Continuing on from Part 1.
#3: Documentation, Receipts and the Rest
In order to lower your taxable income, you need to have the proper documentation in order to claim and to back-up your tax return in case you were to be audited by your tax authority.
Now you could establish a formal bookkeeping system so that everything would be included within it. While this can be a little over-the-top, be aware this doesn’t need to be complicated OR difficult. Aside from all of the electronic options and apps that can help you with this, the key here is actually doing it! Remember that tax calculations cannot be made if you don’t have a good set of financial records.
You could start with keeping a money journal of every transaction that you have entered into. You should have a journal that shows your money inflows that is, the money you have earned and your money outflows, the money you have spent or set aside. Buy a book (some people find this more fun!) or create a table/spreadsheet on your computer or other media and record:
How You Earned This Money
– that could be who you sold your art work to and/or the engagement of your artistic services – the point is you want ALL of your money inflows related to your artistic work.
Amount of Money Received
– what was the amount you were paid for each entry above; be sure to exclude the sales tax, if applicable.
– this refers to the date that you received this money.
– some tax laws want you to document work-in-progress (WIP) for art that is not completely finished and remains to be ready for the marketplace. Depending on where you live, if this is applicable to you than make an estimate of what you believe the value of that is.
How You Spent This Money
– include all of your purchases that were related to creating your art, so that you may keep track of them for tax purposes. Be sure to keep the receipts as backup.
Amount of Money Paid
– enter the amount you spent for each item in relation to creating your art. Of course this could also include your overhead expenses such as, marketing, legal fees, banking charges, etc.
– record the date the purchase was made that is shown on your receipts.
Any other relevant details
Also, you need to reconcile your bank account every month – this will determine if your inflows and outflows presented in your records is correct. Know that financial institutions can make mistakes, although it isn’t frequent, you want to be sure that you are keeping your eye on everything.
The purpose of your money journal will ensure that you have documented proof of your artistic earnings as well as the applicable expenses incurred to produce and bring to market your work. It helps you to keep track for your own purposes and will give you a book of original entry in case you were to be questioned, reviewed or audited by your tax authority.
#4: Getting and Keeping Yourself Organized
Although it may seem obvious, being organized is an essential business skill and it really is useful particularly with your records, both financial and even with your art inventory. Once you have a system in place for yourself to be organized, it is surprising how easy it will be to maintain.
To become and stay organized, always be sure to:
• Get on a schedule of entering your financial information in your money journal
• Mark-up your paperwork to show that it has been entered in your money journal
• Condense your work to smaller, manageable tasks
• Book time in your schedule with yourself to do this – it is that important!
• Match receipts with your credit card, bank and other statements and report any discrepancies
One of the most important aspects of these strategies is they need to be implemented and followed for you to realize the benefits from them. What you should be working towards is having a budget in place for your personal money and then as your creative business starts to develop then you should establish a business budget as well.
Although this certainly is not everything you need to consider when dealing with your personal and business money, it will give you a good starting point to traveling down the path of making you a bit more at ease with a plan in dealing with your money.
Another key piece of advice is not to over-complicate things! Despite all the information that you may have – you need to weed out what is the MOST important and prioritize. Start small and as you gain confidence you will become more comfortable. Through following these strategies this should put you on a course to helping you find your way.
© 2017 Shantel’s Art & Design
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