It’s hardly what comes to mind when one thinks of a career in the arts, but paying taxes are required of even the most bohemian lifestyles. It becomes a bit of a struggle when, as Wilmington Senior Staff Accountant Marie Izzo puts it, “a creative brain encounters boring things like W2s and calculators.” Yet, she feels it is crucial for the community to have their paperwork in order when April 18th comes around (Washington, D.C., will celebrate Emancipation Day on April 15th, giving us leeway before relinquishing money to Uncle Sam). This week, she was gracious enough to share some tips on navigating tax season with ease.
1) Understand what makes you different!
Sure, every artist with his or her personality quirks and open-minded approach to life tends to stand out from the traditional working masses. But that’s not what matters to the IRS. Not many in the creative community have a file full of check stubs from their artistic endeavors. That is just one example of what sets them apart from the rest of the population during tax time.
“Artists are a unique kind of taxpayer because so many of them are self-employed,” Izzo says. “It’s important for artists to know the tax laws that go along with being self-employed.”
For instance, when an employer takes taxes out of a check, they take out Medicare and Social Security taxes. What they also do is match those amounts automatically with every transaction. Self-employed people are required to make up that difference by taking out twice the amount themselves.
“Self-employed people are also required to pay taxes four times a year, instead of just on April 15th,” Izzo says. “Artists need to be aware of those dates, or they can get penalties.”
2) Keep track of your activities!
Since self-employed artists don’t have a time card to fill out, it is important that they find other ways to prove how their time is spent. “Keep receipts documenting everything from road trips to contest fees,” Izzo says. “Artists can not only deduct these expenses but use the receipts to show how much time they devote to their crafts.”
A musician, for instance, who has to be on the road to promote an album should have proof of hotel stays, gas purchases, food and any other expenses incurred on the trip. Writers should have a receipt or confirmation code for any writing contests they enter or publishing costs they might have.
3) When receipts aren’t available, take other documentation!
Izzo understands that ink and paper aren’t always available along the way. There are several ways to prove time spent as a professional artist. “If there is a brochure or playbill for a performance, keep one in your records,” she says. “Flyers and posters work, too.”
In addition, Izzo states that a camera isn’t just a creative tool for photographers. Images of events or projects can also help when it comes time to prove your income.
“Take photos of a booth you had at a festival, a studio with your work in it, or even a home office,” she says. “If you have a way to prove what you’ve been doing all year to make money, it will keep you out of trouble.”
4) Be able to decipher between “hobby” and “profession”!
The IRS has very specific rules about what constitutes a job as opposed to a beloved past time. Artists must be especially diligent in proving their craft as a form of livelihood.
“Make sure you have business cards, a website, and proof of your workplace, if applicable,” she says. “It might be a different kind of business, but having the traditional business pieces really helps to legitimize you as a professional.”
5) Seek help when you need it!
Izzo’s final piece of advice is that if you do hit a snag, look around and realize that assistance is available. “Anyone in any industry can be audited,” she says, referring to those scary notices about money owed to the government. “So many people think they can go in and handle things on their own. But don’t face the IRS alone. Bring a professional with you. They know what you’ll need to bring, what you should say and how things can be handled so you don’t end up in trouble.”
Marie Izzo is a Senior Staff Accountant at John Izzo Accounting and Tax Preparation. Their offices are located at 1430 Commonwealth Drive, Suite 204 and 120 Coppers Trail.