Under the cash method of accounting, a client deposit is taxable income in the year it reaches you, even when the job happens next year. Set part of every deposit aside for self employment tax and income tax, and send that money to the IRS through quarterly estimated payments.
When does a deposit count as income?
A deposit counts as income when it is credited to your account or made available to you, not when you finish the work. IRS Publication 538 says that under the cash method you include in gross income everything you actually or constructively receive during the tax year, and that income is constructively received "when an amount is credited to your account or made available to you without restriction."
The year end edge matters for wedding and event vendors, who often take deposits in December for dates a year out. Publication 334, the IRS guide for small businesses, gives the example of a client check received on December 30 that could not be deposited until January 3: the payment belongs to the earlier year. The same publication is blunt about the obvious workaround: "You can’t hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income."
Vendors who use an accrual method follow different rules for advance payments, which Publication 538 describes. The rest of this post assumes the cash method.
How much of each deposit should you set aside?
A safe set aside covers three taxes: self employment tax, federal income tax and, in most places, state income tax.
Self employment tax is 15.3 percent, made of 12.4 percent for Social Security and 2.9 percent for Medicare (the IRS self employment tax page gives the rate, and 26 U.S.C. 1401 sets both parts). The rate does not apply to your whole profit. Publication 334 says to multiply your self employment earnings by 92.35 percent first, and it lets you deduct one half of the resulting tax as an adjustment to income. A common shortcut multiplies the whole deposit by 15.3 percent; it overstates the bill a little, which is a forgivable error in a savings account and a confusing one in a tax return.
Federal income tax depends on your bracket. In the IRS revenue procedure with the 2026 inflation adjustments, one band reads "$5,800 plus 22% of the excess over $50,400," so a single filer whose taxable income lands between $50,400 and $105,700 pays 22 cents of federal income tax on each extra dollar. Lower earners sit in the 12 percent band below it.
State income tax varies by state. Your state revenue department publishes its own rates, and that is the only number worth plugging in.
Expenses lower all three, because the taxes fall on profit rather than on receipts. Setting aside a share of the gross deposit therefore errs on the safe side.
Paying it: quarterly estimates, not April
Withholding stops being someone else's job once you work for yourself. The IRS estimated taxes page says sole proprietors "generally have to make estimated tax payments if they expect to owe tax of $1,000 or more" when they file. For 2026, Publication 505 lists four due dates: April 15, 2026, June 15, 2026, September 15, 2026 and January 15, 2027.
Deposits arrive unevenly, and the IRS allows for that. The estimated taxes page says that if it's easier to pay weekly or monthly, "you can, as long as you’ve paid enough in by the end of the quarter." Moving each deposit's set aside to the IRS within a week of receiving it is a perfectly good system. The quarterly estimated tax calculator and the self employment tax calculator help you size each payment, and the guide to avoiding underpayment penalties covers the safe harbors that protect you when a season runs hotter than planned.
What happens if you refund a deposit?
A refund in the same year is simple: record the payment and the refund, and your income for the year reflects what you kept. A refund in a later year is different, because the original deposit was already taxed. Publication 334 says that if you include an amount in income and in a later year you have to repay all or part of it, "you can usually deduct the repayment in the year in which you make it," and that a special rule applies when the repayment is over $3,000. For a large refund across a year boundary, bring the details to a tax professional.
Sales tax is a separate question
Whether a service is subject to sales tax is a state question, and the answer can differ for a photographer, a florist and a caterer in the same city. Ask your state revenue department before you assume either way.
Keeping records that match the bank
A deposit record needs four things: the date the money arrived, the client, the amount, and whether any of it was later refunded. Those four fields answer the "which year" question at tax time without reconstructing anything. Deposits taken through BookNox are charged on your own connected Stripe account; Stripe's direct charges documentation says such a payment "appears as a charge on the connected account, not your platform’s account," so the charge date is in your own records rather than in a middleman's.
Keep the set aside in a separate savings account. Money that sits in the operating account tends to get spent on gear and gas before the January payment comes due.
Worked example: a December deposit for a June wedding
A wedding photographer takes a $1,200 deposit on December 29, 2026 for a wedding in June 2027. The photographer uses the cash method, files single, expects 2026 taxable income inside the 22 percent band, and lives in a state with an assumed 5 percent rate. Expenses are ignored, which overstates the tax slightly.
- Which year? The money was credited in December, so it is 2026 income, even though the wedding is in 2027.
- Self employment tax: $1,200 × 92.35 percent = $1,108.20 of net earnings, × 15.3 percent = $169.55.
- Half of it is deductible: $169.55 ÷ 2 = $84.78, which leaves $1,115.22 subject to income tax.
- Federal income tax: $1,115.22 × 22 percent = $245.35.
- State income tax: $1,200 × 5 percent = $60.00, under this example's assumption.
- Total set aside: $169.55 + $245.35 + $60.00 = $474.90, about 40 percent of the deposit. The photographer keeps $725.10 to spend.
The deposit falls in the last 2026 payment period, September 1 to December 31, so its share of tax is due with the January 15, 2027 payment. Run the same steps for a photographer in the 12 percent federal band and the federal line drops to $133.83, the total to $363.38, and the set aside to about 30 percent. Neither percentage is a rule; each one is what this example's assumptions produce, and your own bracket, state and expenses will move it.