Art Galleries Are Not Required to Report Sales via Information Returns Form 1099

Tax flavour. Cue a collective groan.

Are y'all ready to file your taxes or accept you put it off to the very concluding minute?

With the dreaded filing deadline inching closer each day, it'due south important to remember that nothing helps more 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—then tin go a ameliorate agreement of your net income.

Taxes are complicated and especially complicated for artists. You have a lot of dissimilar income sources and a lot of different expenses. You might exist wondering what yous can write off—what counts and what doesn't?

Don't worry, we are here for you.

Whether yous are looking to relieve with mutual taxation deductions for artists, desire to know if you authorize for deductions, or simply want fiscal insights you can employ to strategize for success, take a look at the main categories of expenses that you lot tin track in Artwork Archive for your fine art business organization.

Do you authorize as an art business organisation for deductions?

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

Quite simply, your art practice is defined as a business if you have the intention to sell your work regularly for profit and a hobby is done without financial incentive. If you lot run your studio for profit, yous can deduct business expenses. Withal, if your fine art exercise is a hobby, you do non authorize to deduct your art expenses from a different income stream on your taxes. and if your practice is not for profit, y'all cannot authorize your losses to offset another income.

How else tin can you determine if you authorize to deduct your expenses?

Ask yourself these questions as posed by the IRS:

Do you put time and try into your fine art-making practice with the intention of selling the works?

Practice you rely on this income to eat and pay hire?

If yous lose money doing this activity, was information technology within or beyond your control?

Accept y'all made profits in the by?

Accept you changed your practice in order to improve profitability?

Do you await to see profits in the futurity?

It'southward ok if you lot don't make a profit every twelvemonth, simply as a general guideline from the IRS, they want to see a turn a profit three out of five years.

Know your business organisation classification

Do a piddling inquiry and decide what type of business structure yous desire to become. Many artists choose to classify their business as a sole proprietorship considering it's like shooting fish in a barrel to set upwardly and meets the needs of a basic studio practice.

The process varies from state to state, and so head over to your local Clerk of Courts website, your country's Section of Revenue site, and the IRS site to see what steps are required side by side.

TIP: Get-go a separate business organisation checking business relationship with your banking concern. That way, your concern and personal expenses aren't all mixed in together when it comes time to do taxes. And, don't forget to save your business receipts!

If you are a sole proprietorship you lot volition record all your sales as general income and you lot will deduct your expenses.

Artwork Archive'southwardExpense tracking feature makes bookkeeping & taxation fourth dimension easy for your fine art business.

Accept a look at the list of common expenses that you can deduct every bit an artist.

Ad

Anything you spend money on promoting your work can be deducted. Advertising expenses include print ads, business cards, fliers, sponsorships, Facebook and digital ads, likewise every bit your website hosting and creation costs.

Business organisation Insurance

Just what information technology sounds similar. If you pay for business insurance, proceed rails of your payments and write them off come up tax time.

Commission & Fees

Paying a gallery to bring in clients and giving them a pct of sales? Expense that. As well runway any fees related to call-for-entry, applications, legal advice, outsourced bookkeeping, business organisation consulting too as model or contractor fees. What counts as a contractor? Anyone you pay in order to make your piece of work. This includes fabricators, photographers, administration, etc.

Payment processing fees are also included in this section. If you take payment online through a platform like Paypal, Square, Stripe or Intuit you can expense the processing fees.

Legal & Professional Services

Our recommendation? Get a professional to help you with your tax preparation—you can write off their fee!

Materials & Supplies

Brushes, clay, canvases, easels, glaze, tools… annihilation you lot use to brand your artwork should be recorded every bit an expense.

Large Equipment counts as a depreciable nugget and is annihilation that you will utilize for your art business or studio for more one yr. Call up computers, kilns, cameras and whatever larger expenses that are used over multiple years. You can write this off all in one or over many years.

These are substantial expenses. For these larger items, you can study the nugget's depreciation every bit a deductible expense or you can claim a larger deduction in the outset year.

Meals & Amusement

If you have coffee with a client, accept a collaborator out for lunch, or accept a dinner with a business concern partner—these costs can all be deducted at 50% as long as the purpose of the meal or event is to talk business concern. Go on your receipts, snap a picture, upload them into Artwork Archive, and make note of the purpose of the repast.

Role Supplies

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

Cell phone and cyberspace costs can as well exist recorded. If you use your cell phone and internet for both business and personal use, you tin can split up the monthly charges based on an judge of how much you use for your fine art business.

With revenue enhancement flavour right around the corner, Artwork Archive makes it like shooting fish in a barrel to manage your business expenses.

Professional Development

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

Rent & Lease

Pretty straightforward! If you lease office space, studio space or even a storage infinite outside of your home, that monthly fee can be expensed along with any utilities you have to pay forth with it.

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

Repairs & Maintenance

Have an expense related to repairing or maintaining your equipment or office space? Go on track of the repair costs and fees. For example, if you're a photographer and yous send your photographic camera to the shop to get calibrated and cleaned, the maintenance cost should be recorded.

Taxes & Licenses

Business licenses are often required by the state. You can expense that!

Travel Costs

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

Y'all can also expense $0.58 per mile anytime yous utilize your vehicle to bulldoze to a meeting, pick up supplies, go to an art fair, etc.

Annotation: As always, we encourage you to consult with a tax professional for help with your taxes and this should merely human action as a guide to get you started tracking the expenses for your art business.

At present that you lot know what to keep rail of, the question is how?

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

Bought new pigment or business concern cards? Enter that every bit 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 fourth dimension? Just hit up the Insights feature!

Plus, with the click of a button, you can get an expense report for any category of your business or for any time frame. And one time expenses are recorded in Artwork Annal, you can easily export them to Quickbooks or any other bookkeeping software.

It's important to know where your art business stands at any point financially, and then you lot are never caught off guard—tax flavor or not.

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

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

Yous recorded your sales in Artwork Archive. Y'all kept your receipts and uploaded them into the Expenses characteristic.

If yous waited to the finish of the year this time, skillful luck—we've been in that location. It's less painful to regularly upload your expenses and record your sales, so you aren't stuck with a calendar week of admin tasks. The best time we find is usually once at the terminate of the month, merely you tin find the best fourth dimension that works for your schedule.

Plan for the time to come

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

Y'all tin can just spend so long ignoring the coin side of your art career before y'all find yourself unfulfilled personally, professionally, and financially. The sooner y'all take the guesswork out of your financial state of affairs, the sooner you tin can plan alee for how you are going to sustain your livelihood. Plus, you'll be able to set concrete goals for exactly how much you lot demand to earn and save to encompass your expenses.

Necktie upwardly the loose ends

If you are like nigh artists making a living from your artwork, you will probably have a few other income sources from your gallery or a side gig. If this is the example, brand sure you get a 1099-MISC from each different income source that yous received over $600 annually and file this as along with your sales income.

Consult a professional for advice

There are many facets of the fine art world, and each one has an expert. If you lot have any questions about filing you taxes, e'er consult a revenue enhancement practiced. It could cease upwardly saving y'all money in the long run.

Before consulting an auditor, make sure to have copies of your receipts, invoices, sales reports and expense reports from your Artwork Archive account. These documents will exist your first resource when assessing your revenue enhancement filing.

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

Cheque out this tutorial on setting up your expenses in Artwork Annal.

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