| With tax season coming upon us, I decided to sit down | | | | And if you're not directly absorbing inspiration, you're |
| with Amanda Mills of Loose Change, Inc. and capture | | | | fueling it in your conversations, by talking about your |
| some of the wisdom she's gained in over 20 years | | | | work. And so these activities can often be deducted |
| experience as a financial and business management | | | | as business expenses. |
| consultant for artists. | | | | Action: Keep track of everything you're spending |
| The tax system can be hard on artists. Artists just | | | | money on and keep notice of how it affects the |
| don't fit into a typical career path of making a set | | | | business of your art. Get receipts for everything and |
| amount of money and then increasing that slightly | | | | keep these in a folder, envelope or box marked, |
| year-by-year. | | | | "Expenses". |
| Here are the 7 most important lessons I learned from | | | | 4. Live at the bottom of the curve and keep your |
| speaking with Amanda about artists, money and taxes. | | | | footprints small. Artists often have an irregular flow of |
| 1. Make your passion into a business. Claiming to the | | | | income coming in, so managing cash flow can be |
| world, the government and yourself that your art is a | | | | tricky. It's important to see the low times (when less |
| business is a hugely important step that requires | | | | money is coming in) as "normal", and budget yourself |
| courage and confidence. Reporting the income you | | | | to be able to live on that. Keep your footprints small by |
| generate from your art shows that you're taking your | | | | minimizing the costs of your lifestyle. |
| art and yourself seriously. | | | | Then, when good times happen and some money is |
| Actions: Consider the beliefs that are underlying your | | | | rolling in, you'll be able to take care of some bigger |
| decision of whether or not to report your earnings as | | | | things - get the car fixed, for example, or put some |
| an artist. And by all means, consider hiring a | | | | money aside for the next low time. |
| professional like Amanda Mills to help you out. | | | | Action: Save three to six months of living expenses. |
| Amanda's clients value her unique expertise and | | | | Start small, just by putting aside one week of |
| understanding of the arts because she takes them | | | | expenses. This is the best step you can take to |
| seriously. Other accountants might look at the small | | | | reduce the impact of a fluctuating income. |
| earnings of an artist and ask, "Why bother?" Amanda | | | | 5. Flatten your income. Artist incomes can vary wildly |
| treats your identity and earnings as an artist with | | | | from year to year. One of Amanda's jobs is to |
| respect and gives them the attention they deserve. | | | | "flatten" a client's income out from one year to another. |
| 2. Fund your passion with a supplemental job. A "day | | | | Sometimes that's purely on paper and sometimes |
| job" doesn't have to be something that makes you | | | | that's through strategic actions on the part of the artist. |
| miserable. If it is, it's costing you a lot more than you're | | | | It's especially important that by your third year in |
| earning and you'd be better off finding something else. | | | | business, you're showing some earnings as an artist |
| Look at the big picture - your supplemental job doesn't | | | | (that's often the "red flag" point of time for the tax |
| have to be something you're passionate about; its | | | | collectors). |
| function is to provide the funding for what you ARE | | | | Amanda recommends that her clients help this along |
| passionate about. | | | | by making extra efforts to book shows, apply for as |
| Here's where a supplemental job can really make | | | | many grants as possible, or by donating their artwork |
| things easier with taxes. Let's say your supplemental | | | | to charity. |
| job is teaching at a university, and you make $80,000 a | | | | Actions: Be mindful of the ebb and flow of your |
| year. You're also a sculptor, and you've established | | | | income, and how that will show on paper at tax time; |
| your sculpting as a business. | | | | not just this year, but in the history and future of your |
| You spend $40,000 on your sculpting in a year. | | | | art business. Also, be sure and tell your tax preparation |
| Because it's a business, you can claim that as a | | | | specialist about any upcoming opportunities on the |
| business expense. So, instead of paying taxes on the | | | | horizon. |
| $80,000 you earned at your supplemental job, you only | | | | 6. Think ahead and get your records organized. |
| have to pay taxes on $40,000. That could save you | | | | Contrary to the myth of the "flaky artist", Amanda |
| over $13,000 in taxes. | | | | finds that most artists are quite organized. |
| Action: Weigh out the costs and earnings of your "day | | | | Actions: |
| job". Consider the financial costs (child care, gas, transit, | | | | 1. Get started by checking out the resources at |
| parking, clothing, supplies, training, etc.), time costs (travel | | | | Amanda's Artbooks site (see below). |
| time, time spent at work, bringing work home with you, | | | | 2. Find all of your revenue and expense receipts, sort |
| etc.), mental costs (getting distracted trying to solve | | | | them and add them up. |
| work problems when you're at home, or other | | | | 7. Come to peace with paying your taxes. Think of it |
| stressful thoughts related to work), and lastly the | | | | as rent for your country. If you're making money at |
| emotional costs (being miserable in a job you don't like, | | | | your art, get someone to figure out what percentage |
| interpersonal conflicts with colleagues, or feelings that | | | | of your gross income goes to taxes, and send in your |
| the job or company is not aligned with your personal | | | | taxes as regular payments throughout the year. |
| values). | | | | Otherwise, unless you're incredibly disciplined at setting |
| 3. Art is life and life is art. For artists, there's much | | | | these amounts aside, you'll end up scrambling to come |
| more of a blurred line between personal and | | | | up with this big lump sum of money at tax time. This is |
| professional life. | | | | a recipe for fiscal disaster. |
| Whether you're taking a trip, having lunch with a friend | | | | Action: Decide upon quarterly or monthly tax |
| or seeing a movie, chances are that what you're doing | | | | payments, or perhaps pay after you've received a big |
| will influence your creative work in some way. | | | | payment such as a grant or a paid lecture. |