Tax Tips for Creative Types: How to Prepare for Tax Time without Boring Yourself Stupid
Let's face it, preparing for tax time is not the creative type's forte. And unfortunately, tax preparation is just that little bit trickier for many artists, writers and musos who are self-employed. Here's how to prepare for tax time as you go, saving yourself from a daunting (and boring) task around tax time.
Record your income without realising it
Organising your income records will save you and your tax accountant a pain in the neck when tax time rolls around. Holding onto invoices may seem like enough, but while it's important for verification purposes, it really doesn't help you with calculations. The last think you want is to be going through your bank records, scanning for every payment made to you in the past 12 months.
You can easily avoid this by creating a simple spreadsheet. Every time you get paid, make a habit of putting in the amount, your customer's details and the date. It only takes two minutes to do but saves you a hell of a lot of boredom in the long run.
Whether you earn above or below the tax free threshold, the last thing you want is a surprise debt to the tax department. Start a system of "taxing" yourself as you go, by putting 19% of each payment into a special account. When you get your tax return, use it to repay any debts. If you have no debts—score! You've just made a bonus for the year.
Know what you can or can't claim
Like your income record, keeping a record of your receipts will save you the stress and boredom of turning your studio upside-down when it's time to tax. First thing you want to do is get a list of what you can and can't claim. You don't have to study this list—just get a rough idea.
Then, whenever you make a purchase that is related to your creative enterprise/business operations (even if you're not sure whether you can claim it) list it on your spreadsheet as you do with your income and let your accountant handle the rest.
Get a tax preparation software
If you're the type who can't stand numbers and spreadsheets, then a tax preparation software is your knight in shining armour. There are many free and legitimate tax preparation programs available to download online. A tax programs knows a lot about what you need for tax time. Simply answer its questions and let it do the work for you.
However, if you'd rather work with someone around tax time, consult with experts like CMA Chartered Accountants. They'll help you set up a plan that works for you so you can keep track of taxes throughout the year and make tax time that much easier on you.