Bridge the gap between making art and making a living,
… one tip at a time
Your smARTip for the week:
Tax Time (Part 1): How To Keep More of Your Money
A subject dear to all our hearts: keeping the money we work so hard to earn.
Thank goodness I discovered Peter Jason Riley, a certified public accountant who has spent his career fine-tuning the best tax strategies ever for artists.
Here are 3 foundational pointers from his smARTist presentation: – Watch Your Wallet! Strategic Tax Planning for the Visual Artist that I want to make sure you know about:
- You have 3 choices for how your business is structured… …a LLC, a corporation, or self-employed. Most artists fall into the “self-employed” category for tax purposes, which legally means you and your business are one and the same. With corporations or LLCs, you are legally separate from your business. The following tips are based on “self-employment” because that is the majority of artists.
- Being self-employed is subject to 2 different taxes: 1) federal and state income tax, and 2) self-employment tax (currently at 15.3% – a combo of Social Security and Medicare), which is already a part of your 1040 tax form
- The IRS tax code has three basic criteria for what is a deductible business expense: 1) the expense must be directly connected with your trade or business, 2) it must be ordinary and necessary, and 3) it must not be lavish. In other words, if you can make a case for it, you can deduct it!
Your smARTist Move of the week
Even if you have an accountant or bookkeeper taking care of your taxes for you, don’t be lulled to sleep.
There are elements to the tax law that might slip by these professionals, unless they specialize in dealing with artists.
It’s always a good idea for you to be fundamentally knowledgeable so you can at least ask the right questions.
And, if you are a do-it-yourselfer, then all the more reason for you to get information tailored to your work
I invite you to comment, below, and tell us all: do you have any tax tips that you have come across?
P.S. Do you know:
— how to deduct business losses so you don’t run into the IRS challenging your work as on a hobby?
— the IRS’s 9 criteria for keeping the records you legally need?
— besides the sale of your artwork itself, what else the IRS considers an artist’s income to be?
All of this important information will help you keep your hands clean, so you can concentrate on making art.