Web Designers, UI/UX, Digital Marketers, Graphic Designers & Freelancers

Accountant & Tax for Digital Agencies & Freelancers

We'll do your bookkeeping, tax returns, and work hard to lower your taxes.

Relax, we'll handle the books, taxes & help reduce your taxes all year round!

Built for Agencies or Small Freelancers

Whether you're a larger agency, or you're a solo 1099 from Upwork, we'll make life easy & lower your taxes.
Passageway Financial Tax & Accounting

Combined Service for an Easy Life

We combine year-round tax reduction planning with bookkeeping, payroll and tax returns for a turn-key service.

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Never Worry, Waste Time or Overpay in Taxes

We'll be your outsourced accountants, and handle everything for you at an affordable price.

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Our Complimentary Tax Reduction Guide

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Tax Accountants for Digital Agencies & Freelancers

If you're a web designer, marketer, freelancer, UI/UX designer or digital nomad of any kind, we're here to help you lower your taxes, keep pristine books, keep compliant with the IRS and ensure that you can focus on what you do best.

You Deserve Lower Taxes

When you choose to work with us, we'll handle all the bookkeeping, year end tax returns and accounting, but we're so much more than that.  We're committed to ensuring you never overpay in taxes and that you don't have to waste staff time doing monotonous accounting, payroll and bookkeeping tasks.

We'll handle all the books & tax, while helping you lower your business taxes.

There's a huge difference in the taxes paid between our clients and the typical accountant business customer, and that's because we go above and beyond to identify and implement tax reduction strategies you usually have to pay massive up-front fees for.

Specialized Accounting Firm for Digital Agencies and Designers

We love helping digital marketing, design, development, and SEO businesses implement top caliber tax reduction planning so that they can keep more of their hard earned money.

Services We Offer for Digital Agencies & Freelancers:

  • S-Corp Setup or Conversion
  • Tax Return & Preparation
  • Bookkeeping Services
  • Bill Pay
  • CFO Level Guidance & Consulting
  • Tax Reduction Planning & Implementation

We're an Accounting and Tax firm built for Web Designers, Digital Marketers, UI/UX Designers, SEO Companies and other digital freelancers or agencies.

Get Small Family-Owned Service with Huge Capacity

We're not your typical accounting firm, we exist to help high-growth agencies get better outcomes, grow a more profitable and scalable business, and help them keep more of their hard earned money.

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FAQ's

Digital Agencies & Freelancers

What's required to start a web design business or agency?

Basic steps:

  1. Pick a business type
  2. File required paperwork
  3. File for an EIN (if applicable) from IRS.gov
  4. Open a bank account
  5. Consider website, social media, email, phone number, etc

Furthermore, here are some of the best practices to start a new business.

The first is to decide what type of business entity you want to be. Most businesses should be fine starting out as a sole proprietorship, but you may want to consider whether you should be an LLC (typically if you have any potential liability). Once you’ve decided  what entity type you want, you’ll need to file with either the Secretary of State (for LLCs, etc) or with your local county (if applicable for DBA/sole props). Filing with the Secretary of State is preferable but can have additional costs. Even if you want to be a sole proprietorship you’ll need to file a DBA (doing business as/fictional name) if you want to do business as a business name rather than your personal name. You don’t have to file a DBA if you want to just conduct business under your own personal name, but you will have a hard time getting an EIN and a business bank account. Getting a DBA doesn’t affect how your company is taxed. Minnesota requires you use the Secretary of State for DBA/Assumed names and LLC, etc.

Next up you’ll want to file for an EIN on IRS.gov, this is a special number that is your tax ID for your business. You can apply for that here.  

After that take your DBA paperwork and your EIN paperwork and go to a bank of your choice to open a business bank account.

Keep in mind - websites, social media, email addresses, and business specific phone numbers are all helpful tools to help you promote your business, drive additional sales, and keep some separation between your personal life and business goals.

When are digital services subject to sales sales tax?

Any tax related question is state dependent due to various laws that are different between states. It is also highly dependent on what the nature of your services are. However, in general any service that requires labor and isn’t just the basic transfer of a digital product that already exists should be exempt in most states. Be careful here to make sure it is a service and not something that falls under the digital products umbrella for taxation, which is more split on whether its taxed or not. If you live in Texas or Connecticut, be extra leary as they have fairly strict sales tax requirements for various services.

Taxation of online business

While normally you have to have some significant economic connection (HQ , office, employees, etc) in order to collect sales tax, when it comes to online businesses a recent Supreme Court ruling (2018 – South Dakota v Wayfair)  has made it so that connection can be defined differently. Most states have chosen to make it that if you collect more than a set amount you need to charge sales tax for items sold in their states. Please check out this helpful site that breaks down the thresholds per state.

Taxes on digital goods by state

Sales tax laws vary from state to state, so please be sure to check with your specific state’s laws before relying on any information below.

Digital products encompass things like graphic designs, music, eBooks, photographs, etc that are sold in a digital format. Various states treat the taxability of these items differently. Some distinguish between whether an item is rented or bought (rentals are not charged tax on but purchases are).  Currently, Minnesota states that digital products are taxable as long as their non-digital format is taxable. One of the main examples is textbooks. Since textbooks aren’t taxable in their physical format then they aren’t taxable in their digital one either.

How to avoid sales tax on your web design business & digital marketing agency

The best way to avoid sales tax on your web design business or digital marketing agency is by providing services.

Anytime you are providing a digital product that doesn’t require labor, you’re more likely to have to collect sales tax, but if you are providing a service most states shouldn’t require you collect sales tax.

When it comes to digital marketing agencies you should be a bit more cautious as advertising is treated differently by states. Most states should still allow you to be sales tax exempt as long as you are involved in some of the design or other parts of the ad. Please note, all sales tax laws are state dependent and subject to change.

How much should web designers save for taxes each month?

A general rule of thumb is to look at your effective tax rate from last year and add 10% to that tax rate and then withhold that amount monthly. This normally ends up being around 20-25%. Best practice is to consult a CPA so they can help you plan accordingly.

Do you charge sales tax on web design services?

Generally, labor or service based businesses don’t have to charge sales tax for their services, but different states treat web design differently. For example: Minnesota doesn’t require sales tax on web design services, but states like Connecticut and Texas do.

Please keep in mind that sales tax laws vary from state to state and are constantly changing, so you should consult your state’s specific laws to confirm whether you’ll need to pay sales tax. Also, you are only responsible for sales tax in states that you have a personal connection with. If you are HQ and work in Minnesota but sell a website to someone who lives in Texas, you won’t be required to collect sales tax (minus some specific circumstances). Your sales tax is due to the states you work in/reside in, so typically interstate sales don’t qualify.

Does Passageway Do 1120s S-Corp Tax Returns

Yes, Passageway Financial will prepare and file S-Corporation tax returns, which are corporate tax returns.  1120S Tax Return preparation happens to be one of our specialties because we help business owners get the most out of their S-Election.  We can also help Sole proprietorships convert to an S-Corp with the 2553 forms and help them maximize their tax reduction from an S-Corp.

How are web design services taxed by the IRS?

All web design services are taxable by the IRS, but exactly how will depend on the nature of your business. Please note that the services can be offset by certain costs, which means normally only your net revenue is taxable.

Tax rates for most businesses will be subject to your normal income tax rate, but please consult a CPA for more detailed information. General rules are as follows, but subject to change based on circumstances – consult a CPA to be certain.

  • If your business is a sole proprietorship, then you’ll pay the IRS by capturing your income through your schedule C tax form.
  • If your business is a partnership, you’ll be responsible for your portion of profits and will capture your income through a schedule K-1. There are several additional requirements for partnerships such as form 1065.
  • S-corporations can be partnerships or sole proprietorships, you’ll use the 1120-S form for your business filing and the schedule K-1 form for your personal filing. You’ll also have payroll taxes to deal with from 940, but if you have a decent payroll provider they should be taken care of easily.
  • LLCs or Limited Liability Companies can be partnerships, sole props, or S-corporations when it comes to taxation and the answer will depend on which you are.
  • C-Corporations and other corporations become separate and distinct taxable entities and are beyond the scope of this article.

Contact Passageway Financial for additional information regarding this question and the entities listed above.

Are graphic design services taxable?

States like Texas and Connecticut require sales tax on graphic design but most states like Minnesota, California, Florida, and New York do not. Please check your specific state’s laws to confirm

Are web design services subject to sales tax?

In Minnesota and most states web design services are not subject to sales tax, but there are some caveats. For example, it must be an active service for a new design or to alter an existing design. You can’t sell an already made design or website template (one that you don’t edit for them but require them to edit – similar to a digital product). However, in states like Texas and Connecticut web design services are taxable. Please check your specific state’s laws to confirm.

Accounting, Tax & Bookkeeping for Digital Nomads

If you're a "digital nomad", you probably understand how vital it is to identify and implement excellent tax reduction strategies.  As an accountant for digital nomads, we help you identify the best business entity, utilize benefits such as health insurance and retirement plans, find ways to hire your kids or family members, and build the most tax efficient wealth possible.

Tax Accountants for Digital Nomads

If you're searching for an accountant as a digital nomad, we're here to help.  Whether you're making $50,000 in net profits a year, or if you're bringing in $500,000, we're certain you'll love our outsourced accounting service.

What's included in our Outsourced Accounting for Digital Agencies and Freelancers?

We'll help you lay a perfect accounting foundation, get everything cleaned up in your bookkeeping, create an in-depth tax reduction plan, do everything necessary to setup that tax reduction plan, and then provide monthly bookkeeping services for you.

Once we've laid the foundation, we'll also help you pay in your taxes throughout the year so that you don't have any surprises at the end of the year.

We'll also help you identify the best tax reduction strategies and write offs for your digital business, which could include things like computers, home office deductions, travel, education, vehicles, retirement plans, health insurance and more.

Digital Freelancers and Entrepreneurs have Amazing Tax Reduction Strategies Available To Them!

Don't overpay in taxes, don't waste time doing your own books, and don't work with a tax accountant that doesn't specialize in digital entrepreneurs and agencies.

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Digital Agencies & Freelancers