I wrote the piece below three years ago and thought I’d share it again with updates as the tax-prep season is upon us.
My system has worked quite well and while I started using manila envelopes instead of folders for the receipts not a great deal has changed in the basic approach. I do have my tax income/expense spreadsheet linked to one which contains worksheets that mimic each form/field required for filing my taxes instead of just tabulating the different categories required for expenses and income calculations.
If you have questions about doing this yourself I’d be happy to consult with you on setting up templates for your work and getting you started. However, I am not a CPA and still have a CPA prepare my actual taxes. All I am offering is my expertise, through business experience and trial and error, to assist you in ways to have information prepared early, and with a minimum of scrambling, for your tax accountant.
I imagine a visual artist at tax time in a paint-splattered smock, standing before a desk (easel to one side), paint brushes in one hand and a crucifix in the other. The crucifix of course is pointed in the direction of tax forms on said desk.
Since my under graduate degree was in Accounting this should be a snap. However, that was a degree of convenience and although I graduated Magna Cum Laude it was not the course of study I would have chosen under different circumstances. However, the degree is one thing that helps me where some artists might falter.
I also get some aid from my personality type as defined by the Myers and Briggs tests. According to those tests I’m an ISFJ with the ‘I’ being almost off the scale and the ‘J’ just as extreme. But that ‘J’ allows me to, nay demands that I, plan. So I organize and plan all year hoping I’ll be able to just print out the figures the accountant needs. However, no matter how much planning I do I still end up with last-minute add-ons to the records I’ve kept during the year. (2106 – Now that I have my system streamlined all I have to wait for and add are those banking and tax statements from external sources.) And I’m torn between the absolute soul-wrenching need to work and the horror of not getting those damn taxes done on time.
The tax work no longer wins out in my struggle and I’m sharing some approaches that might make life a little easier for other artists.
A critical act to getting organized for your taxes is categorizing all those pieces that have to be reported. While I am fairly technologically savvy I still use hard files in addition to anything stored on my PC – and back up on either CD or USB device stored. (I am working toward scanning hard copies so I can eliminate paper receipts but that is, I hope, coming this year.) So
folders envelopes labeled with the appropriate categories are created and tucked away for record retention. (You can get perfectly serviceable envelopes at the dollar stores so creating new ones each year is not expensive.) Previous years’ paperwork is bundled and put away storage bins labeled Taxes Year XXXX when the process is completed (i.e. tax returns are filed).
Here are some categories to consider: Sales, Sales Taxes, Insurance, Vendor Fees (framers, printers, etc.), Membership Fees/Dues, Exhibit/Submission Costs, Legal, Postage, Supplies (both office and work), Equipment Purchases, Advertising/Marketing, Travel – Lodging, Travel – Meals, etc.
If you work out of your home then apply the percentage of space used to utilities, phone, household maintenance, rent/mortgage payments and, if you require it, internet provider fees. A word of caution here: You must have dedicated studio space in your home make such deductions. In addition to all those categories we can’t forget the usual suspects that are not business related: Medical costs, Prescription Medicines, Property Taxes, and Charitable Contributions. I know you’re seeing a filing cabinet looming in wavy motion before you as you get dizzy from all the
folders envelopes needed.
I also use an MS Excel spreadsheet to enter the expenses as they occur and have it feed to a worksheet in that file that keeps a running total of each category throughout the year. Where I’ve faltered is in entering the information regularly. I now keep a folder where receipts are placed as they come in (it doesn’t hurt one bit that they come in nice bright colors). The folder stays in a strategic location (on a desk in the den) where receipts can be slipped in and once
every two weeks once a month I sit down and put all the data into the tax spreadsheet. I’ll let you know next year how that worked out. (It worked out grand and I continue to use it today).
Oh, a simple tip for online purchases – print out the email from the supplier showing the totals and slip it in the folder. Not only is this great for overall costs but it can help keep track of your inventory costs as well.
The other crucial tool to have is a notebook in your car to keep track of the miles you drive for your business. You can make your own, use a downloadable template or buy one ready-made. Again, where I faltered was being diligent in writing in the mileage. I know I’m losing out on some business trips this year because I failed to enter them in my book. Keep the book and a pen in your car and wait until the end of the year to take it inside and tabulate your mileage – not doing so was the source of at least a couple of my missed entries. (I am much, better at this and don’t feel I’m missing much now in business miles tracked).
I keep tweaking my process until tax time no longer brings on panic attacks and guilt at not working on my art.
This approach can also be used for other parts of your artistic endeavors. I keep a expandable file folder with my ongoing business data. It contains folders for Exhibit Prospectuses, Upcoming Exhibit paperwork, Current exhibits and Shows, marketing tips I run across, blog ideas, gallery lists, and submissions awaiting response. It’s also a great place to keep current hard copies of Bio’s, Artist Statements, and resumes and CV’s (or CD’s with work examples and these documents ready to send off for places that require that type of submission).
Admittedly there’s a lot of work to be done up front but it can pay off in the long run – if you use it!
Another thing I’ll mention, and no I’m not paid by anybody to tell you this, but I found a great program
this year that, again, if used properly can store information on inventories and works (costs, prices, images, sizes, dates, etc.) all in one place. If you are looking at a way to get all this information in one place take a look at Working Artist. I priced a lot of database storage systems, and even worked on building my own since I did that in a former career incarnation, before stumbling onto this reasonably priced, fully functional, system designed by an artist.
If you have ideas about how you organize your business information or art and inventory data please share in the comments here. We can all benefit since one way of doing things doesn’t necessarily work for everybody.
Here’s hoping your tax information gathering is almost complete! We want to spend as little time on these things as possible and more time in the studio creating!