Do I "have" to start a business?

[Barbara WC]

This year, I've had work in three local shows (county fair art show, and two watercolor society shows). This is the first year I've put prices on my work. Haven't sold anything yet.

I don't think it will happen yet, but if I happen to sell a painting, do I have to set up a business? Or can I just add that amount of the sale to my regular income tax form in the "additional income" section.

I can't imagine at this point selling anything, but in a current show have something for sale at $325 and wanted to get some idea with what I'd actually do if it sold!

I also can't imagine selling more than a couple of paintings a year if I'm lucky, I don't do commisions or anything like that. Would rather take the prices off my work if I'd legally have to start a business- I had a small craft business about 15 years ago that lasted one year, and oh my, what work it was to do the book keeping...

Thanks.
Barbara

[George924]

It is still considered a hobby, take up the extra income with your tax preparer...

[Barbara WC]

Thanks. I forgot about the whole "is it considered a hobby" question- remember reading about that when I had my craft business so many years ago.

Barbara

[Horsa]

The big pitfall to think about is collecting sales tax. In many jurisdictions sales tax is due on any and everything bought or sold. This is seperate from income tax.

Depending on the selling venure, you may or may not be responisble for collecting the sales tax. Many galleries will collect it and remit it for you. Most shows where you pay a booth fee do not.

[DaveMak]

The advantage of setting up a business is being able to write off your expenses. Art supplies, art fair entrance fees, your tent, your travel, etc.

Talk to your tax professional but you should be able to write off any losses against ordinary income as long as you are profitable, I believe, three out of five years.

[Barbara WC]

Thanks everyone!

At this point, I'm doing local shows that feature work from several artists- juried and non-juried where the work is hung without me being there- no travel, no tents, no expenses to me, except a low entry fee (3 shows this year have had a $4 entry fee per painting, the other was $12 per painting). The paintings generally hang anywhere from a week to 3 months. I just show up and drop my piece off. The county fair takes commissions, and there is nothing in the paperwork about me collecting sales tax- I assume they take care of that out of the sale- if something is sold, I would get a check 3 weeks later directly from the county with the sales commision taken out. The watercolor society is similar.

Thanks again. I just wanted to find out what I'm supposed to do in the off chance any of my work sells. Never had to worry about this when I entered things "NFS". I only do about 4 shows a year (not solo, but shows with several other artists). I was more concerned about what I need to do if money comes home to me- I want to be sure I pay the proper tax to Uncle Sam! Glad to hear if I sell just one painting through the county fair, I don't have to go through the headache of starting a business!

Barbara

[Carole A]

I'm sure any entity that sells your work will send you a 1099 form and file a copy with the IRS. Then you will have to include your portion of the sales price in your income tax return.

It would be a good idea to start saving receipts from all your art supply purchases.

Somewhere on W.C., I saw an article about when the IRS considers your art or hobby to be a business entity. You might do a search.

Always, always, always consult your accountant. The IRS does not play nice if they decide you've cheated them out of taxes in any amount.

Carole

[noodle1]

Depending on your state tax regs in your state, you will either have to apply for a full Tax ID or a Temporary one, here in NYS they don't care if you sell all the time or once a year they want their tax, but the latter allows you to sell within a set limit of time and collect the state taxes for those items sold. No matter what you are responsible to add whatever income you make from the sales as just that income on your Federal tax return..however if you had a tax ID number there are certain things that could possibly offset that income on a Federal tax form. Since reading and digesting most of the tax info is likened to brain surgery it is best to ask an accountant or your lawyer if you have one to know exactly what you could or could not deduct with a DBA..doing buisness as.

The state tax thing is more of a pain then anything, accurate records must be kept from every sale, it's suggested to get a signed receipt for sold item, bill of sale as it were, that you must also keep on file..this would include name, address and amount paid. You have to file state tax quarterly here whether you sell or not, it ends up being more paper work but it must be done and accurate.

I personally found during the time I was doing this that if the volume of sales was limited or high the idea of having a DBA was not terribly problematic, just time consuming and of course I was more in the eye of the State and Federal government then perhaps I would have liked, I could deduct a few things but not as much as everyone thinks especially if you are not productively selling. Profit and loss and all that comes in between is often better explained by an accountant so that could be an extra expense. Federal regulations are the same across the board, at one time I had incorporated which has some added advantages and disadvantages, a DBA is fairly simple however but not having someone who knows all the laws and regulations in my opinion leaves you open to be audited and perhaps miss something that otherwise you would not have.

Have to say tho once you are in the system there is no dodging it, but if you sell and are somehow caught outside this system you could end up paying fines which generally, here anyway run from 10,000.00 and up. They've changed the laws on Craft fairs here as well, your state may not be as bad, so best advice is to look into it carefully, get good information from someone who knows the tax laws then decide, you can continue doing it yourself or letting an accountant do it as you increase in sales but being informed is important. Just my take and experience with it.

Elaine

[Bees-in-Art]

Starting a business would be good discipline for your art too. It can be surprisingly illuminating to to write a business plan. It can help an artist to professionalise their studio practise.

[doug234]

I guess the question is "Do you WANT to make money with your art?"

I think it's important to set an intention.

Once you make a commitment to do something you'll have much more power.

Doug