There is often mystery surrounding how to file taxes as an artist.
As an artist, selling your work can be an exciting experience, but it can also come with many questions and uncertainties, especially when it comes to taxes.
We often hear from artists who are confused about certain aspects of filing their taxes.
In this series on art taxes, we will be debunking five common art tax myths that could be hindering your art business. From clarifying if you need to file taxes if you aren't making a profit, to dispelling rumors about only filing annually, we will provide you with the facts you need to file your taxes confidently and avoid potential troubles.
You can also learn more about art taxes in the previous articles in this series on how to get organized for filing your taxes, what is tax deductible, how to handle sales tax, and what you need to know about filing quarterly or annually as an artist.
Note: As always, this is not a substitute for legal advice or to be used in place of using a qualified accountant with knowledge of small businesses and the art world.
Here are five common myths about art taxes, and the truth behind them.
Myth 1: "I don’t need to file taxes as an artist because I didn't make a profit."
The first question to ask yourself is, are you a business?
Is your studio practice run with the goal of making money?
If the answer is yes, even if making money is not your main goal but one of several goals, you likely should be filing taxes. Now moving on to the second part of that statement, are you sure you’re making “no money” being an artist?
If you are truly making less than $400 a year selling your wares and time then perhaps you don’t need to pay taxes, fair enough. But, you are likely making more than that if you’re actively exhibiting and teaching, selling a digital file on Etsy, doing markets, or any combination of common ways artists sell their work. It is also very hard to pin down exactly what you made if you haven’t been keeping track all year with the intention of completing a schedule C— so you may have made a larger profit and not realize it. This is why consistent record-keeping is so essential.
The easiest way to keep track of your income each year is to stay on top of it with a program like Artwork Archive, where you can track sales and other revenue, plus record all your expenses in one place.
Myth 2: "I don’t need to keep track of my deductions, I’ll just give it my best estimate when I’m completing my Schedule C."
If you’re filing taxes for a business, you need to keep your receipts for your expenses and should add them together to come up with the totals for each category of expenses like Office Expenses and Insurance.
Some years as an artist you might spend a lot on supplies and almost nothing on advertising then reverse that in the following year because you finished the work you were making and need to promote it. Your Schedule C should tell the story of the previous year and be an honest reflection of what costs and profits you had as an artist. You need to keep your receipts for 3-5 years in case of an audit.
You can get an accurate picture of your art business by staying on top of your income and expenses with Artwork Archive. Tie your expense records to a client within the database, gain insight into how much you are spending in certain categories, and get one-click expense reports with the expense tracking tool. It's much easier to keep track during the year and make a digital copy, so that you don't have a giant folder of paper receipts at the end of the year!
Myth 3: "I don’t want to do my taxes myself, so I’m just going to hire someone ... all accountants are the same."
Absolutely hire a professional to help you with your small business taxes, that’s a great idea if you can afford it and feel overwhelmed. A professional can help you make sure you’re maximizing your deductions and is also responsible for helping you if you end up getting audited for a tax year they prepared for you.
The myth here is that all accountants are the same because they are not.
Like other professionals, they have different specialties. The people best prepared to help artists prepare taxes are those with experience either helping nonprofits file taxes or other small businesses with multiple forms of income. It’s normal for an artist to make money on sales, grants, prize money, teaching, subscription income, and speaking gigs all in the same year and you want a professional who can wade through all that paperwork with you and help you file it correctly.
Another myth is that by hiring someone you’ll have no prep work to do to file. Keep in mind that your accountant will ask you how much you spent on certain things, how far you drove for work, and so on. Your job is to provide all that information to them to complete the forms correctly.
Myth 4: "I can just pay annual taxes on my art business."
It is likely if you are making more than $1,000 profit a year as a self-employed artist that you should be sending quarterly payments to the IRS. This article from earlier in the series was a deep dive on this major concern for artists in 2023.
Myth 5: "If I make [insert amount of money you calculated you need to support your lifestyle] then I’m all set for the year."
Unfortunately, no. As you probably know, every year due to inflation, life in the United States gets more expensive. Federal and local tax rates change all the time with seemingly little warning. You never want to not have the money to pay your taxes because delinquent payments collect interest extremely quickly. For this reason, you should always be budgeting an extra 5-10% over whatever you think you’ll need and why quarterly payments are your friend for avoiding a big bill in April.
Want to cut down on the tax-time stress and be ready to file?
You can try Artwork Archive, the all-in-one platform for artists, free for 14 days. Artwork Archive is the leading platform for artists to manage their art business, including their artworks, expenses, contacts, and galleries all from the same place. Plus, track your expenses and stay on top of your finances for tax time.
From inventory and consignment reports to sales and invoices, contacts management, and location tracking, Artwork Archive provides all the tools you need to get organized and manage your career.