As a tattoo artist, you may be in the business of art and style, but doing your taxes is one area where you don’t want to get creative. Fixing things with the federal government isn’t as simple as covering up bad ink, so it’s important to keep your deductions and liabilities clear, and submit a return that’s done right the first time.
For the sake of this story, we’re going to assume that you are an independent contractor rather than an employee. Being self-employed, there are many deductions you can take to reduce your taxable income for the year, and thereby reduce your taxes.
“The independent contractors have a lot more deductions that they can take versus the employee,” confirms Lisa Padilla, co-owner of The Industry Tax Services, a tax preparation and bookkeeping firm for individuals and small business owners, particularly those in creative industries. “Among things that individuals want to be conscious of saving, keeping track of all expenses as well as notes of how they directly tie into their business in case they are ever audited is key.”
Any money you spend on your craft, whether for working or trying to find work may be a deductible expense. Deductions, defined by the IRS are “ordinary” (reasonable amount spent on the deduction) and “necessary” (directly related to performing the activity).
As a tattoo artist, one of the most valuable expenses you can claim are materials needed to produce creative work, including needles, machines, inks and even the paper used to make stencils — again, ask yourself if these items are necessary for doing business. If you rent your work station, of course you can write off the full amount you pay weekly or monthly. If you have to pay a portion of utilities like electricity and water, you can write those off as well.
Education expenses to improve as an artist, such as seminars and classes, are tax deductible for a professional artist. The IRS allows these deductions for the same reason it allows deductions for education with other professions. It allows the artist to continue to grow and increase skill level in the field which may open up new business contacts. An artist may also deduct the cost of museum and gallery memberships, traveling to tattoo shows (whether you work there or not), and even trade magazine subscriptions, as business-related expenses.
While many of your clients may come from word-of-mouth, marketing tools are an often overlooked deductible expense. This includes items such as business cards, calendars, T-shirts, and other promotional items. The cost to design and host a website, flyers, brochures, and even updates to your portfolio, can be deducted as part of doing business.
When you file your taxes, you don’t have to send receipts to the IRS. But you still need to keep receipts or equally valid documentation of the expenses you’re claiming. Receipts are often the only proof you have of tax-deductible expenses, especially if you’ve paid a bill in cash. If you are ever audited by the IRS, you will have to provide these receipts or face penalties and additional payments.
In the old days, you might have saved all your paper receipts in a shoebox, but it’s more convenient to keep electronic records to support your claims for expenses. This can include images of cancelled checks, as well as scans of receipts, invoices and bills. Padilla advises clients to keep separate business and personal bank accounts to more easily define expenses. If you have a credit card/bank account for your business you can even make notes on monthly statements.
Remember that these tips are not intended to be the whole story. The Federal Tax Code is very complicated and your specific applications should be reviewed with a tax professional before filing your taxes. Professional artists are unique in the world of taxes, so it may be to your advantage to turn over your return to a professional preparer experienced in taxation for creative endeavors rather than going with TurboTax or other fill-in-the-blank options.
“Just because the program allows you to do it, doesn’t mean it’s getting it right,” Padilla warns.
“We have an idea about the end result that we’re looking for. We compare what we have with what we’re expecting, and if we see anything amiss, we’re going to ask those questions to figure out what’s not correct,” Padilla says. “We know what to ask you to get answers that we’re looking for so that we can help you on your return.”