In this article, I will be sharing 7 useful sales tax filing tips for artists that could help you with tackling this issue head-on.
Even if you are painting as a hobby, drawing could prove to be an expensive endeavour. Being able to declare your expenses against other income might be tempting. Beware of the obstacles that must be overcome.
It is your choice to do the right thing when it comes to any tax filing related matters.
It is always a good idea to consult with a professional tax consultant for advice.
If you’re thinking about pursuing art as a career, it is best to be knowledgeable about what can be deducted and to keep accurate records.
However, you don’t have to be an expert on sales tax filing matters, nor an accountant. These tips I’m sharing with you could prove to be immensely helpful.
What does sales tax nexus mean?
Economic nexus refers to a seller collecting sales tax in a state due to them earning above a certain revenue or sales threshold in the given state.
This is typically common for sellers that trade out-of-state. Economic nexus really is sales tax nexus paid for online sales.
More states are implementing economic nexus laws due to online sales becoming more and more popular nowadays. The threshold for economic nexus is different for the different states.
The most common threshold, however, is when the seller has more than 200 transactions or has reached $100 000 in sales in that state annually.
7 Sales Tax Filing Tips for Artists
1. Find a professional tax preparer or accountant to build a long-term work relationship
It’s best to look for a professional that is knowledgeable about tax matters that relate to artists.
Preferably, someone that understands the world of art and that has experience working alongside artists. They can help you with filtering out what can, or cannot, be deducted.
2. Always keep receipts and accurate records on everything
You could try a PC-based bookkeeping program, but I find that a good old-fashioned line ledger works best for me.
Don’t postpone when it comes to recording this vital information. The last thing you want is to try and sort through a box full of old receipts once tax filing season is in full swing.
3. Use a separate credit card and banking account for your business
This can really go a long way in keeping the bookkeeping side of your business problem-free. You can even opt for online record-keeping services where information can be directly downloaded onto the accounting software, which makes tracking expenditures a walk in the park.
4. Deposit all art-related income into the dedicated account
Be sure to categorize these deposits through breaking them down into separate groups with a small description, for future clarification purposes.
5. Keep a small ledger in your vehicle for recording mileage to and from art-related ventures
All the trips that you make to your shipping agent, the art store, or art classes can start adding up. Even drives that you take for inspiration are a part of what you do.
6. Having a separate studio space purely for art can be a significant deduction
If you are using a dedicated room in your living area, it can become somewhat tricky. In this case, a tax consultant or agency must assist you with working it out.
7. Art workshops and classes are viewed as ongoing education
Everything that you do to further your expertise as an artist, like attending workshops or art classes can be deducted. This includes travel, tuition, meals, and lodging.
We hope that this post was helpful to you. Sales tax filing shouldn’t be a scary or time-consuming exercise. If you are in doubt and want to do your taxes correctly the first time around, then it’s worth hiring a professional to assist you if your budget permits.
This post was sponsored by Tax Connex. All opinions are my own.