New Series: NFT Fridays

A collaboration between artist/programmer team Hannah Cole (of Sunlight Tax) and Aubrey Holland (who also happen to be married)

Hello everyone, today we’re restarting our series of posts on NFTs for artists and creators. We have big plans, but what we’re kicking off today is a series of Instagram posts we’re calling NFT Fridays as well as a newsletter you can join to get more detailed guides as we chart our journey from NFT beginners to creating and marketing our own series of NFTs. At the end of that journey you’ll be armed with enough information to decide if NFTs make sense for you, have all the tools you need to get started with them, and even have a free NFT from the collection we’re creating. If you’d like to join, click the link at the end or the one right here.

Before you ask, we’re well aware that you may have concerns about NFTs, and our first few posts will cover them in detail. If you have specific concerns, drop them in the comments and we’ll be sure to address them. Our belief is that there’s enough good here for many artists to benefit from, and that with a few resources we can bring more art to a world crowded with hype, noise, and ape avatars. This is going to be an interactive journey, so please let us know what’s on your mind and share this with your friends. Have a great weekend!

We are starting a special NFT blog for these posts. We’ll link it through the Sunlight Tax blog, so you can easily find it. But you can also bookmark it directly here.

(The first image above is a Fidenza by @tylerxhobbs, which recently sold for $3.3 million after being minted on the @artblocks_io platform last June. The artist receives 5% of all secondary sales from the series, which have totaled over $150 million to date. The second image is a Chromie Squiggle, also originally sold on @artblocks_io and created by its founder Erick AKA Snowfro. These are both examples of generative art, which are automatically created by software, but not all NFT projects require technical knowledge)

Getting Organized: Financial Resolutions for Artists

This article originally appeared on Art F City and was updated 8/16/21.

As we enter the new year, let’s take time to think about the priorities in our arts practices, and in our personal lives. You may roll your eyes at the idea of New Year’s resolutions, but there is evidence that writing down your goals actually helps you achieve them. So grab a pen, and let’s put some intention into this next year of our lives.

In my interview with artist Susan Crile about her eight year ordeal defending herself in US Tax Court, there was a lot of discussion about keeping records to prove the profit motive in one’s art practice. It brings up a good question for most of us: how are we doing on our own record keeping? If the IRS sent an audit letter tomorrow, would you feel good about the shape that your records are in? If the answer is not good, don’t panic. Here is a list of what you will need, and some thoughts on how to improve your record keeping going forward.

• Good Bookkeeping. Bookkeeping is important to any business. Without tracking expenses and growth, there is no way to improve your practice. It’s impossible to argue that you are actively trying to turn a profit when you don’t track your income and expenses. Not only is keeping an accurate set of books a legal requirement for your arts practice, but it can help you by generating reports to show you how you are using your resources, and these reports can be the documentation you need to get loans, make budgets, and apply for grants. In short, bookkeeping is worth all the investment of time we put into it and then some. If you have a simple business without a lot of transactions, say, you sell about 10 paintings a year, then a spreadsheet may be all you need. If your operation is more complex, you’ll need more robust software. Before picking the cheapest software, think about how your business may grow in the next five years, and what you may need. Do you need software that can integrate with a ticket sales system or an Etsy shop? Do you think you may hire an employee? Do you need invoicing? Do you want to do it all yourself, or would you like a system that a bookkeeper or accountant can easily access? Quickbooks is the old standby, but it can be confusing for those without an accounting background. There are lots of alternatives, ranging from free to expensive, and all with different strengths. Xero is a cloud-based accounting software that has a clean design, is user-friendly, and works on mobile. No matter which you choose, make sure you have a good bookkeeper set it up for you, and give you a thorough tutorial on how to make entries correctly. It is worth some up front cost to have a professional set you up because you’ll be basing business decisions off the numbers in your books.  Bookkeeping errors can lead to costly mistakes not to mention the hefty expense of having a professional clean your books up..

• Good bookkeeping is a question of habit. So schedule a regular time to do it. This is why the design of Money Bootcamp includes quarterly bookkeeping co-work sessions. The point is that you need to establish the habit of sitting your butt down to do your books at least every quarter.

• Save receipts. The law says that if you can’t produce the receipt to prove it, it never happened, and you can’t deduct the expense. Your bank statements or credit card statements aren’t enough. For meals, the documentation requirement is even stricter: the receipt must be accompanied by the name of the business contact you are meeting with, plus the reason for the meeting. A receipt alone will not suffice. Personally, if I don’t grab a pen and jot these things down at the moment I am handed the receipt, I will never do it. So that has become my personal habit – I write directly on my receipts, and then save them in a file folder. You can also pair the receipt with an entry in your calendar that states who you met with and what the business purpose was.
  
  Some people are handy enough with their phones that they snap a picture of every receipt (many accounting softwares integrate a receipt-saving feature like this, and there are stand alone apps dedicated to it). I am not fast enough with my phone for this to work for me, but if you are, it is a great method for keeping your receipts.

• Tracking mileage. I went over the details of mileage tracking in my Miami travel expense post. But here’s a tip: go out and record your car’s odometer reading right now. And while you’re at it, set an alarm on your calendar to do this the first day of every year. Because tracking your business mileage means not only tracking the number of business miles you drove this year, you also must record your total miles for the year. By recording your odometer on day one, you have both your ending mileage for last year, and your beginning mileage for this year. Two birds. One stone.

• Keeping a calendar. In the days of Google calendar, you probably have one that is pretty good already. But you might not realize that this can be an important document to show your business activity in the event of an audit. Your calendar can be used to show the amount of overall time you spend on your arts practice — and that means everything from making the actual work to networking, marketing, and bookkeeping. Your calendar can also show who you met with and for what purpose. This may corroborate other parts of your documentation, from travel expenses (your calendar shows the meetings you had set up in your travel location), to your meals expenses (meeting the strict substantiation requirement of who you met with and for what purpose).

Maintaining important correspondence shows your effort to grow your career. You may still snail-mail out old-school introduction packets to museums (and be sure to save those receipts if you do!), but you almost certainly reach out to art world people over email. In the days of searchable email, this is a lifesaver. If you use an email folder system, consider saving this correspondence into one place (ie. “gallery + museum correspondence [current year]”), so that in the event of an audit, you can produce this important evidence of your businesslike intentions quickly and without having to rely on your memory.

• Maintaining your arts inventory. In Susan Crile’s drawn-out audit, her professional inventory system weighed heavily in her favor to prove that she was a professional artist and not a hobbyist. How do you track your art inventory? Artwork Archive is a great professional inventory-tracking software (and yes, that’s my affiliate link, where you can get a 20% discount). Having an up-to-date document that shows what you’ve produced and where everything is is an important tool in your arsenal.

While looking at record-keeping goals for our work lives is important, it’s even more important to look at the complete picture. Where do we want to have an impact in the larger world — in our personal lives, and in our communities? If donating money to good organizations hasn’t always been your habit, consider making it a goal this year. There are many organizations doing important work--from good journalism to addressing income inequality issues and more--that could use your support. This is important. Give some thought to the world you want to help shape, and take a moment to write down your charitable giving goals for this year. It feels good, and it reduces your taxable income if you itemize your deductions.

And lastly, remember that we need to budget more than just money. Time is the most limited of all resources – so consider budgeting time to be mindfully present with friends and family, and time for civic engagement. It may end up being the most valuable contribution you make to the world this year.

What's the Deal with Receipts?

Here’s the confusion: You keep hearing that the IRS requires you to keep receipts and documentation for all of your business expenses. So why is your accountant annoyed when you try to hand her your receipts?

Here’s the story. Yes, you are required to keep receipts and documentation to prove each and every one of the business expenses that you deduct. That is the law. And here is the actual gospel, from the IRS itself. And here is a comprehensive list of what New York considers to be legal proof of your expenses. In case it’s not clear - and I get enough questions from people to know that it isn’t - the reason that you need this documentation, besides being a good practice for your actual business anyway, is that should the IRS or your state decide to examine your tax return, this is the proof of expenses they will require you to show them in order for them to allow you to keep those deductions. If you can’t, then you have just lost your deductions, you may have a bad experience, and you will owe them money. You need to save these receipts and documentation for 7 years.

So why is your accountant irritable when you hand over receipts? That is another story. Tax season is super stressful. Most people, despite their intentions, don’t get their tax documents organized until a few weeks before the tax deadline, so your tax accountant has a drinking-out-of-a-firehose situation from about March 1-April 15. A lot of inexperienced taxpayers with freelance income don’t realize that they have a fairly big job to do before they can get their taxes done - that is, they need to do their bookkeeping. They need to tally up their receipts and income, and put it into some basic expense categories. Here’s a beautiful chart to help you with that. You can hire a bookkeeper to do this for you ($30-$60/hour) or, you can join Money Bootcamp, which is designed to teach you how to do it yourself (and have quarterly bookkeeping co-work sessions to keep you on track and up-to-date, along with loads of other valuable financial and tax skills). 

So keeping your books is a requirement if you run a business. And if you’re a freelancer of any kind, though you might not have realized it, you are running a business. 

So showing your accountant your receipts says that you haven’t done your bookkeeping, that you probably don’t realize that you have a sizeable job ahead of you, and that you probably need some coaching about the basic tax rules.

This is totally understandable. You’re just a bespoke latex dog-costume designer, not an accountant! This might even be your first year freelancing. But your accountant is facing an immovable deadline with an obscene flood of work. So if she’s not keeping up with her loving-kindness meditation, she might get grumpy with you. As a person who was new at my arts practice once, and as a tax accountant, I’m advocating for understanding in both directions here.

Does Anyone Make a Living Doing Public Art? A Money Story with Liz LaManche

Liz LaManche (she/they) is an artist on a mission to add more color and fun to the world through big art in public places and small art in weird places.

Hannah Cole: Tell me about what brought you to a place where you wanted to learn more about taxes and getting your money organized.

Liz LaManche: I spent a bunch of years in software doing UX/UI consulting, so I had practice doing that, and getting decent rates, and doing contract negotiations, so that wasn’t the hard part. The hard part has been figuring out what artists get paid, and all that learning I talked to you about. Being avoidant about money in general. Not wanting to know my budget, not keeping track of receipts, even though at the end of the year I had this big terrible accounting project of tallying all my receipts. 

You’re the first person who has been able to teach me in a calm, accessible way. I had old men accountants who said they would teach me, but then actually just asked for my numbers which they would just enter into their system. When I would ask them questions, they would say, “Just read the instructions on the form.”
The fact that you’re able to realize in a psychological way what is going on with people, gently and realistically, has been really nice.

This was part of a program I set myself where I was intending to get better at the financial thing, and set myself up better. I’m examining, “What are my attitudes? What is keeping me from getting specific? From actually tackling this stuff?” You helped with the specifics--as in, here’s how to do this and that.

I think psychologically, I bounce between overfunctioning and underfunctioning. I can’t deal, and then I bounce back. I have a tendency to want to get everything done perfectly, then I can’t deal anymore. You’ve been very helpful about putting it all in perspective. You say, if you improve one thing, you’re headed in the right direction. It doesn’t need to be all perfect immediately. 

I would go from ignoring my receipts for months, to “I have to enter every 50 cent coffee I ever get into this spreadsheet.”

HC: What did you observe in your transition from consulting work to the art world?

LL: Being up front with clear communication took practice. I got good at writing contracts that were basically in English that people normally speak, but take care of contingencies that both parties actually care about. You need to spell it all out in an understandable way, and to have it covered in a contract. A lot of my artwork is commissions and consulting.

HC: So you really have to use contracts for that. 

LL: Yeah. You have to lay out what is going to be done in this project.

HC: Can you describe your art?

LL: I’m doing public art and murals. I’m also working with an organization that helps cities and towns work on their pedestrian access, safer streets, bikeways, and designing asphalt art. I make artistic crosswalks, intersections, and pathways. I get to use my architecture background, making urban environments more beautiful, and sustaining human beings. It has been helpful coming from being an architecture major. First, you have to figure out what the client wants and needs, and what environment the client is in. Then you design something bespoke to solve those problems and make something that is both beautiful and usable within its environment and neighborhood. 

Business skills have helped a lot in the project work I’m doing. Being able to form a relationship with clients where they feel taken care of, and they are sure I know what I’m doing, because I approach things like a pro, I know what the issues are, and I can get them a solution that works for them. I show up and behave like a professional. People dealing with artists are a bit afraid about that.

HC: Has there been anything particularly helpful that you have learned?

LL: I had some habits that helped me already. I can do math, I had business bank accounts, I can use spreadsheets. But others you helped me a lot with were--I couldn’t face my receipts, and keep a running tally of what was going on. I couldn’t look at my actual financial situation. I would just try to get money coming in and hope that things worked out. Then I would panic if the account balance got too low. 

Following your program, I’ve been able to get a handle on things, know where I’m at, develop some good habits (if not make and stick to an actual plan). Things like getting more methodical about putting money aside, being able to check on it, that sort of thing. Being able to get on top of the quarterly tax thing, and what I should be doing taxwise, has made me a lot happier and calmer. 

HC: That stuff provokes so much anxiety.

LL: It’s just astonishing that no other tax person has gotten me to do quarterlies ever.

HC: I’m so proud

LL: One of the things I’m working on now is trying to learn more about what artists are getting paid, in my field and in others. I want to learn more about what’s realistic. Because there’s so much secrecy around money all the time. That doesn’t serve us well.

I spent some time in circus performance doing aerial dance, and there’s a lot of talk there about “charge what you’re worth” and “don’t undercut others,” and how to get people a living wage.

The same is true in performance. There’s the thing or service you’re selling, and then there’s the years of work and study that made you good at doing that thing. There's more overhead than people expect.

I would love for art to be a sustainable thing for more people. Because it's such an important thing for our culture, and for being able to sustain ourselves as a society.

There’s awe and beauty--those uplifting feelings. In public art, too - you’re getting beautiful things out to people who are just getting through their day, in what would otherwise be a dull streetscape. It might make their day better.

I’ve heard about people quoting extremely low rates, basically doing things for free. That’s problematic because it leads to that being the expectation. And there should be a graduated scale based on your experience, and the type of work and that sort of thing. But that’s the question that we run into in circus arts, too. There has to be a place for people to start, but people commissioning work need to realize there’s a difference in the final quality, too.

I’m hoping that there is a tier for professional artists to stay professional and make a career of it.

People look at me as someone who is successful, because I’ve done projects that are known around town. [But I’m still wondering], “Does anyone get a living wage doing public art?”

I Like Your Work Podcast: How to Pay Yourself

In my last episode of the I Like Your Work Podcast, I shared the one key thing you need to do to get started with control of your numbers in your creative practice. Now I’m answering the question behind why you haven't done it yet: how to pay yourself.

If you’re ready to de-stress your taxes, save time and feel understood so you have the freedom to create your biggest, boldest work, click below to join the FREE masterclass at Sunlight Tax: De-Stress Your Taxes and Get Back to the Studio (for Creators)