As the year draws to a close, artists who sell their creations online and at art fairs find themselves at a crucial juncture—tax season is just around the corner. While the creative process may be the heartbeat of your artistry, managing your finances is equally vital. Here, we provide valuable tips on how to prepare for taxes in December, ensuring a seamless meeting with your tax preparer.
Organize Your Financial Records:
Start by organizing all your financial records for the year. This includes sales receipts, expense receipts, invoices, and any other relevant documents. Having a well-maintained record of your financial transactions will make it easier for your tax preparer to understand your income and expenses.
Review Your Online Sales Platforms:
If you sell your art online, review the sales reports from your platforms, such as Etsy, Shopify, or any other e-commerce site. Ensure that the income reported on these platforms aligns with your records. Some platforms provide year-end summaries, which can be immensely helpful in cross-referencing your data.
Track Art Fair Expenses:
For artists participating in art fairs, it’s crucial to track all related expenses. This may include booth fees, travel expenses, accommodation, and material costs. Compile these expenses into a comprehensive list, making it easier for your tax preparer to identify deductions.
Update Inventory Records:
Take the time to update your inventory records. Keep track of the artworks you’ve sold, including details like date of sale, price, and buyer information. This not only aids in accurately reporting your income but also provides a clear picture of your artistic journey throughout the year.
Understand Tax Deductions for Artists:
Familiarize yourself with the tax deductions available to artists. This may include deductions for materials, studio space, travel expenses, and even a portion of your home designated as a workspace. Discussing these deductions with your tax preparer will help maximize your potential savings.
Prepare for 1099 Forms:
If you’ve received income through platforms that use payment processors like PayPal, Venmo, or Etsy, you may receive a 1099-K or 1099-MISC form. You should receive these forms by early March. Ensure that you have these forms on hand when meeting with your tax preparer, as they will need to be included in your tax filing.
Plan for Estimated Taxes:
Self-employed artists are often required to pay estimated taxes quarterly. December is an opportune time to review your income for the year and assess whether you need to make any additional payments. Your tax preparer can guide you on the best action to avoid penalties.
Schedule a Meeting with Your Tax Preparer:
Your tax preparer can help you plan your year-end in December. Reach out to your tax preparer and schedule a meeting well in advance. This allows both parties to prepare adequately and ensures you have sufficient time to gather any additional information or documents they may require.
As an artist, navigating the financial aspects of your career is just as important as honing your craft. Taking proactive steps in December to prepare for your taxes sets the stage for a smooth and stress-free tax season. By organizing your records, understanding deductions, and collaborating with a knowledgeable tax preparer, you can confidently focus on what you do best—creating art that captivates and inspires.