As an artist, managing and filing your taxes can be a complicated and overwhelming task. Like other freelancers, professional artists earn an income that needs to be reported to the Internal Revenue Service (IRS). However, identifying the expenses you can write off and the income you need to declare is not a straightforward process. Whether you are a budding or professional artist, here are some things that can help you during tax season.
Clearly define your business
The first step you need to take is to classify your business. Do you categorize your art as a hobby led by passion, or do you plan to profit from your work? The majority of artists categorize their business as a sole proprietorship, as it is one of the simplest business entities from which one can operate. However, there are certain liability issues that you need to be wary of. The process of classifying your business as a sole proprietorship varies in each state, so make sure to check the IRS website and your local state’s site to check on the guidelines and requirements.
Use separate bank accounts and keep your receipts
As a professional and to easily keep track of your expenses, you should have a separate bank and credit card accounts for your art transactions and personal expenses. Doing so will help you collect and filter your expenses to easily identify those that you can deduct. As a taxpayer, you can remove some of your business expenses, but be careful when doing so and remember never to falsify any information, as you may be charged with tax fraud.
Some of the expenses you can write off include home office expenses, self-employment tax, internet and phone bills, travel expenses, bank fees, interest on loans, business insurance and licenses, and retirement savings plans. For instance, if you will be attending a conference or an art fair related to the art piece you are making, you can categorize your airfare and hotel accommodations as travel expenses. If you are renting a studio for your office or workspace, you can write them off under your office expenses. Be considerate when classifying your returns and avoid overly estimating your tax-deductible costs.
Hire an accountant
The art industry is a very dynamic sector that contains several facets. If you have doubts or any questions when filing your taxes, it is vital that you consult with an expert. A reliable accountant can help when deducting your returns and will ensure that you are tax compliant. If you are an artist based in New York, you can find a skilled tax expert and schedule an appointment just by searching “CPA near me.” Before consulting with an accountant, make sure that you have all your financial records ready, as these documents are crucial when assessing your tax.
It is perfectly natural for you to get intimidated and confused when filing your taxes. It is vital that you know how to properly manage them and always seek the help of a professional.