How Do I Do Taxes if I Do Art Commissions

Tax flavor. Cue a collective groan.

Are yous ready to file your taxes or take yous put it off to the very final minute?

With the dreaded filing borderline inching closer each day, it'due south of import to recall that aught helps more than than keeping all of your financial records organized throughout the year. This includes knowing where all of your sources of income are generated and where your money is going—so tin can get a better understanding of your internet income.

Taxes are complicated and especially complicated for artists. You take a lot of different income sources and a lot of different expenses. Y'all might be wondering what y'all tin write off—what counts and what doesn't?

Don't worry, we are here for you.

Whether you lot are looking to save with mutual taxation deductions for artists, want to know if you authorize for deductions, or simply want financial insights you tin use to strategize for success, accept a wait at the main categories of expenses that yous can rails in Artwork Archive for your art business.

Do y'all qualify as an art business organization for deductions?

When it comes to deciding if you need to file taxes as an artist, the IRS draws the line betwixt whether you ascertain your exercise as a "hobby," or a "business organization."

Quite but, your art practice is defined as a business if you lot have the intention to sell your work regularly for profit and a hobby is washed without financial incentive. If y'all run your studio for profit, you can deduct business expenses. Still, if your art practice is a hobby, you do not qualify to deduct your fine art expenses from a different income stream on your taxes. and if your practice is not for profit, you cannot qualify your losses to outset another income.

How else tin can you decide if you qualify to deduct your expenses?

Ask yourself these questions as posed by the IRS:

Do you put time and effort into your art-making exercise with the intention of selling the works?

Practice yous rely on this income to eat and pay rent?

If you lose coin doing this activity, was it within or beyond your control?

Accept you made profits in the past?

Have you changed your practice in lodge to improve profitability?

Do you expect to see profits in the futurity?

It's ok if you don't make a turn a profit every year, but every bit a general guideline from the IRS, they want to see a profit three out of v years.

Know your business organization nomenclature

Exercise a niggling research and decide what type of business concern structure you want to become. Many artists cull to classify their business as a sole proprietorship because it's piece of cake to ready up and meets the needs of a basic studio practice.

The procedure varies from state to state, so caput over to your local Clerk of Courts website, your state's Section of Revenue site, and the IRS site to run across what steps are required next.

TIP: Start a separate business checking account with your bank. That way, your business organisation and personal expenses aren't all mixed in together when it comes time to practice taxes. And, don't forget to salvage your concern receipts!

If you are a sole proprietorship y'all will tape all your sales every bit general income and you volition deduct your expenses.

Artwork Archive'sExpense tracking feature makes bookkeeping & revenue enhancement time like shooting fish in a barrel for your fine art business.

Take a look at the listing of mutual expenses that you can deduct as an artist.

Advertising

Annihilation you lot spend money on promoting your work can be deducted. Advertising expenses include print ads, business cards, fliers, sponsorships, Facebook and digital ads, every bit well as your website hosting and cosmos costs.

Business Insurance

Merely what it sounds like. If you pay for business concern insurance, proceed track of your payments and write them off come tax fourth dimension.

Commission & Fees

Paying a gallery to bring in clients and giving them a percentage of sales? Expense that. Besides rail any fees related to call-for-entry, applications, legal communication, outsourced bookkeeping, business concern consulting every bit well as model or contractor fees. What counts as a contractor? Anyone you pay in society to make your work. This includes fabricators, photographers, assistants, etc.

Payment processing fees are also included in this department. If you have payment online through a platform similar Paypal, Foursquare, Stripe or Intuit you can expense the processing fees.

Legal & Professional Services

Our recommendation? Get a professional to assist you with your revenue enhancement grooming—you tin can write off their fee!

Materials & Supplies

Brushes, clay, canvases, easels, coat, tools… anything you use to make your artwork should be recorded as an expense.

Large Equipment counts equally a depreciable asset and is annihilation that you volition use for your art business or studio for more than one yr. Think computers, kilns, cameras and any larger expenses that are used over multiple years. Y'all tin can write this off all in one or over many years.

These are substantial expenses. For these larger items, you tin report the nugget's depreciation as a deductible expense or you tin claim a larger deduction in the first year.

Meals & Amusement

If y'all have java with a client, have a collaborator out for tiffin, or have a dinner with a business partner—these costs can all be deducted at 50% as long as the purpose of the meal or event is to talk business. Continue your receipts, snap a motion picture, upload them into Artwork Annal, and brand note of the purpose of the meal.

Part Supplies

Paper, pens, staplers, paper clips, folders, art for the walls, a mouse for your reckoner—you get the bespeak. But don't forget online services such as spider web hosting, software subscriptions like Artwork Annal, an bookkeeping service, or image services, and annihilation else necessary to go on your online presence and career running.

Cell phone and internet costs can likewise be recorded. If you utilize your prison cell phone and internet for both business organisation and personal use, you can split up up the monthly charges based on an judge of how much you use for your art business organization.

With taxation flavour right around the corner, Artwork Annal makes it easy to manage your business expenses.

Professional Evolution

Professional memberships or any type of dues you pay to an art organization, online courses, conferences, books, workshops, or residency fees—anything that tin can be used to enhance your career can all exist expensed!

Rent & Lease

Pretty straightforward! If you lease office space, studio space or even a storage space outside of your dwelling, that monthly fee can exist expensed along with whatever utilities you have to pay along with it.

For those that accept an art studio in your domicile that is used exclusively for your art business organization or making fine art, you can deduct a portion of your monthly overall expenses for that space that will be calculated at the fourth dimension of filing your taxes.

Repairs & Maintenance

Have an expense related to repairing or maintaining your equipment or office space? Keep track of the repair costs and fees. For instance, if you're a lensman and y'all send your photographic camera to the store to become calibrated and cleaned, the maintenance cost should be recorded.

Taxes & Licenses

Business organization licenses are oftentimes required past the land. You lot tin expense that!

Travel Costs

Going out of town to install a evidence? Traveling to a briefing? Paying for airfare or hotel costs? Using a ride-sharing app to go to a gallery? Track and expense that.

Y'all tin also expense $0.58 per mile anytime you use your vehicle to drive to a meeting, choice up supplies, get to an art fair, etc.

Annotation: As always, nosotros encourage you to consult with a tax professional person for help with your taxes and this should simply act as a guide to get you started tracking the expenses for your art business concern.

Now that you lot know what to keep rails of, the question is how?

These expenses add up quickly! But with the Expense Tracking feature in an fine art management tool like Artwork Archive, you can keep track of them with ease.

Bought new pigment or business organization cards? Enter that as an expense in Artwork Archive.

Paid an invoice for a portrait model? That expense can be tied directly to a Contact.

Want a quick overview of your production, sales, and expenses over time? But hit up the Insights feature!

Plus, with the click of a button, yous can get an expense report for whatsoever category of your business or for whatsoever fourth dimension frame. And one time expenses are recorded in Artwork Archive, yous tin can easily export them to Quickbooks or whatsoever other accounting software.

It's of import to know where your art concern stands at any point financially, so yous are never defenseless off guard—tax season or not.

Generate sales and expense reports in the click of a button in Artwork Archive.

Easily calculate your expenses and sales income in Artwork Archive to become your net income.

You recorded your sales in Artwork Archive. You kept your receipts and uploaded them into the Expenses feature.

If you waited to the end of the yr this time, good luck—nosotros've been at that place. Information technology's less painful to regularly upload your expenses and record your sales, and then yous aren't stuck with a week of admin tasks. The best time we find is commonly one time at the end of the month, just you can find the best time that works for your schedule.

Plan for the hereafter

Ignorance is elation … except when it comes to your finances. Make certain y'all are setting aside a portion of your income to pay for your taxes and to invest in IRA if you have plenty left over.

You tin only spend so long ignoring the money side of your art career before you find yourself unfulfilled personally, professionally, and financially. The sooner you have the guesswork out of your financial situation, the sooner you can plan ahead for how you are going to sustain your livelihood. Plus, you'll be able to set physical goals for exactly how much y'all need to earn and relieve to comprehend your expenses.

Tie up the loose ends

If you are similar most artists making a living from your artwork, you lot volition probably take a few other income sources from your gallery or a side gig. If this is the case, make sure you become a 1099-MISC from each different income source that you received over $600 annually and file this as along with your sales income.

Consult a professional person for advice

There are many facets of the fine art globe, and each ane has an expert. If yous take any questions about filing y'all taxes, ever consult a revenue enhancement expert. It could finish up saving you money in the long run.

Before consulting an accountant, make sure to have copies of your receipts, invoices, sales reports and expense reports from your Artwork Archive business relationship. These documents will be your first resource when assessing your tax filing.

Ready to become started? Expense tracking is included on Professional person and Master plans on Artwork Archive.

Check out this tutorial on setting upward your expenses in Artwork Archive.

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Source: https://www.artworkarchive.com/blog/a-short-guide-to-doing-your-taxes-as-an-artist