(More!) Peace, Love and Financial Planning
(and information on 3 relevant presentations)
The following is Part II of an excerpt from “Peace, Love and Financial Planning — An Illustrated Guide to Money”, by E. Larson Gunness, a local financial planner (and friend).
Note: “You” is the narrator in the book, who is working for a local accounting firm, and has just met Art, a new (artist!) client in distress because he has not filed his taxes for a couple of years. Any resemblance between the fictional “Rich” and myself must be purely coincidental!
Rich Responds — Part One
Art goes silent. He seems exhausted but relieved, as if he’s confessed to a great burden he’s been carrying… for two days. Rich leans back in his chair, props his elbows on the armrests and interlocks his fingers.
“Well, Art,” Rich begins. “That’s quite a story.”
Then you watch Rich as he applies his wisdom and experience to the situation of Art.
“You will not go to jail, even if it will improve your artistic career. The IRS is not out to punish people but to bring them into compliance and have them pay what they owe. You may face penalties if it turns out you owe – but we do not even know that yet. Relax. Sit in the massage chair.
Our plan is to reconstruct your finances for the last two years as best we can. It will not be precise but at least we will be able to file, get you on the right path going forward.
Do you have a copy of your last tax return, three years ago?
What kind of records can you come up with for your income? Can you or did you get a statement from Katya (the gallery owner) ?
Do you have a separate bank account for your painting income?
Do you have copies of your bank statements? I know it’s a long shot but that might shed a light on your business activities. (You have a business, you have income, you have income tax.)
We need to get a sense of how much you made from non-gallery sales.”
Stay out of jail — FOREVER! Attend my free May 6 webinar, Business Basics for Start-Ups , sponsored by Social Enterprise Greenhouse. Click here for information
Rich Responds — Part Two
Rich continued. It was kind of impressive to see how many ways he could think of to help Art. Art was clearly becoming relaxed, really relaxed.
“You are allowed and expected to deduct your professional expenses and only pay taxes on your “net”. Going forward, you will need that separate bank account AND a tool to help you track your income and expenses (e.g. Quickbooks). Going back, do the bank statements have copies of the checks? Did you pay anything by credit card?
Other expenses – we can deduct your roundtrip business mileage to NYC. How many times did you drive there? Supplies? Courses? Memberships?
Is your studio part of your residence? We may be able to take a “home office deduction” if it qualifies. Or was the studio a separate location?
What % of your phone do you use for business?
Do you pay health insurance? That is a deduction.
What is your best projection for this coming year’s sales?
You should plan to save between 30% and 35% of each art sale for taxes, and we will set you up on an “estimated tax plan” for next year.
Learn more in person May 14, in Warren, RI: The Business Of Art: Tax And Accounting Basics For Working Artists And Designers Sponsored by Gallery Night Bristol Warren. Click here to register
Art is Calmed
The meeting with Art is now almost done. The information will be compiled into filings with the IRS.
.
“Not to worry,” Rich says. “It is possible that you may incur a fine. But, at least you’ll be up to date. At least you are trying to do the right thing.
“And from now on,” Rich continues, “you will do this regularly, right? You’ll pay quarterly estimated taxes on self-employment income and file your annual return, either with or without my help?”
“Right,” cries Art.
“Because, they’re your taxes and your responsibility. The money you owe in taxes isn’t yours, even if it’s in your hands for a few weeks or months… got it?”
“Got it!”
This is copyrighted material, text and illustrations reprinted with permission of the author. The entire book — glossary, case studies and more can be found online. It’s a hoot (and helpful too!).
Boston artists: I will be at the famed Artisan’s Asylum in Somerville, May 21 to present Life On The Ledger, How To Make Your Art Add Up click here for details
Summary Of My May Presentations
May 6 – Webinar Business Basics For Start-Ups at Social Enterprise Greenhouse click here
May 14 – Live lecture in Warren RI: The Business Of Art sponsored by Gallery Night Bristol Warren. click here
May 21 – Live lecture Somerville MA: How To Make Your Art Add Up at Artisan’s Asylum.
click here
