Wednesday, June 16, 2010

Learn more. Reduce stress and reduce taxes.


Dearest June ,hello my name is sara, i am a mixed media artist living and working in new york but selling my work all over the world and getting taxed like crazy in new york.. I'm getting taxed like 30% ..and i feel like i don't know my rights and am getting raped as a result...

i wrote basic things off like; travel , supplies, shipping and so on..but it doesn't seem to make much of a difference.. do artists have a different set of rules that apply to them, or do we just get taxed like everybody else depending on what tax bracket we fall into.

are there important loop holes that i am missing and don't know about and should know about that could save me a lot of money ..?

i would appreciate any advise or guidance that you could give me, as every time i pay my taxes i have an anxiety attack right after, and am angry and depressed..and i know that there has to be another way..:(

with kind regards
Sara


Dear Sara,

First, you are not really being raped. I wouldn't throw around that word. It has a very different meaning.

Artists must abide by the same rules as any other self-employeds. That means they get the same kinds of deductions and pay the same taxes as plumbers and psychologists and IT people and anyone else who works for him- or herself.

You said you are paying 30% on your income but you don't say whether that's 30% of your gross income or your net income.

Gross income is what you are paid for your work.
Subtract from that all business expenses.
You are left with net income.

It is on net income that you pay tax.

You pay approximately 15% self-employment tax + federal income tax + state income tax. And in New York City depending on your income there could also be New York City Unincorporated Business Tax and Commuter tax. All that can easily add up to more than 30%.

My guess is that your problem lies in not taking advantage of all business expenses. You must deduct every possible business expense in order to reduce your net income.

Start here by requesting a complimentary List of 100+ Indie Business Expenses . Also read Is it a deductible business expense?

That will be your starting point to educating yourself as an artist in business. Anxiety, anger and depression are not going to reduce your taxes. Learning about the business side of your art will.

For a complete understanding of the basics of income, expenses, taxes and recordkeeping for an artist, check out my book Self-employed Tax Solutions. If you can't spend $13 it should be at your library.

Knowledge will give you the confidence to come to grips with your indie business.

I wish you a less stressful indie life!
June

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