THE TAX MAN COMETH And Boy, Is He Mad!

I was browsing the web today, searching for “Luann Udell” because someone recently said I was an “Internet sensation.” I think they were kidding. Anyhoo, I came across an article I wrote years ago for The Crafts Report. And since it’s that time of year again, I thought I’d share it with you today.
by Luann Udell

Remember that “911 for artists” idea I had awhile back? I think we also need a special income tax service for artists.

When tax season rolls around, things get a little heated around here. Not like at your house, I’m sure. I bet things are very civilized and even-tempered at your house … (snicker).

There are cries of, “You spent how much on African trade beads? Did you leave any in Africa?!” Questions like, “So tell me again how many vintage paper cutters you need…” Perhaps at your house, it’s questions like “Just how special is that vast quantity of new glaze you bought?” and “What do you mean, the great idea you had that needed 10,000 new frames ‘just didn’t pan out’?!”

But the first few times we visited a tax preparer was truly a window into how mad our private little world really was. It started well until we got to my business.

He asked how much inventory I had on hand, and what was it worth? I said I had no idea. It goes out, it comes back in. Some pieces are at shows, some are on consignment. Even the sold stuff doesn’t stay put. A store swaps old stuff for new stuff, a customer returns a piece and takes another. Sometimes I get a little check from a store that hasn’t been in the loop for years.

He frowned, but persevered. Okay, so what about cost-of-goods-sold? Oh, I said, I could use some help figuring that out! I don’t really know for sure. I figured it out once for my polymer artifacts, but when I factor in my time, the price goes through the roof. “How much do you pay yourself an hour?” he asked. “Well, I compute it as $25 an hour, but in reality, I make about $3.25 an hour,” I replied. “Which figure should I use?” He decided to set that aside for now.

He asked for receipts. I said, “For what?” He began making funny little noises under his breath. They got louder when I explained that most of my fabrics come from junk stores, antique galleries, thrift shops and friends. I have antique paisley shawls, ancient handwoven rug scraps and fine vintage linen napkins I bought from a friend’s yard sale and over-dyed orange. “I paid a dollar for the lot, but if I had to go to a store today and replace it, I’d have to pay anywhere from $20 to $40 a yard.”

Did I have receipts for anything? Well, yes, things like sterling findings and my polymer. But the first six styles of chains I bought didn’t work out, so I sold some, but then I found a style that worked when I oxidized them, so then I oxidized all of them, but I used some in necklaces and some I cut up to use in earrings. And some I bought ten years ago, and I didn’t have the receipts anymore. Oh, and the price of silver fluctuates daily.I started to tell him how I acquire my beads, but he had to take a break.

We decided to skip ahead to charitable donations. Oh, good, I had a question: If I donate a wall hanging to charity, I can only deduct the actual cost of the materials I used. But if I sell it to someone and they donate it, they get to deduct the actual market value of the piece, even if it’s more than they paid for it. So what if I sell it to a customer but then they return it, so I’ve essentially bought it back from them–can I donate it and take the full price deduction then? He began to quiver.

What about books and magazines? Oh, I’m gold. I have magazines about jewelry, sculpture and fiber. And quilting. And metal work, Africa, anthropology and archaeology. I start to list more, but he says that’s plenty.

He said that anything used to furnish the studio is tax-deductible, too. Music CDs, for example. “What about dolls?” I asked. Dolls? I have a jillion vintage dolls, suitcases and globes in my studio. In fact, one visitor, taking in the table made of stacked suitcases and a shelf filled with globes, remarked, “Going somewhere?” I was baffled by the attraction, too, until another artist remarked, “Colors and shapes.” Ah. My husband is simply grateful because I used to acquire old typewriters until I realized how heavy 20 old typewriters are…The tax guy says they are not inventory. “But what if I bust up one of the dolls and use the parts to make jewelry?” I ask. “And hey, I forgot, I also have doll magazines!”

His eyes begin to glaze over. Something tells me I won’t have many deductions this year.I see that next under deductions is the one for casualty losses. Wait until I tell him about all the fabric the rabbit chewed up.

Author: Luann Udell

I find it just as important to write about my art as to make it. I am fascinated by stories. You can tell when people are speaking their truth--their eyes light up, their voices become strong, their entire body posture becomes powerful and upright. I love it when people get to this place in their work, their relationships, their art. As I work from this powerful place in MY heart, I share this process with others--so they have a strong place to stand, too. Because the world needs our beautiful art. All of it we can make, as fast as we can! Whether it's a bowl, a painting, a song, a garden, a story, if it makes our world a better place, we need to do everything in our power to get it out there.

11 thoughts on “THE TAX MAN COMETH And Boy, Is He Mad!”

  1. Thanks for this! I still need to pull the rest of my expenses and mileage together and I’ve been avoiding it.

    I gave up on inventory and cost of goods sold too – I found an IRS article at one point that said you didn’t have to worry about it if you were under 1 million in income… Not a current problem for me 😉

    Like

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