Taxes are due April 15 here in the US and I’m sure you’re well prepared.
So . . . what are your best tax tips for other artists?
How do you organize your finances so that you’re best prepared?
How do you keep track of mileage and expenses?
What’s the best decision you ever made re your taxes?
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11 thoughts on “Tax Tips for Artists”
I use an online program to figure out what I owe, they spit out a file which then I upload to the government site…(I use cutetax with netfile, but that’s canadian)…I save about 950 dollars a year by doing this online myself rather than paying an accountant…(& I send the money owing using bill payment function from the bank on my telephone)…No paper, no mailing, no line up at the bank…(re:best decision)
Who, me? Well prepared?
Seriously, the best tax tip I know of is to find a good CPA who understands the creative business. Look for someone who has clients in the arts: performers, writers, and so on. Your ordinary accountant will focus on the wrong things, because a creative business does not work on the same cost/results model as a ‘normal’ business.
I suppose the best would be an artist trained as an accountant, but the closest I’ve found is an actor who does accountancy on the side. So far, it’s worked pretty well for me.
Failing that, a few good books might be worthwhile. I don’t have a current title on hand, but the F&W book clubs (Writers Digest, Northern Light, etc) often publish good stuff.
The best decision I ever made regarding my taxes? That’s easy: I married a CPA! (And she likes to help me with my art business as well, even loves building and stretching canvases – I have no idea what I did to get so lucky)
The other very positive thing I did was to get a separate checking account for my art business and Quickbooks – makes it far easier to track all my expenses and makes it easier at tax time to get everything in order.
Wondering if anyone knows a good accountant for expats… those living abroad… things can get so confusing and complicated, even if the IRS has all those publications with info…eek!
I use a file folder system with all the main categories on them. This would be an individual matter as to how someone would label them, but I do things like have folders for my credit card statements and I mark them as they arrive for items that I ordered form my art business (like frames and art supplies and art books). Then when I gather the info for my tax preparer, it is all in one big plastic file box to be gone over and tallied.
Works for me.
Best thing I ever did was open a separate business checking account. Sounds obvious to me now, but it took me a while to come to that conclusion. Also I use a custom database in Bento for tracking which helps enormously.
I use an accordion file to file all my art expenses by month. I use Appleworks spreadsheet to tally the expenses and income by month and then a year end total for each category. I’ve had a separate checking account and credit card for art for years. And, I keep track of mileage in my daily planner where I record where I went for what and the mileage. At the end of the year, I just go through the planner and add up the miles.
We use an accountant who gives us a workbook each year. I fill that out with all of our expenses and deductions at the end of the year, and he compiles it. I try to do as much as I can to keep costs down and don’t send the accountant a box of receipts. That’s way too expensive! I work a lot cheaper than he does.
Keep everything for your business separated from your personal. Have a separate business checking account and a separate business credit card. Don’t mix your personal purchases with business.
I went through an audit 5 years ago and it was a nightmare. There was one deposit for $16,000 in our business account that we couldn’t account for. You would think I’d remember where such a large sum of money came from, but it was for years prior and I just didn’t recall. The IRS was going to make us pay taxes on it because we couldn’t prove it wasn’t income. Then, at the 11th hour, I got lucky and found documents showing that the $16,000 was actually money I had pulled from personal savings and put into the business as a loan. YIKES, I almost paid income taxes that weren’t due! In the end, we owed nothing but it cost me weeks of pulling receipts and documents together.
Lesson learned – Put in the time for keeping records organized, or you”ll end up paying more in taxes than you should.
Great topic! I’m a business coach and I specialize in the Arts and Entertainment industry. Money/Financial Management is among the top 3 issues clients come to me for. I have a couple of tips:
1) Systematically manage your finances all year long and doing taxes at the end of the year becomes a breeze.
2) Use a computer system like Quicken and Quickbooks so that doing your taxes becomes just a matter of running a report.
3) Run your business like a business. Meaning – have a separate checking account and credit card for your business expenses. Save ALL your receipts and document why they’re a business expense. Report all of your income, even that $10 for the CD you sold a friend. Even if you’re not making a profit, if you treat your business like a business, the IRS will more likely agree.
I have an ebook “Build Your Financial Foundation” on my website if you want to know how my clients successfully create their financial systems:
http://artists-edge.com/products
Warm regards,
Debra Russell
Business Coach for Creative Professionals
and the Professionally Creative
Robert: You ARE lucky. Be sure to take care of that CPA wife!
Linda: That would be a good resource (CPA for expat artists). I’ll let you know if I hear of anyone. Maybe Tina Mammoser knows of one.
Lynne: You sound very organized. Another way to go about it would be a card just for your business. Then you don’t have to circle anything.
Maria: Wow. So glad you found that $16K. Thanks for sharing that valuable lesson with us.
Debra: Normally I don’t allow product advertising in the comments, but your ebook sounds valuable. Thank you for sharing your 3 tips here.
Thanks Alyson – normally I don’t advertise in blog comments – but it seemed like such a perfect fit for the topic I couldn’t resist đŸ˜‰
Thanks for the twitter follow – I look forward to reading your blogs and tweets!
Debra