The great fun of taxation
Robert Genn

February 23, 2010

Dear Rodney,Yesterday, Maro Lorimer of Anna Maria Island, Florida wrote, "As tax time 
approaches, do you think artists who sell very little work are better off 
treating their art as a hobby (claiming no expenses and reporting no income) 
or going through the formalities of reporting income and claiming expenses? Is 
there a threshold where it makes sense to switch from hobby to profession? 
Related decisions include whether to claim part of the home as business space, 
get a business license and get a reseller's license to buy wholesale. For the 
artist who wants to keep life simple but who occasionally sells originals, 
giclees and cards, what's the best path?"
 
Thanks, Maro. For this one I had a chat with the artists' tax expert Bob 
McMurray. Right away he told me in his experience artists who go the reporting 
and claiming route tend to do better. "Just by keeping records," says Bob, 
"they get a better grip on a career. They take themselves seriously, learn 
more stuff, and, just like blonds, they have more fun."
 
Bob has counselled many emerging and established artists. He urges artists 
worldwide to talk to their own tax specialists. "Different jurisdictions have 
different spins and loopholes," he says. "And every individual artist has 
specific needs and requires specific advice." Apparently, all taxing agencies 
provide guidelines for artists who are considering reporting. Generally, to 
report for tax purposes two main questions need to be positively answered: Are 
you carrying on a business? Are you in pursuit of profit?

If your answers are positive, then you should report your activities whether or 
not they are showing a profit. It's understood it might take a number of years 
to actually show a profit, but that doesn't mean you are not carrying on a 
business.

It seems most emerging and semi-motivated artists find their expenses exceed 
their revenues and these losses can be deducted from any other income. Its 
possible to lower taxes generally by reporting your art losses.

"The artist must report all income, both cash and non-cash, and may claim all 
expenses that can reasonably be related to the income earning process. In most 
places there are lots of deductions, depreciations and other benefits," said 
Bob.

"But it's all such a pain," I blurted out. 

"Not painful for you," said Bob. "You just give us a great big cardboard box 
and go on having your fun."

"Scotch?" I said.

"No ice," he said. 

Best regards,

Robert

PS: "Acting professionally breeds professionalism." (Bob McMurray)

Esoterica: Bob McMurray has been doing my taxes for thirty years. A couple of 
years ago he decided to retire and get serious about painting. He was always 
impressed with how much fun his artist-clients were having. These days he 
gives tax workshops as well. He's the only guy I know with two FCAs after his 
name: "Federation of Chartered Accountancy," and "Federation of Canadian 
Artists." Along with Maro Lorimer's work at the top of the current clickback, 
we've put up some work by Bob McMurray FCA, FCA.