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Informational Journal: IRS, Paypal, Tax, Self Employment!
3 years ago
The footer is the truth.
So, I know a lot of people here have been worried about what it means to now have paypal reporting everything above $600 in a year to the IRS. Well, this was set in motion years ago, and it took a long time to get the paperwork done. So you can stop blaming Biden. He has NOTHING to do with it. This was started because the previous amount was $20,000, and people would under report, or not report at all, and even claim unemployment while making money.
So, what does this new system mean for all of you artists? Well, I gave my mother a call, as she is an accountant, or was, and works within the government's system a bit for her job (I can't be specific) and handles this sort of stuff often so she has a lot of the better information. I tried to ask questions that you artists might have for this, but I don't have all the questions you might have. I'll cover what we went over in the call, and if you have more questions, just ask and I will call my mother again sometime to get more answers.
So please, share this around with artists, I want this to help as many people as possible. Also, please don't just copy my journal and make your own version, thats rude. Not to mention you won't have up to date information because I'll be updating this as I get questions and I find more information. I have an advantage here as my mother works within the system and has lots of experience over multiple decades dealing with this exact stuff and has even worked for one of the tax filing companies like HR Block, can't remember the name of it though but it was one of the bigger ones. So, yea. Just share this around, reference it in your replies to people or whatever. Lets try to get this out there to help calm everyone down.
I will for the time being, make this journal featured on my page.
Self Employed Tax:
A self employed person has to pay their half of their social security and FICA taxes. Normally if you work for someone else, they pay half and then half comes out of your paycheck, out of your part of the paycheck. So self employed people, have to pay both the employee and employer share.
When you do your taxes at the end of the year, there's a Schedule C form that you fill out, and if you don't make much then you don't reach the threshold to actually pay those taxes. It just means tracking a lot of your expenses and things, so that when you do your taxes, the more of your expenses you're allowed to claim, the less your taxable income will be and the lower your tax amount you'll have to pay.
Working & Self Employed?
You still have to do the Schedule C, and pay your taxes based on that. It may not affect you, it just depends on how much you're making.
What are in the taxes?
Your taxes from working a normal job are a combination of state, federal, FICA, and social security. From what I understand, the average tax rate from a normal job for most people is about 25%. If self employed tax is 15% (half of that is social security, half of that is FICA), and then your other tax being the state and federal taxes, possibly being 12% at the poverty line (Unsure if thats the lowest), that comes out to 27%. A 2% difference, simply because you have to pay your entire FICA and Social Security tax yourself. (If I understood this right.)
The taxes change every year, so the numbers will be slightly different every time. For example, this year the FICA tax is 7.65% (Also not entirely sure).
This is all taxed after your expenses.
Tracking your expenses:
You must keep a receipt of every expense related to your work. Maticulously track and keep every proof. If you don't have proof, you cannot count it as an expense. I'm not sure what this means for the dedicated room of a house portion that I list in the below list. I'll find that out a bit later. You'll have to have a travel log to justify the expenses of why you traveled and where to show it was work related too. Honestly this one might be hard for most people to keep track of, so I don't expect a lot of you will be tracking your gas costs driving somewhere. But, if you do, you'll need to carefully track it and get receipts for your gas when you fuel up. Its very easy to knock down how much you really make, by showing every expense that you can but you absolutely must track these expenses and have proof.
What is an expense?
Gas spent driving to collect art supplies.
Physical art supplies.
Shipping expenses.
Fees from paypal to process the transactions. (Maybe)
Online advertising.
Dedicated work room in your house.
- This means if you built a studio in your house, a room dedicated to artwork, you can deduct that square footage expenses.
-- E.G. 20% of your electricity. 20% of your heating costs because this is upkeep of your "business area".
Successful Artist?
Are you making a decent amount doing your art? You should find an accountant to pay for advice, and to help you with your taxes at least once so that you can learn more tricks to help you in whats tax deductible and not. Of course, if you talk to them about it, its a consultation fee. If they do any work for you, they tack on additional fees. So if you go to an accountant, ask what they charge to give advice, ask what else they charge for doing anything else. Don't just let them start doing stuff then find out you have a large bill afterwords.
Doing your taxes.
There are plenty of services out there that will let you do taxes and help you with them. Some of them expensive, some of them even completely and entirely free for life. Credit Karma for example has a way to do taxes, for free. Some of these services also let you get your tax refund even faster by charging you another fee, however don't be silly, just wait 2 weeks extra to get your full tax refund.
If you try and use something like HR Block or anything to do your taxes, they advertise low fees, but then every time you have to add a new schedule or something, they tack on an additional fee, so these places rack up lots of fees while you do your taxes and you end up paying a lot. Self Employment has a lot more forms to fill out, and these services like HR Block will be charging you a lot for that, you'll end up paying hundreds of dollars for these services.
Porn or Art?
The difference between porn and art is in the eye of the beholder. Technically speaking, since you're doing artwork, drawing, rendering, whatever, it should absolutely be considered artwork. Now, you can't wank off on camera and call that artwork. I doubt the IRS will accept that.
Income Level?
A single person household would be about $12k/y for the poverty line.
A two person household would be about $18k/y for the poverty line.
These are just speculations though, we didn't actually look this particular information up during the call so this is just some very rough examples. If you want me to fix these values, please help me look up the information and reference the sources! Preferably from .gov websites like the IRS one.
Benefits of filing taxes regardless of income level?
If you're on the tax rolls, its easier for things like stimulus checks to be direct deposited to your bank.
REFERENCES
Schedule C: https://www.irs.gov/forms-pubs/abou.....le-c-form-1040
Free Tax Filing: https://www.creditkarma.com/tax/i/h.....edit-karma-tax
Additional Resources
Taxes for Artists: https://www.gyst-ink.com/taxes
So, what does this new system mean for all of you artists? Well, I gave my mother a call, as she is an accountant, or was, and works within the government's system a bit for her job (I can't be specific) and handles this sort of stuff often so she has a lot of the better information. I tried to ask questions that you artists might have for this, but I don't have all the questions you might have. I'll cover what we went over in the call, and if you have more questions, just ask and I will call my mother again sometime to get more answers.
So please, share this around with artists, I want this to help as many people as possible. Also, please don't just copy my journal and make your own version, thats rude. Not to mention you won't have up to date information because I'll be updating this as I get questions and I find more information. I have an advantage here as my mother works within the system and has lots of experience over multiple decades dealing with this exact stuff and has even worked for one of the tax filing companies like HR Block, can't remember the name of it though but it was one of the bigger ones. So, yea. Just share this around, reference it in your replies to people or whatever. Lets try to get this out there to help calm everyone down.
I will for the time being, make this journal featured on my page.
Self Employed Tax:
A self employed person has to pay their half of their social security and FICA taxes. Normally if you work for someone else, they pay half and then half comes out of your paycheck, out of your part of the paycheck. So self employed people, have to pay both the employee and employer share.
When you do your taxes at the end of the year, there's a Schedule C form that you fill out, and if you don't make much then you don't reach the threshold to actually pay those taxes. It just means tracking a lot of your expenses and things, so that when you do your taxes, the more of your expenses you're allowed to claim, the less your taxable income will be and the lower your tax amount you'll have to pay.
Working & Self Employed?
You still have to do the Schedule C, and pay your taxes based on that. It may not affect you, it just depends on how much you're making.
What are in the taxes?
Your taxes from working a normal job are a combination of state, federal, FICA, and social security. From what I understand, the average tax rate from a normal job for most people is about 25%. If self employed tax is 15% (half of that is social security, half of that is FICA), and then your other tax being the state and federal taxes, possibly being 12% at the poverty line (Unsure if thats the lowest), that comes out to 27%. A 2% difference, simply because you have to pay your entire FICA and Social Security tax yourself. (If I understood this right.)
The taxes change every year, so the numbers will be slightly different every time. For example, this year the FICA tax is 7.65% (Also not entirely sure).
This is all taxed after your expenses.
Tracking your expenses:
You must keep a receipt of every expense related to your work. Maticulously track and keep every proof. If you don't have proof, you cannot count it as an expense. I'm not sure what this means for the dedicated room of a house portion that I list in the below list. I'll find that out a bit later. You'll have to have a travel log to justify the expenses of why you traveled and where to show it was work related too. Honestly this one might be hard for most people to keep track of, so I don't expect a lot of you will be tracking your gas costs driving somewhere. But, if you do, you'll need to carefully track it and get receipts for your gas when you fuel up. Its very easy to knock down how much you really make, by showing every expense that you can but you absolutely must track these expenses and have proof.
What is an expense?
Gas spent driving to collect art supplies.
Physical art supplies.
Shipping expenses.
Fees from paypal to process the transactions. (Maybe)
Online advertising.
Dedicated work room in your house.
- This means if you built a studio in your house, a room dedicated to artwork, you can deduct that square footage expenses.
-- E.G. 20% of your electricity. 20% of your heating costs because this is upkeep of your "business area".
Successful Artist?
Are you making a decent amount doing your art? You should find an accountant to pay for advice, and to help you with your taxes at least once so that you can learn more tricks to help you in whats tax deductible and not. Of course, if you talk to them about it, its a consultation fee. If they do any work for you, they tack on additional fees. So if you go to an accountant, ask what they charge to give advice, ask what else they charge for doing anything else. Don't just let them start doing stuff then find out you have a large bill afterwords.
Doing your taxes.
There are plenty of services out there that will let you do taxes and help you with them. Some of them expensive, some of them even completely and entirely free for life. Credit Karma for example has a way to do taxes, for free. Some of these services also let you get your tax refund even faster by charging you another fee, however don't be silly, just wait 2 weeks extra to get your full tax refund.
If you try and use something like HR Block or anything to do your taxes, they advertise low fees, but then every time you have to add a new schedule or something, they tack on an additional fee, so these places rack up lots of fees while you do your taxes and you end up paying a lot. Self Employment has a lot more forms to fill out, and these services like HR Block will be charging you a lot for that, you'll end up paying hundreds of dollars for these services.
Porn or Art?
The difference between porn and art is in the eye of the beholder. Technically speaking, since you're doing artwork, drawing, rendering, whatever, it should absolutely be considered artwork. Now, you can't wank off on camera and call that artwork. I doubt the IRS will accept that.
Income Level?
A single person household would be about $12k/y for the poverty line.
A two person household would be about $18k/y for the poverty line.
These are just speculations though, we didn't actually look this particular information up during the call so this is just some very rough examples. If you want me to fix these values, please help me look up the information and reference the sources! Preferably from .gov websites like the IRS one.
Benefits of filing taxes regardless of income level?
If you're on the tax rolls, its easier for things like stimulus checks to be direct deposited to your bank.
REFERENCES
Schedule C: https://www.irs.gov/forms-pubs/abou.....le-c-form-1040
Free Tax Filing: https://www.creditkarma.com/tax/i/h.....edit-karma-tax
Additional Resources
Taxes for Artists: https://www.gyst-ink.com/taxes
Vas did a kind thing and answered a whole plethora of tax questions, I'm sure many artists, myself included, find useful.
Then we scroll to the comments to see your comment... this isn't even about Biden or Trump.