With tax season coming upon us Nike Air Force 1 07 Se Scontate , 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 yourself seriously.
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 Nike Air Force 1 07 Saldi Scontate , it's costing you a lot more than you're earning and you'd be better off finding something else.
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 Scarpe Nike Air Force 1 07 Scontate , 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 Nuove Nike Air Force 1 07 Scontate , transit, parking, clothing, supplies, training, etc.) Nike Air Force 1 07 Low Mid Scontate , 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) Nike Air Force 1 07 High Scontate , 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 Nike Air Force 1 07 Low Scontate , 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, "Expenses".
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 lifestyle.
Then Nike Air Force 1 07 Italia Scontate , 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 Nike Air Force 1 07 Bambino Scontate , 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.
Actions:
1. Get started by checking out the resources at Amanda's Artbooks site (see below). 2. Find all of your revenue and expense receipts Nike Air Force 1 07 Uomo Scontate , 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 fi