[ tax ] advice for artists

Monday, January 28, 2013

preface:  this advice is mainly a little letter to myself, a reminder of lessons learned thanks to all the mistakes I've made over the past year.  Now 2013, please be kinder to me :)

(NOTE: I file my taxes as a sole proprietor, compared to an LLC or corporation.  It's pretty similar to filing before I was self-employed, except for an extra form or two.)

1. open a business bank account and credit card. I just applied for a PayPal debit card which I hope will ease a lot of headaches.  PROS: I already use PayPal for all my invoicing and payments.  This way I will now have all records in one place, and keep all business expenses and income completely separate from my personal account.  It will also allow me to access my money quicker when I need to buy supplies, instead of having to wait 2-3 days for the money to transfer to my checking account.  CONS: except for the fact that the debit card will take 2-4 weeks to arrive, none really (I think).

2. pay taxes quarterly.  Instead of waiting all year, you can pay quarterly based on an estimate of how much you think you will owe (looking back at how much you owed at this time last year).  It will help me better manage my income and savings, so I'm not scrounging up a huge lump sum at end of the year.  And, more than anything, it will keep me more responsible and in touch with my business records since I will have to revisit them every three months (instead of just just blissfully ignoring them all year ;)

3. put away 30% of all income.  this ties into number 2, and will also help ease stress when tax season rolls around to make up any difference between your estimated and actual income. 

4. keep receipts. For the most part, I should (theoretically) have electronic records of all purchases through my paypal account, but I am still determined to keep an accordion folder of printed receipts just in case. For 2012, there's probably about $1000 worth of expenses that are unaccounted for thanks to my crappy record keeping -- never again.

Alright, artists/small business owners/CPA's out there, what I am missing?  

Please share an tips you've learned along the way!

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