Note: This is the second in a six part series about business essentials that artists and crafters who run a business need to know. The series, “Going it Alone,” runs every two weeks. The last installment was posted Feb. 26 and dealt with motivation.
April 15 might just be the most dreaded day of the year. No, your mother-in-law is not coming to visit – at least we’re pretty sure she’s not. No, it’s Tax Day, that scary time when filling out forms with lots of numbers that you really hope are right comes and leaves us all with an unhealthy fear of being audited.
Most people don’t look forward to tax season. Let’s face it, even if you are getting a big fat refund, which does take some of the bitterness of tax season away, you still have to fill out those stupid forms and there’s always that chance that you will receive an audit notice. But, there is a way that you can make your life a little easier when it comes to taxes. Keeping good records means that filling out a 1040 A form or knowing what to do with a 1099-Misc. form won’t be as difficult.
This second part of our “Going It Alone” series deals with taxes and record keeping. The post is designed to give a very brief and general outline about taxes and should not be relied on solely for your individual tax circumstances. Talk to a tax advisor about your unique situation.
If you are a full-time artist or crafter (or even if you only do it as a hobby), your tax situation is going to be a lot different than most other people who are employed by others. There are many different rules that people who are self-employed must follow, but there is one vital concept you need to know.
The first is that you, and you alone, are responsible for paying taxes. This might not be that big a deal if you simply filled out your tax form once a year like most everyone else, but that is not the case. If you make more than $400 per year with your arts or crafts, you need to pay estimated quarterly taxes in April, June, September, and January. That is in addition to filling out your regular yearly tax forms. Only doing your taxes once a year means that you will have to pay penalties for not paying on time.
The IRS offers a “Self-Employed Tax Center” that can help you a lot and that goes into more details about how to pay quarterly taxes and other important information you should know.
Filing your yearly taxes by April 15 each year is extremely important. Unfortunately, because tax situations are so different from one person to another, it is impossible for us to go into detail about circumstances similar to your own individual tax situations. However, there is one thing that can be similar for almost everyone.
Deductions are a way for you to lower your tax bill. For example, if you are an artist and you purchase art supplies for your business, you can deduct that from your tax bill. There are a lot of different deductions you can get (you should talk to a tax advisor to learn more), but some of them include:
There are also many different helps for you when it comes to taxes. The IRS website has a lot of useful information and there are a number of companies that offer to help you file your taxes, including H&R Block and Jackson Hewitt. If you would like to do taxes on your own, TurboTax and TaxAct could be for you. Even professional tax software from Intuit can be helpful for you come tax season. (Please note that references to these companies or tax software is for example purposes only and does not indicate endorsement.)
Filing taxes can be stressful enough even without having to worry about where a receipt or invoice is that you misplaced. Getting taxes done right really comes down to a matter of organization.
There are many different ways that you can keep your records, but no matter what you do, there are a few things that you need to keep in mind:
Keeping good records is an important part of being self-employed, and can help you not just at tax time, but for many other different situations as well.
We hope that this blog post helps you as Tax Day approaches. Please keep an eye out for future blog posts in the “Going It Alone” series.
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