Artists & Taxes
How to make filing your taxes as an artist as seamless as possible?
It’s that time of year! No one looks forward to writing their taxes. I sure don’t but here are some tried and true ways that we can offer up for you to try to hopefully make your life a little easier during tax season!
It ultimately comes down to developing better practices year round that so you are ready and organized for that infamous Tuesday in April. Here are some helpful tips to help cut down on stress during tax time.
Track Your Expenses Throughout the Year
Develop a system to keep your receipts in a easy to maintain, organized fashion.
Most taxpayers who deduct business expenses already know that it is a good idea to keep their itemized receipts in case of an audit for at least three years. What some folks don’t realize is that you can be sorting your receipts as the year progresses. If you are feeling really ambitious you can even going as far as to digitize them in real-time by scanning them with your phone and saving them in a folder on your computer for safe keeping!
If you are feeling super technical, you can also presort and label these receipts as you generate them. This will allow you to see how much was spent on materials in a given month. Spreading this work out over the whole year prevents a backlog of work for the following spring. If doing this every day seems like a goal you may not stick with, consider doing it once a month or quarterly if that would be more manageable for you.
Get a Credit Card or Debit Card that is Only for Your Art Business
Continuing the theme of keeping your financials organized and easy to sort — consider separating your business expenses from other day-to-day things that you regularly spend money on like coffee, groceries and gas.
By keeping all your business expenses on one card, you will create an informal accounting of what you bought and when. It can also be helpful in capturing recurring auto expenses like utilities or web hosting that you might forget to track. However keep in mind, in the case of an audit, your credit card statement will not be sufficient— so definitely don’t skip out on keeping those itemized receipts!
If you are thinking about doing this, make sure to shop around before selecting a card to use, especially if it has an annual fee. And be sure consider all those different cardholder perks that most credit card companies offer these days. Some can be pretty sweet!
Learn from Past Art Business Financial Mistakes
You don’t want to be surprised when you pay your taxes.
Instead, learn from your expenses and tax returns from years prior. For instance, did you forget to track your mileage for work last year and miss out on that deduction?
Get acquainted with the kinds of expenses you regularly incur and try to check in regularly to keep yourself on track with your expense accounting.
Use One Invoicing System for All Art-Related Sales
If you are an artist that issues invoices for commissions or services you provide, make sure to keep it simple and easy to maintain. There are so many different softwares these days to help with that or if you’re not ready to commit to something like that keep it simple by creating your own template in google sheets or something similar! This is great way to also keep track of invoices that you’ve issued and are still awaiting payment on. While this may seem like another boring task, you can get creative with this and design them to they are on brand! If it helps you get paid in a timely manner, seems worth the effort to me!
Understand How to Deal with Profit Split Over Years
Artists are often get caught between years when it comes to incurring expenses and seeing profits.
Rather than holding expenses and filing them when you’ve earned the income you intended to generate, file both in the year they happened — even if they are different years. In a busy career, there is money going in and out so it’s natural that your sales will not neatly fall into a single calendar year.
Pay Attention to Your Projected Income
If you’ve been paying taxes as an artist for a couple of years, you should have some sense of what you’ll make in profits this year—and what tax bracket you will fall in as a result. With that in mind, plan out anything you’d like to do to offset what you owe the IRS at the end of the year. You could consider making a charitable donation or contributing to an IRA. If you are going for a grant, it can be helpful to calculate what the percentage may be that you should set aside to pay as taxes. Preparing for this early on will make it much less stressful when it’s time to pay the government.
Want more?
If you stuck with this blog and found these tips helpful to you, check out our Creative Career Support Program. It is full of ideas on how to implement these best practices as well as other impactful ways to elevate your creative career even further. Led by our Artist Development Director, Ryan Vai, she will lead you through tailored workshops on how to further your artistic career. Cheers to that!