John Fuller - Accountant

Notes from John Fuller's Feb 21 Visit to ARTS 4900/6900

**I encourage you to read the chapter in Taking the Leap that focuses on preparing for tax season, and use these notes from Fuller's visit as a supplement**

Tips:

Remember to always record your mileage - gas can be written off in your taxes.

There is a distinction between profession and hobby. If you are a professional, you will do certain self-promotional things (sending out invitations or email announcements, keeping a mailing list, visiting galleries). The evidence of these activities is evidence of your engagement in the profession of being an artist and will help if you are ever audited by the IRS.

Separate checking account for your art - a good idea. That way, you can more easily keep track of your expenses. A detailed bank statement will be the same thing as a bunch of receipts, to the IRS.

Form 1099 - Your gallery should provide you with one of these. These are "non-employee compensation" forms.
W-2 - Your full time employer should provide this to you.
Form 1098 - Should come from your mortgage people, or your student loann company that you've been paying. It's proof of having paid interest on a debt. Interest is tax deductable.

Schedule C - The form that relates to your work as an artist. It is the Income Form for Business or Profession. It comes after the usual 1040 that you fill out.
1040 - The typical tax form that you fill out.
1040EZ- Don't want to use this if you've been buying a lot of supplies and selling art. Won't really reflect your situation.


Deductions: You can deduct your expenses for the year before the "tax" on your income is determined. By deducting these expenses, you are lowering your taxable income. This is a very, very good idea.

A business license is not necessary. But if you have a business telephone number, someone may call it and check to see if you have a business license.

When selling work: you don't have to collect sales tax. But, if you have a business license, you probably should.

If you are going to be a business, be a LLC (limited liability corporation). You'll pay your taxes quarterly in this case. You'll also be paying Social Security, and making a good "nest egg" for the future.

Social Security caps out at $90,000/year, but Medicare never runs out.

Begin saving money in a traditional IRA or a Roth IRA if you can.

You have up to 3 years to amend your taxes if you think you've made a mistake. So, this year, you can go back as far as 2003's taxes.

State Taxes - Standard deduction is $3,000 (for Georgia).
Federal Taxes - Standard deduction is $5,000.

If you're claimed by your parents as a dependent, don't claim yourself as a dependent.

It's smart, financially, to deduct yourself.

If you owe money, don't forget to put your SS# on the check. Your return will come faster.

Might be a good idea to prepay for a big expense in December, so that it will be on that year's taxes, and you can write it off as a deduction.

Tips on Deductions:
Remember to deduct your business phone. You can't deduct your cell phone, but a separate business phone, absolutely.
Remember to deduct any business trips you take. Including meals, hotels, etc.
Remember to deduct all business costs - including postage, mileage, gas, entertainment (buying a gallery owner lunch)
Remember to deduct any medical supplies, medical costs, visits to the doctor (including routine things such as eye glasses, etc.)
Remember to deduct the interest on the payments you've made on student loans.
If your studio is in your house, remember to deduct part of your rent, part of your utilities. If you own the space, you can take depreciation on bills. Think of it in terms of percentage (is your studio 25% of the floorplan space of your entire apartment? Then deduct 25% of your monthly rent, etc.)
There is a thing called "Lifelong Learning" which means that you can deduct $1,000/year on books, etc., you bought to continue learning.
If you don't sell any work in 7 years, you will definitely be audited if for all of those 7 years you have been writing off artist expenses.
Business equipment - you can write off up to $100,000 each year.
If you net a profit of over $400, it is subject to the self-employment tax (15% of what you earned)
If you net less than $400, no need to tax it
Deducting mileage: you can't deduct from home to studio mileage, but you can deduct from studio to places to buy supplies, or to meetings.