Episode 18: Taking Stock of Taxes with Renee Sneed

Renee is a Certified Public Accountant and Certified Financial Planner. But Abigail first met her when she joined Texas A&M’s Equestrian Team and they were teammates. She has a background showing Paints and QH and after excelling in collegiate competition and graduating with a BBA and Masters of Science degree in Accounting, she joined one of the Big Four, Ernst & Young in Dallas. Today she works with her dad at Dirkse & Associates Ltd, where she helps individuals, small and medium businesses, and farms & ranches with their tax and accounting needs.

In this episode, we picked Renee’s brain about tax and accounting stuff because that is definitely outside of our wheelhouse of expertise. We were excited to have her on the show before she has her first baby in a few weeks. So, welcome to the show Renee! 

Renee's role as a CPA/CFP with individuals and businesses.

Renee works with clients from the ground up, helping them set up what kind of entity they need, strategize business plans and work with them along the way to help them grow and succeed.

Setting up a business as a freelancer--what needs to happen first, before money is exchanged?

On the front end, it doesn't take much - gumption, and finding contacts. Her advice is to get a couple of good mentors--including an accountant with a lot of experience with freelancers. Also an experienced contact in our chosen business.

Benefits/disadvantages to the different types of entities, i.e. sole proprietor, S corporation, LLC, particularly related to costs and taxes.

Sole proprietor: Pros - few formalities, great place to start a business quickly, simple to file. Cons: It can be unfavorable for a higher income because of the high (15.3 percent) self-employment tax.

S Corporation: Pros - Limits payroll tax (over the sole proprietorship self employment tax) depending on your income. Cons: more formality, separate tax filing, more books and records, have to keep track of payroll. And payroll tax. And franchise tax. Basically you need an accountant at this point.

Partnership: Pros - flexibility for distribution

LLC: Pros - lots of flexibility because you can have it taxed as a sole proprietor, s corp or a partnership. Cons - more paperwork, separate tax filing, etc. It's smart to work with an accountant to prepare your taxes.

Discussing the income threshold that makes it more financially smart to be an S Corp vs. a sole proprietor

Renee says making under $40,000-60,000 a year, you can save as a sole proprietor doing your own taxes and avoiding the extra paperwork a different entity requires. After that income level, it starts to be come more cost-effective to switch to an LLC that can become an S Corporation or partnership.

Sales tax - what needs to be collected, particularly for photographers, and does it matter where the client and freelancer are located?

Renee said it's specific for each state and even circumstance, but in Texas, you're often more likely to see a sales tax audit than an IRS audit. a CPA can be very helpful with sales tax. Get very familiar with your state's sales tax, and don't be afraid to call your state's comptroller 1-800-252-5555 (for Texas) or your CPA to get specific answers. The shoot location and product delivery location very much matters. It's always better to collect sales tax versus not collect sales tax.

If you haven't already, sign up for our newsletter to get the helpful PDF from Renee about Texas sales tax for photographers!

Here’s a question from our Freelance Remuda Facebook Group. Can you start paying your estimates taxes any time of the year, or does it have to start in January?

Renee says the first estimated tax is due April 15, then June 15, September 15, and the last one is the following January 15, if you're paying quarterly taxes. This avoids a big once-a-year-hit or an estimated tax penalty. You can pay anytime, with a check, or even easier, sign up to pay online at eftps.com. Sales tax is based on your volume to determine how often you'll pay.

For federal taxes, estimates of how much a freelancers should keep back from each project’s pay to cover taxes? Example, paid $500 for a story, what percentage of that should be reserved for taxes?

Renee recommends putting back 20-30 percent of your net income for a sole proprietor. If you have an S Corp, that number is a little lower, but it'll require more tax planning with a CPA to do that.

Expenses – are there any guidelines our listeners should keep in mind to track expenses?

In general, "ordinary and necessary expenses" to run your business are the kinds of costs you can write off. Renee says freelancers need to watch out for trying to write off your home office. You can write off areas that are used "regularly and exclusively" for your business (so not a dining room table, for example), but a home office can potentially be written off - a portion of utilities, etc. there is a standard to calculate these numbers. Freelancers can also expense mileage on their cars. Keep records of your mileage in a mileage log. Travel, meals on trips. Make sure you're capturing those expenses. Clothes - depends, but generally not unless it requires specific gear, or a shirt with your logo on it for advertising, for example.

Common freelancer pitfalls:

Freelancers sometimes don't ask enough questions, then get to the end of the year and don't know what they need to do for their taxes. Be proactive! Meet with a CPA and/or get your records together. Don't be afraid to ask questions!

Things a freelancer should do before setting up a business bank account:

Bring an SS-4 form - paperwork from the IRS that has your tax ID number on it. Some banks may want say, your LLC paperwork too, depending on the bank. Regardless, bring the SS-4 that has your name on it and your tax ID number.

Extra note on sales tax:

In Texas, photographers are actually considered manufacturers. So you don't need to pay sales tax on equipment, bring a manufacturers certificate or an exemption certificate (click on the first link here for the Texas form) to the camera store. Other states, check your comptroller's website.

How to contact Renee Sneed:

Dirke & Associates Limited: 972-771-1040, Renee@rickdirkse.com.

Don't forget to sign up for our newsletter to get the helpful PDF from Renee about Texas sales tax for photographers!

About The Freelance Remuda
The Freelance Remuda is a podcast about navigating the equine media frontier. Co-hosted by seasoned freelance professionals Abigail Boatwright and Kate Bradley Byars, the podcast explores the trials and triumphs surrounding life as a freelancer in equine media, while sharing valuable tips from equine media editors and creatives doing what they love. Find and subscribe to the podcast on iTunes and Stitcher.








Abigail Boatwright