Discussing art and taxes simultaneously seems immoral. It actually makes me feel dirty, but the tax thieves have no respect for art or beauty or anything, so here we go.
Professional, independent, working artists need to report and file taxes, and protect themselves from IRS abuses just like the rest of the non-artist populace. I will be referring mostly to visual artists here, but the information will apply more broadly as well.
If you are a professional, working artist the first thing you want to do is realize that you are a business and begin to act accordingly – if you’re not doing so already. Businesses operate for profit. That is simply a matter of earning more money than it costs you to earn that money. Simple is not easy, but that’s another blog. For now, we’re talking about the meticulous tracking your income and expenses for the purpose of tax reporting.
The sale of art is not an artist’s only source of revenue. For a lot of professional artists, it’s not even their biggest source of revenue. Lecturing, fellowships, residencies, grants, stipends, teaching… Most of these will come with a 1099Misc tax form, but not always. It’s important to track all of the revenue that comes in. Art and non-profits go together like stuff that goes together. That means that a lot of the money artists get comes from people interested in a tax deduction as well as supporting the arts and artists, so they’re definitely reporting that they gave it which means the IRS probably knows that you got it. I’m a big fan of not paying taxes, but not reporting income isn’t a smart way to go about it.
Creation of art engenders many expenses. Track all of it. It will serve you well to have a business checking account separate from your personal accounts. Expense tracking apps are great too. Expenses for creating art are varied and vast. There are guidelines though. They have to be necessary and not exorbitant or overly esoteric. Travel is necessary. Traveling first class with a retinue of assistants, all of whom have a champagne allowance, might draw unwanted scrutiny. The taxing authorities are animals and barbarians. They don’t understand art and artists. We’ll need to keep it simple for their sakes.
Creation of art engenders many expenses. Track all of it. It will serve you well to have a business checking account separate from your personal accounts.
For most artists, your income and expenses will be reported on a Schedule C form attached to your tax return. The Schedule C form has lines for “Beginning Inventory” and “Ending Inventory”, referring to the beginning and the end of the tax year. Therefore, you need to track inventory. For a visual artist, this applies to completed works, ready for sale, not supplies et al. There is inventory in your studio. There is inventory at your other studio, at your gallery, at your mother’s house, at the coffee shoppe where your friend works, in your car, hanging at the library… You need to track and know the value of all of it (and know where it is).
None of this seems very artisty, but remember – you are a business. This is business stuff. You may need to employ help with some of this. If you do, and you pay them, you’ll want to give them 1099Misc forms so that they can report their income and so that you can record those expenses. The more you grow your practice, the more of this you will want to outsource. Get professional tax help right away though. Don’t do your own taxes, and I promise I won’t paint portraits or dance ballet or write symphonies. Deal..?
William S Jiggetts