Freelance Artist Taxes Explained: Financial Tips From Sunlight Tax
It’s been said nothing is certain but death and taxes—this year’s upcoming April 18 deadline seems to prove that theory true yet again. And if you’re a freelance artist or creative professional, filing your income taxes is probably only slightly preferable to the finality of death.
Like other freelance professionals, artists typically rely on multiple streams of income to get by, all of which must be reported to the IRS. It’s a real headache to track, especially when your income tends to dip and spike. To help combat tax-related anxiety, we recently spoke to artist and accountant Hannah Cole of Sunlight Tax, an organization that counts many artists and creatives among its clientele.
In her interview, Cole, herself a working artist, gives us some basic tips to help navigate tax season smoothly, this year and every year after. Read on for a behind-the-scenes scoop on the tax industry and how freelance creatives can come out on top of the (money) heap.
Beware the Tax Industry
“Tax is a brutal business,” says Cole, who dove headfirst into the industry after a series of financial setbacks in her creative career. Soon after graduating with her MFA, Cole sought a tax professional to help her with the previous year’s earnings, income that was heavily subsidized by freelance work. “I was horrified by the experience,” she confesses. “[The accountant] wasn’t curious about me at all, he didn’t ask me any questions. He sort of made assumptions about me being a hobbyist when I was an absolute professional. He just had no idea what a working artist looked like.”
It would be several years before Cole got her next financial shock. Due to outdated or nonexistent bookkeeping practices, the New York design firm where she served as project manager was unwittingly hemorrhaging money. When Cole brought in bookkeepers to tidy their records, upper management came to a startling conclusion about the future of the firm: in one fell swoop, they handed out pink slips and shuttered their doors.
Out of work and with a new perspective on the world of art and finance, Cole went back to school for accounting. After earning her enrolled agent’s license, she trained at several NYC-based tax firms. Of her time there, Cole says, “I learned a lot about how a tax business operates, and there's a lot I didn't like about it. And I felt like this isn’t how I want to do this—I want to do it in a different way.”
Make Peace with Money (Bootcamp)
Cole’s accounting business, Sunlight Tax, is certainly different. “There's so much stuff in money that holds back anybody who doesn’t see themselves in the khaki-wearing finance bro,” she reassures us. Appropriately, Cole’s business model caters to “creative weirdos” who feel like square pegs in round holes when it comes to money. “My audience started as artists specifically, but over the years it's grown to just creative people who work for themselves,” she explains. That growth was due in part to Money Bootcamp, Cole’s immersive tax course for creative freelancers. “Money Bootcamp has all that secret knowledge you don’t get from your accountant,” Cole shares. You read that right: Your accountant doesn’t tell you everything.
“A profitable tax firm gets as many clients in the door as it possibly can, and it does the tax returns as fast as it possibly can,” Cole explains. “They want to just pump out your return and give it to you and you sign and that's it. So individual guidance and attention is not something that’s ever going to be prioritized.” The churlish tax professional Cole collided with in her first year of freelancing is a byproduct of the industry’s overarching attitude: “It’s a volume business.”
Lean into the Mess
But there is hope, Cole promises. “There are all these things written into the tax code to really help people. They are genuinely there to help people to build wealth, pay for medical expenses, pay for college and education for their children and themselves. But if you don’t know about it or you don’t know how it works, you’re never gonna use it. It doesn’t matter that it’s there.”
To get over your anxieties, Cole recommends diving headlong into the mess of miscellaneous receipts and unkempt file folders before you feel you’re ready. “Perfectionism is absolutely going to stop you dead in your tracks. A much better mindset that will serve you is thinking of it as a process you move through that’s more like a habit you repeat.” The first module in Money Bootcamp deals with a scarcity mindset, but it also acts as a primer for starting habits that lead toward a healthier financial future. No matter where you are in your career, Cole stresses, it's never too late to take the first step. “You don’t wait to start the habit, you just start it now. You’re always going to have an awkward first year, you just have to start it.”
Don’t Worry About the Inevitable Audit
No tax guide would be complete without mentioning the dreaded “A” word. But Cole reassures us “audit” is a loaded term, completely misshapen by its portrayal in the media and our general ignorance of finance. “Don’t freak out if you get audited,” she advises. “It's really important to remember that an audit is a check-up, not an accusation.”
And then she offers an uplifting piece of information: “Audits are down, generally.” While Cole admits artists, self-employed freelancers, and small businesses are all at higher risk of receiving an audit, the process isn’t the near-death experience it’s been painted as. She stresses the phrase “check-up” in relation to the IRS and audits, a tactic that diffuses some of the tension surrounding the ordeal. “If you think of it happening to you, it's a very unpleasant thought. But if you think of it on a macro level—all these people self-reporting—shouldn’t they occasionally be checked on?” Essentially, she says, an audit is the system functioning as it should.
Get Help From a Tax Pro
Cole’s last piece of advice? Get help from someone who’s been where you need to go. There’s no guarantee the path forward will be easy, but it’s got some guardrails thanks to creative entrepreneurs like Cole.
Due to its surging popularity, Money Bootcamp is frequently waitlisted, but Sunlight Tax offers a few other ways to start your journey. Laid out in beautiful colors and clean graphics, Cole’s free guide to tax deductions is perfect for visual learners—grab your copy here. Need a little more TLC? Cole and her tax team also offer a free, on-demand masterclass that shows you how to put your taxes on autopilot and start building your “freedom fund.” You can register here and take the class as soon as today; as Cole says, “that perfect year will never happen—there’s no better time than now.”
Hannah Cole: Website