Earning an income as an artist can differ greatly from the structure of most other career choices, but there are some marked similarities, as well. One of these similarities is the need to file and pay income taxes.
Because the income stream generated through art may range from slightly irregular to very sporadic, artists may struggle with some of the basic accounting tasks needed to ease the tax filing process.
If you are earning a full or partial income as an artist, these accounting tips can help you improve your record-keeping skills and ease the pain of your next income tax filing.
Make a business plan and a budget
Because of the sporadic nature of an artist's income, many fail to create a business plan and a budget. Artists who intend to have a career based on sales of their artwork should always treat their work as a business, complete with a long and short-term business plan and monthly and annual budget plans.
Creating and using these documents will help artists make good decisions for making purchases and expenditures, as well as providing additional motivation to become as productive and successful as possible.
Create a file for each income stream
Artists often have multiple income streams, such as those from online market places, social media, and physical sales, like art shows and sidewalk displays. Each income stream should have its own file, in either digital or paper form, to record all associated sales, as well as information for supply purchases, site fees, etc.
Separate files for each income stream will allow you to see which type of art is most profitable as well as where expenses may be able to be reduced. These files can then be used to configure your annual profit and loss statement, which will provide a snapshot of the entire year's incoming and outgoing money for your business.
Utilize digital apps to reduce bookkeeping tasks
Becoming successful as an artist requires spending time to both produce and market your art. Using digital methods, like scanning apps paired with email, can allow you to maintain good records without taking too much time away from your creative and marketing tasks.
When a piece of artwork sells or you make a business purchase, simply scan the paid receipt, bill, or invoice and then email it directly to a dedicated file. When tax time arrives, artists can simply email these files directly to the accountant who will prepare and file their income taxes.
To learn more about accounting, record keeping, and filing taxes as an artist, take time to meet with a reputable accounting professional in your area who has experience doing accounting for artists.Share
13 December 2019
Accounting is the absolute most important element of running a business. If you mess up the bookkeeping even the slightest bit, the entire business could be in trouble. I know how costly a small bookkeeping error can be. About three years ago, I made a seemingly small mistake in the financial records for my business and the next year when I filed my taxes, things were very bad for me. What would have required a small tax payment had suddenly turned into a big tax bill and quite a headache. Since then, I have worked with an accountant and things have been better.