Contributed by Rob Kaiser-Schlatzlein / As an artist, I used to feel that doing my taxes would always be a complicated burden. But there is no good reason tax season has to be eternally daunting; all I needed was some good practical information and a little up-front learning. In the past, friends have offered a mixed-bag of tax tips, but none seemed grounded in the technical language of the Internal Revenue Code, so they did little to calm my fear of being audited. Since I was always afraid I would miss something, every year I hired a tax preparer. While I still think it is a good idea to retain someone who specializes in freelance/artist taxation, answering some of the larger questions for yourself is also important.
For example, should I incorporate as an artist? Susan Lee has an answer to this question (she says you probably don’t need to) and answers to a whole host of other questions on her helpful website, to which I often find myself returning. She prepares taxes, too.
Another website with great information is CPA for Freelancers. Come up with a few questions about your taxes, write them down, and then spend a few minutes on the blog to see if it provides answers.
Freelancers Union is often useful, though it is not always applicable to artists. One area that I have struggled with is Schedule C expenses. I was unsure how much I could deduct without triggering an audit. I suggest looking into the Hobby Loss Law, which regulates how many years in a row you can take a loss on your business expenses.
This past year I developed my own automated spreadsheet to track expenses. It’s especially important to realize that, depending on your practice, you aren’t likely to use all the categories on the Schedule C form, so it helps to spend a little time in advance to identify the more important categories–those in which you incur the most expenses. I don’t advertise, for example, so I never worry about that, but I do track business meals (of which you can deduct 50%) when I meet with artists and curators to discuss upcoming shows. Identifying the limitations that the IRS imposes on those categories can reduce a lot of stress as you collect receipts and track expenses throughout the year.
Get conversant with Schedule C categories once and your anxiety is likely to lift. Attached is my automated excel worksheet, which can be updated throughout the year and be uploaded to Turbotax. Most of the preprogrammed categories will probably be inapplicable (I only use about five of them), so the record-keeping task should end up being very focused. As an artist you probably would, at most, need Advertising, Insurance, Legal and Professional, Rent for Business, Taxes and License, Travel, Meals, and Utilities. If you aren’t squeamish about privacy issues, software like Turbotax can scour your bank statements and invent a expense list for you. Expense tracking through Mint.com is also very helpful, especially for artists who are uncomfortable with spreadsheets. However you do it, though, keeping track of expenses pays dividends to your art practice beyond merely facilitating tax preparation. In particular, it helps you determine whether you’re charging enough for your services and work.
Finally, plenty of reputable accountants are sympathetic to the business challenges that artists face. Make sure you choose one of them–an accountant who explains to you what he or she is doing and answers your questions clearly. Maybe you’ve already filed your taxes this year, and maybe you haven’t. Either way, it’s a good idea to assess your strategy for gathering your tax information now so that you can improve the process for next year.
About the author: Artist Rob Kaiser-Schlatzlein is fascinated by finance and the stock market. In conjunction with the $50 Stock Club for Artists, Kaiser-Schlatzlein will be giving a presentation titled “Inflation: the Open Secret of Everyday Life” at Two Coats HQ during DUMBO Open Studios. Saturday, May 13, 4pm, 55 Washington Street #321. Stay tuned for details. Contact the author at email@example.com