Navigating Tax Season as a Creative Business
It's dangerous to go alone, take these tips -
#smallbuisness #musicindustry #strategy #advice #artists #artcareer #taxes #DIY
Hi, hello, and happy Tax Season…(haha, said no freelancer ever). Tax season, for a number of reasons, is an overwhelming time, but it doesn’t have to be! Now, we don't offer that we can make tax season absolutely painless, but here are a few tips to help lighten the aches that come with it -
Track your income in all forms: The IRS will want proof of all of your income, even if you don't receive a W-2 or 1099 form. As an artist, you are still required to report all income earned from your art, including sales, commissions, and performance fees. Showing proof of income like this can be done through physical or digital invoices, Venmo or CashApp receipts, or a good ol’ paper receipt.
Records are your friend: Make sure to keep detailed records of all income and expenses related to your craft. This will make it easier to claim deductions and ensure that you don't miss any deductions that you're entitled to. There are plenty of apps to track your expenses (some of our favorites include Expensify and Mile IQ), but the important part is finding one that you will use. Trying to take deductions is useless if you aren’t tracking those expenses.
Take advantage of deductions: Working in a creative field has its perks! Artists can claim deductions for a wide variety of expenses related to their art, such as supplies (including software), studio rent, and travel expenses. There are so many more items you are able to deduct depending on your creative field, so be sure to consult the IRS Publication 535 for the full list of what is deductible.
Understand self-employment tax: If you're self-employed, you'll need to pay self-employment tax in addition to income tax. This includes Social Security and Medicare taxes and can add up to a significant amount. Be sure to set aside money throughout the year to cover this tax. The typical rule of thumb is 1/3rd of your earnings; however, this is not the same for everyone, so take the opportunity to speak with a tax professional about what would be best for you and your business.
Consider hiring a professional: Tax laws are complex, and the IRS is scary, so it can be to your benefit to work with a tax professional who has experience with artists' tax issues. They can help ensure that you're taking advantage of all the deductions and credits available to you. As an added bonus, they often take a wild amount of stress off your shoulders by helping you make sure you’re not going to miss something.
Taxes, much like art, require patience, organization, and sometimes a little support in the right places. Remember to stay organized, consult the IRS publications, and don't hesitate to seek professional help if you need it. When it comes to taxes, never go it alone!
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