Taxes, Taxes, Taxes (Federal, State, and Self-Employment)

Today is April Fool's Day, but it's also exactly 16 days from when you either must file your taxes, or obtain an extension, and joking around with your tax obligations can get you in hot water.

It's a sad fact that most people don't recognize -- the government, in one form or another, takes about 50% of your profits. I'd love to see the day taxes are due as the week before election day each year, but alas, our elected officials have put it as far away from that date as possible.

Just how does our taxes add up to 50%? Well, if you only earned a profit of $20k, your taxes as a single person are $2,600, or about 13%, at $50k, your taxes are $9,000, or about 18%.


The above tax table for 2006 shows the range from 10% to 35% for your federal obligation only. Since the disbelievers of the 50% total tax liability tend to be young, and single, I am showing just this tax table, but the entire schedule can be seen 2006 Tax Rate Schedules (http://www.irs.gov/pub/irs-pdf/i1040tt.pdf?portlet=3) on page 84 shows the summary for the various filing statuses.

You can't survive long with just a $30k taxable income (i.e. that's what's left over for you once you have paid all your expenses) but even at that figure, your federal taxes are 25%, at $62,000 you pop up to a 28% tax.

State taxes - beware! It's not just the various state income taxes (http://www.retirementliving.com/RLtaxes.html) that will cost you. Many states with seemingly low income tax rates more than exceed other states with personal property taxes. Virginia, for example has a range for income taxes of a low of 2% to a high of 5.75%. Since the 5.75% rate applies at a taxable income total of just 17%, allmost all tax payers who are photographers will be at this rate (actual taxes are $720 + 5.75% of the amount over $17k). Yet, Virginia, like many other jurisdictions charges personal property taxes. For example, living in Fairfax County, in Northern Virginia near Washington DC, both personal property and business personal property is taxed (http://www.fairfaxcounty.gov/dta/tax_rates.html) - per year - at $4.57 per $100, or 4.57%, so each year you pay 5.75% + 4.57% based upon the value of your cameras and computers and vehicles, and such. In other words, you're paying more than 7% to be sure. So, with that in mind, let's add that arbitrarily (but reasonably arbitrarily) arrived to 7% with the 28% federal, and you're now at 35%.

What then, is the next 15%? Well, if you're familiar with your cryptic friend FICA, from your days getting a semi-steady check from your desk job where FICA kept taking money from you for no apparently reasonable reason, then you're familiar with Social Security, also known as Self-employment tax, for those of us who are, well, self-employed. They are the same thing, just different names. And, in the case of FICA, you only pay 7.5%, and your employer is responsible for the remaining 7.5%. When filing as self-employed, you are responsible for the entire 15%. Here's a nice descriptive page - (http://www.irs.gov/businesses/small/article/0,,id=98846,00.html) Self-Employment Tax. According to the site "SE tax rate. The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance)."

See? 35% + 15% equals 50%, sadly, it's that simple. So, be sure to save every receipt that is business related. For every $100 business expense you have a receipt for, you are reducing your taxable income by $100, and thus, preventing you from having to pay $50 out of your pocket. In other words, for every $1 as a valid business expense, you save $0.50.

Of course, I am not an accountant, so take this as just an eye-opener and an inspiration to seek professional tax advice from someone who is actually licensed to do so -- I am not!

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So you wanna be a photographer?

The other day, one of you readers posited this:

Hi John,

I have a simple question for you, one I'm sure you get a lot.

How do you go about building a portfolio when you are starting out without undercutting established photographers for a certain time period, even if you intend on staying in the business long term? It seems a catch-22. Without charging less why would a client go to an unestablished, unproven photographer when there is an established one charging the same price?

Consider, for example, Heather Drake, whom I met recently at an Advertising Photographer's of America meeting here in DC this past Tuesday. Heather has a full time job, is taking classes at the Art Institute of Washington, and, she - STEP 1 - Has a website, STEP 2 - has not let the fact that she doesn't have many assignments keep her from making great images in the style and type of work she likes.

Of course, her site's not finished (check the Fashion, Beauty and Celebrity sections), but she's headed in the right direction. She has taken the first few steps. She also has the financial backing (i.e. she has a job that pays the bills, even if she would rather be doing photography) so she's not forced to take the jobs that undercut what she's worth. Yes, her website will improve, get finished, but she's moving down the path, not stationary, paralyzed by her own inaction.

Before someone will give you a paying assignment (worth having), you have to proove you can complete an assignment. Yes, I know, seems a catch-22, as suggested. Yet, it's not. Give yourself an assignment! It's called....self assignments! Read the paper, find out about the latest parade in your area. Go to high school or small college sports, and practice. You want to be a wedding photographer? Offer to cover a friend's wedding as a guest that will not cost them anything as you won't eat, or if you are a guest at a wedding, cover it as if you were working. After two or three, you'll probably have the beginnings of a portfolio that you can use to get paying work. Portrait photography? Offer to make portraits of friends and family, and then use those in your portfolio.

Once you have a portfolio - and by that I mean a website - where your work is displayed, once a client determines, based upon a review of your work, they they want to give you their assignment, then they have deemed you worthy of the work, and capable of completing it. Period. At that point, it's all about what that assignment is worth. If you don't know, start looking around for guidance. Ask the question "What budget are you trying to work within?" See where they are coming from. Tell them you'll work on the paperwork for the assignment, and then do so. Call a few other photographers and ask them what they'd charge. Post a message on a photo forum that has professionals on it that have done assignments like the one you're being asked to do. Be thoughtful about the estimate, and then put it in writing, including the proper rights package, and then send it along via PDF attached to a cover-letter-type e-mail.

If they said their budget was $200, and everyone you got counsel from said it was an $1,100 assignment, send the estimate near that knowing you may not get it, and chalk it up to good practice. And, as it says on the back of the shampoo bottle, "lather, rinse, and repeat." Eventually, fair budgeted assignments will come your way, and you will (slowly) grow your clientele to be fair paying. If you take every $200-job-that-should-have-been-$1,100 at $200, you'll never have the fair paying clients, or, at the most they will be few and far between. Further, you'll be surprised at how many people tell you $200 and then approve your $1,100 estimate. Sometimes, they are just trying to be cheap, but know what they really have to pay.

If being a professional photographer was easy, everyone would be one. Many many people are photographers, or hang out their shingle and call themselves one, yet are not among the professionals, nor are they even aspiring professionals. They are just stepping in and dilly-dallying around, not being serious about it as a sustainable profession. About 2% of actors actually earn their living as actors. I submit that less than that are professional photographers.

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The Value of Post Production

I've just posted over at my agency's blog - Black Star Rising, an article on the Value of Post-Production, a little insight into what I charge, and so on, as promised in an earlier post this week Cost Justification Time.

Long gone are the days where we made the last frame, and sent it to the lab via courier, and it returned to show us the glory of our work (or where we’d made a disasterous error.) Yet, this “ship and forget” system meant more time shooting, doing what we love (and hopefully are most talented at.)

Today, a photographer’s time is spent far differently. The biggest leech of our creative time is that of post-production. The time from final capture, to ingest, process from raw to TIF/JPEG/DNG and the necessary noise reduction, metadata application, and proper redundant archiving.

(Continue Reading)

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The Reality of One's Future

Why must we stand by and somehow accept what other photographers are doing to the detriment of our profession? Why must we simply sit back and say "heck, go ahead and do RF!", or "wow! You just took an assignment for $75, using $250 worth of equipment if you had to rent it all. You go girl!", or "wahoo! You just got a photo credit for your work! Congrats! It looks great next to the full page ad that the advertiser paid $50k for! That's awesome!"

I was listening to the radio on the way home tonight, and heard this story. British General and Commander-in-Chief in India in the early 1800's, Sir Charles Napier, became famous when he was confronted with a terrible Indian (and that's India's Indian, not American Indian) ritual, called "suttee". It's a horrendous act, whereby when a man dies, as they are burning his body in a ceremonial fashion, the now widowed woman is tossed on the fire to burn to death. Napier, in charge of India, governed by British Authority, confronted the Indian seeking to do this, and stated to him:

"You say that it is your custom to burn widows. Very well. We also have a custom: when men burn a woman alive, we tie a rope around their necks and we hang them. Build your funeral pyre; beside it, my carpenters will build a gallows. You may follow your custom. And then we will follow ours."

Which brings me back to my point. Why must we stand by without making an objection as another photographer stands before us and says "man, I just think it's so cool that I made $25 off that photo." Why must we feel compeled to say, "It's ok that all you got for your hard work was a photo credit." Why, somehow, are we to listen while someone says "oh, my full-time job is X, so I'm not worried about how much I get for my photographs." Or, from our fellow photographers who are full time staffers, who say "oh, my freelance work is gravy to me, it's an extra few hundred bucks or so. It's no big deal to me."

I don't know. I suppose, there are several ways to confront someone. One is to yell at them. One is to try to convert them by citing how wrong what they are doing is. One is to toss a glass of water in their face and walk away. Trust, me, all of these are thoughts I have had. Really.

Napier, of course, had a bit more authority. He could actually jail, hang, or otherwise punish wrongdoers. What he did, though, was reason with the man.

What, then, should we do? Well, for one, not be silent. Yet, take a positive approach as you do respond. Stock licenses still cost good money. Just yesterday, I licensed an image for $1,800. That was fair for this company to pay. There is clearly a bottom, and it's free. I can't concieve of anything I'd ever endeavored to produce should ever be given away for $1, or less.

Perhaps ask a few questions, like: "do you want to do this for a long time, or just a few months?" "Do the people who hire you have health insurance and a 401k? Can you concieve that you'll have that in the (near) future? Is that fair?" "Do you think you could afford a family, or to eventually make mortgage payments at a revenue level that is about $200 a day?"

Try helping people to see the reality of their future. Suggest that they may look back at this year and next when they are five years down the line, and realize that all the work-for-hire deals they signed means they have nothing to show for their hard work back then.

Noted novelist Catherine Aird said it best:

"If you can't be a good example, then you'll just have to serve as a horrible warning."

That's pretty damn succinct. Thanks Catherine.

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Metadata and Mermaids = Metamerism?

No, sorry. For men, this one's easy to illustrate - have you ever pulled out the black suit, and black pants, checked to make sure they matched outside your closet, and then once you're outdoors, your wife points out that they don't match? For women, it happens with dresses, but somehow, not so often.

While this affects you when you're with a client and they are looking at you and worrying that you are color blind, how does this affect you beyond that? Well, it extends to printed output, and specifically, to prints you produce under your own lighting source, and then, upon receipt, the client sees under their light.

While this is a little technical, check out this animation and really study it, to see how, as the color temperature/wavelength of the light changes, the reflected light hue/saturation changes.

Further, Wikipedia has a great explanation of metamerism, and it is among the things that can render a print you are looking at (prior to delivering to a client) good, and then not so good once you've delivered it, because it's looked at under a different light.

The other issue is dry time. When you are producing a final image from a printer, you should wait for the inks to totally dry and confirm that the color is accurate. What you see fresh out of an inkjet printer is not what the final image rendering will look like. While humidity, ink type, paper pourousness type, and others all factor into how long it will take, suffice to say, you need to put from an hour or two, to several hours between printing and final judgement, to ensure proper client satisfaction!

One resource is a light hood. The folks over at Luminous Landscape have a great explanation about the benefits of it. It is illumination that is calibrated, by the bulb's life and manufacturers specifications to ensure a known light output. I will, however, say that I do not have one of these, because I don't have an inkjet printer system to speak of, nor do I have plans to put a system like that in place. If I did, however, I would be sure to have one. Further, you should always know - at least as much as possible - what the lightsource where your work is being displayed is like, so you can be sure it will look how you want it to, and the client will too.

When it comes to my suits, it's easiest to just check the brand name to make sure the pants match the jacket, and I then can walk outdoors safe knowing that I don't look the fool.

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