Tips for Managing Your Taxes as an Artist

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’re 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. For more information please see: What is a Sole Proprietorship?

However, there are certain liability issues that you need to be wary of, which is why many artists form a limited liability company (LLC). The process of classifying your business as a sole proprietorship or LLC 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. More on liability issues definition.

Use separate bank accounts and keep your receipts

As a professional and to easily keep track of your expenses, you should have a separate business bank account and credit card account 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. Separating business and personal finances also makes it easier to show your activities are a business, not a hobby. 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, half of your 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’re 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 any doubts or questions when filing your taxes, it’s vital that you consult with an expert. A reliable accountant can help when deducting your returns and can help ensure that you’re tax compliant. 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’s perfectly natural for you to get intimidated and confused when filing your taxes, but it’s vital that you know how to properly manage them and always seek the help of a professional. Learn more about accountants in this CPA definition.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

Written by Sophie Turton.