever tells you how things like this work. Had I not been meticulous with collecting receipts, ordering my invoices, and making only legitimate business expenses, then I could have easily had a tax bill of $5000 to contend with. Will that stop me from growing the photography business into something bigger? Nope. It will make me think about what kind of business I want to do,though, and it will force me to revalue the time I sell. Given my tax bracket, I needed to understand that I cannot compete with other photographers in lower brackets on price. If Suzie is working only as a photographer, and she makes $30,000 a year, then I cannot compete with her on price simply because she pays 20% less tax than I do on that same job. I need to compete with photographers in the same income bracket. Lesson learned: I need to up my game even further so that my work has the same value to clients as work produced by the city’s best photographers.
One other thing that I have found very interesting this month has been to see where traffic to my website comes from. As part of my business plan, I have been using Google Analytics to track the demographics of who searches my site and what they look at. Obviously, most of my readers come from Toronto or Prince Edward Island, but it is the other information that reveals how people find my site, what city they search from and how long they are on the site. It never ceases to amaze me how much one can learn from the numbers spit out by robot droids creeping the web.
At the end of the day, I am still very happy with my first year in business, and am thankful for the opportunities that have come my way because of my love of the world beyond our daily, grinding lives. Mom may not have taught me much about money, but she always told me how to focus on the important things in life.