7 Tax Tips
Linda Dessau, the
With tax season coming upon us, I decided to sit down with
Amanda Mills of Loose Change, Inc. and capture some of the wisdom she's
gained in over 20 years experience as a financial and business
management consultant for artists.
The tax system can be hard on artists. Artists just don't fit into a
typical career path of making a set amount of money and then increasing
that slightly year-by-year.
Here are the 7 most important lessons I learned from speaking with
Amanda about artists, money and taxes.
1. Make your passion into a business. Claiming to the world, the
government and yourself that your art is a business is a hugely
important step that requires courage and confidence. Reporting the
income you generate from your art shows that you're taking your art and
Actions: Consider the beliefs that are underlying your decision of
whether or not to report your earnings as an artist. And by all means,
consider hiring a professional like Amanda Mills to help you out.
Amanda's clients value her unique expertise and understanding of the
arts because she takes them seriously. Other accountants might look at
the small earnings of an artist and ask, "Why bother?" Amanda treats
your identity and earnings as an artist with respect and gives them the
attention they deserve.
2. Fund your passion with a supplemental job. A "day job" doesn't have
to be something that makes you miserable. If it is, it's costing you a
lot more than you're earning and you'd be better off finding something
Look at the big picture - your supplemental job doesn't have to be
something you're passionate about; its function is to provide the
funding for what you ARE passionate about.
Here's where a supplemental job can really make things easier with
taxes. Let's say your supplemental job is teaching at a university, and
you make $80,000 a year. You're also a sculptor, and you've established
your sculpting as a business.
You spend $40,000 on your sculpting in a year. Because it's a business,
you can claim that as a business expense. So, instead of paying taxes
on the $80,000 you earned at your supplemental job, you only have to
pay taxes on $40,000. That could save you over $13,000 in taxes.
Action: Weigh out the costs and earnings of your "day job". Consider
the financial costs (child care, gas, transit, parking, clothing,
supplies, training, etc.), time costs (travel time, time spent at work,
bringing work home with you, etc.), mental costs (getting distracted
trying to solve work problems when you're at home, or other stressful
thoughts related to work), and lastly the emotional costs (being
miserable in a job you don't like, interpersonal conflicts with
colleagues, or feelings that the job or company is not aligned with
your personal values).
3. Art is life and life is art. For artists, there's much more of a
blurred line between personal and professional life.
Whether you're taking a trip, having lunch with a friend or seeing a
movie, chances are that what you're doing will influence your creative
work in some way.
And if you're not directly absorbing inspiration, you're fueling it in
your conversations, by talking about your work. And so these activities
can often be deducted as business expenses.
Action: Keep track of everything you're spending money on and keep
notice of how it affects the business of your art. Get receipts for
everything and keep these in a folder, envelope or box marked,
4. Live at the bottom of the curve and keep your footprints small.
Artists often have an irregular flow of income coming in, so managing
cash flow can be tricky. It's important to see the low times (when less
money is coming in) as "normal", and budget yourself to be able to live
on that. Keep your footprints small by minimizing the costs of your
Then, when good times happen and some money is rolling in, you'll be
able to take care of some bigger things – get the car fixed, for
example, or put some money aside for the next low time.
Action: Save three to six months of living expenses. Start small, just
by putting aside one week of expenses. This is the best step you can
take to reduce the impact of a fluctuating income.
5. Flatten your income. Artist incomes can vary wildly from year to
year. One of Amanda's jobs is to "flatten" a client's income out from
one year to another. Sometimes that's purely on paper and sometimes
that's through strategic actions on the part of the artist.
It's especially important that by your third year in business, you're
showing some earnings as an artist (that's often the "red flag" point
of time for the tax collectors).
Amanda recommends that her clients help this along by making extra
efforts to book shows, apply for as many grants as possible, or by
donating their artwork to charity.
Actions: Be mindful of the ebb and flow of your income, and how that
will show on paper at tax time; not just this year, but in the history
and future of your art business. Also, be sure and tell your tax
preparation specialist about any upcoming opportunities on the horizon.
6. Think ahead and get your records organized. Contrary to the myth of
the "flaky artist", Amanda finds that most artists are quite organized.
1. Get started by checking out the resources at Amanda's Artbooks site
(see below). 2. Find all of your revenue and expense receipts, sort
them and add them up.
7. Come to peace with paying your taxes. Think of it as rent for your
country. If you're making money at your art, get someone to figure out
what percentage of your gross income goes to taxes, and send in your
taxes as regular payments throughout the year.
Otherwise, unless you're incredibly disciplined at setting these
amounts aside, you'll end up scrambling to come up with this big lump
sum of money at tax time. This is a recipe for fiscal disaster.
Action: Decide upon quarterly or monthly tax payments, or perhaps pay
after you've received a big payment such as a grant or a paid lecture.
(c) Copyright 2006, Genuine Coaching Services -
Self-Care, Creativity and Writing Solutions
For more information about artists, money and taxes, check out
Amanda's websites, http://www.loosechange.ca
Article Source: http://EzineArticles.com/?expert=Linda_Dessau
Linda Dessau, the
Self-Care Coach, helps
artists enhance their creativity by addressing their unique self-care
issues. Feel like your creativity is blocked? Would you
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