Making A Living As An Artist
(Starvation is NOT an Option)
Q: I’ve never made a dime even though my art hangs in all the major museums. Now I am told the tax people could reclassify my activity as a hobby?
–P. Picasso, penniless in Paris
A: Well monsieur, I cannot speak for how the socialist French tax their artists. In the United States there is an expectation that one is in business to make a profit. A good rule of pouce (thumb) is to show a profit in three out of every five years to avoid an IRS audit. However, a recent court ruling gives artists much more leeway than traditional businesses, and I have clients who have never shown a profit and still walk the boulevards in peace. Then again, if you French didn’t take such long vacations maybe you’d earn a bit more, n’est pas?
Q: I was told to organize as an LLC to save on taxes. But maybe I didn’t hear this correctly.
–Ludwig LLC, Bonn
A: Herr Beethoven I cannot speak for the bureaucratic Germans. Nevertheless an LLC — Limited Liability Company – is only that, it does not provide any specific tax breaks. It is simply a sole proprietorship with a legal schild (shield), which may be important to you. In some states there are annual franchise fees to contend with (RI and Mass, $500).
Here in the U.S. we do not overtax our citizens just to provide silly fringe benefits like health insurance. If your income is sufficient you may save some taxes by incorporating as an S-Corp, see my artikel.
(By the way L, I am told that Streitfeld is derived from the German for battlefield. So I know something about schilds– and wait till you hear the story of my boys’ names.)
Q: I write for a living, do I have to pay estimated taxes?
–Fyodor Dostoyevsky, Leningrad
A: F. it really depends on how many rubles you make. If you have a job as an employee you may simply increase your withholding; or, come on, your babushka supports you, so let her take more taxes out of her paycheck. In the United respecter of sovereign countries* States the IRS does not care how you pay — withholding, estimated, through a spouse (if you file jointly).
Then again your new documentary Pennies from Amazon may not yield you much income, or perhaps you can claim a loss. Then your taxable income goes down.
* with periodic exceptions
Q: I make and sell sculptures for a living, and I hear Rhode Island is a safe haven for sales tax on artwork.
–Michael Angelo, Roma
A: Indeed. Starting a year ago sales of “original and limited sales of art” in Rhode Island became exempt from sales tax.. However, you still must apply for the exemption and continue to submit monthly reports, even if you owe no tax. Note that consumables (e.g. candles, soaps) and mass-produced items (e.g. sold in a bookstore) would not qualify. Rhode Island State Council on the Arts has an excellent guide as well as links to the registration forms.
You may want to download yourself from that chapel ceiling before you download the forms.
Q: Which vegetable do strangled painters covet?
A: An artichoke
I give live talks and webinars on self-employment for a wide variety of professionals, including artists. Contact me for samples and availability.