Your Superpower: Seeing What Others Don't, a podcast interview

A podcast episode about art + entrepreneurship on Brand New Women, hosted by Scarlet Batchelor

“I want to say to you if you’re a woman or are BIPOC or are from a historically marginalized group:

You have a superpower. If you have had to operate in a world that doesn’t always see you, or that underestimates you, then you see things that they don’t see. And there’s business opportunity in that.”

Fostering democracy in the art world: an interview on the Not Real Art podcast

In this episode, Hannah debunks the myth that artists are no good with numbers and shares some practical advice to help us impart our own ‘freaky flavor’ into our businesses while also taking money-making seriously. You’ll also gain some insight into her journey from punk-rock-loving anticapitalist to creative tax specialist and what she learned about the art world and her own practice along the way, plus so much more!

In all of my talks, I always end with an appreciation for what artists do in the world, which is [that] we are the empathy builders. We are the people bridging divides and showing the less creative part of the population that a better world is possible. I think it can be really hard when you are an artist. I want all artists to take the making-money part more seriously, treat themselves like they deserve it, and not think of all money as evil and all people with money as evil, because those are attitudes that shoot you in the foot. They stop you from having any financial security.

Listen to the episode here.

Money Story: Lex Ritchie

This interview has been edited for clarity.

Lex Ritchie is a tarot reader and folk magical educator. You can find more about their work at www.thelexritchie.com IG @thelexritchie

HC: Who are you, what are your pronouns, and what do you do?

I’m Lex Ritchie, I use they/them pronouns, and I’m a tarot reader and folk magical educator. I help folks connect to their magic so they can make change in their lives and in their world.

HC: What brought you to a place where you wanted to learn how to get your money stuff together?

LR: It was really starting my own business that prompted it. I’m not someone who has a ton of experience with money. I grew up working class, not affluent. For a large part of my adult life, I didn’t make enough money to have to file taxes. By the time I started a business, I had never filed taxes. The other half of my adult life was filled with bad tax experiences--I had terrible luck with taxes. One year my partner's employer was committing tax fraud. Another year a number was wrong on our W2, and caused an enormous headache, and another year I was paid differently because I was a grad student. 

I went from making too little to file to owing taxes every year after that. When I started my business, I needed to figure this out and know what I’m doing.

Like a lot of people who go from being poor to having some money, there’s this pain around that. There is a shame of not knowing. A shame that you have to know these things now. I needed to go into this business with my eyes open, not giving in to the past trauma or knee-jerk responses I had before. I wanted to build my business and grow it into something that can support me. I had to take responsibility towards my business, like taxes. I wanted to take personal responsibility towards that.

HC: Is there anything that being in Money Bootcamp has taught you, or that has changed for you?

LR: It’s funny. I’ve been a part of Money Bootcamp for two years. I wouldn't at any point have been able to pinpoint that I know these things or that my relationship to money is changing, until I was talking to a friend who is switching to contract work from full time employment, because she has a baby. And I’m like, “hey, there are these tax benefits, and she’s like hey, how do you know all this?”

The fact I pay my quarterly taxes, I’m in this position where I know enough to ask the right questions, I don’t have to just go along with it. I know enough to advocate for myself - it provides me with knowledge and not just garbled nonsense. 

I come from a science background. My major was in science communication, so I know a lot about communication.

One thing that comes from having greater financial literacy is that I, as someone who owns my own business, have to pay taxes out of my account every quarter. It’s not automatic. Better financial literacy means knowing when I have enough, and don’t. Budgeting. That’s been part of this larger effort in my life of how to navigate money. Because I have this thing--I didn’t have money growing up, so I never feel like I have enough. I’ve learned how to navigate what I need, earmark for savings, and figure what is ok. Both my partner and I are chronically ill. Figuring out that my partner will not be able to do his work forever. Ensuring ok-ness with that. Past baggage from not knowing when we had enough. 

It’s easy to hoard. That is the default. When you grew up feeling like you needed to hoard money, its easy to do, because there’s a cultural default. [Having a sense of enough-ness is] helping me live my values in that way.

Having enough: for me, when I was in engineering, I studied sustainability. Sustainability is important to me. One reason I left grad school is that when we talk about sustainability, we aren't’ critiquing the ways we talk about progress, money, and the economy. The ways those feed sustainability and feed structures of unsustainability. The same goes for money and my values--I value sustainability and abundance. There’s a ceiling to that. It looks different. It manifests differently for different people. I’m recognizing that sufficiency for myself. Growing up poor, when you're stuck in insufficiency for so long, it’s hard to recognize when you really do have enough. For me, numbers make sense. Seeing it in my numbers was helpful, and allowed me to see that it is sustainable, that I could share more, and that saving wasn’t just pointless--I was able to build a cushion.

HC: Is there anything else you’d like other people to know?

LR: Something I want to talk about is to shout out to you, and how amazingly you hold space for how complicated and stressful and wrapped up in trauma and injustice taxes are. 

When we had our conversation last year, I was like “I have perennial problems around taxes” and you were like “none of that is your fault.”

You can learn more about what Lex does at their website: https://thelexritchie.com/ 

The Civic Impact of Taxes

This post originally appeared in Hyperallergic on March 15, 2019. 

Taxes are our only mandatory civic duty : So why is tax education left out of civics? 

You probably recall a school lesson in your past about our “bicameral legislature” or the “separation of powers” between our three branches of government. But did you ever get a lesson in graduated income tax rates, the personal exemption, or how freelancers pay into Social Security?

When the president tries to extract a pledge of loyalty from someone in the Justice Department, an alarm goes off about those “separation of powers,” and as a citizen, you understand a basic tenet of our democracy is being tested. But what about when states propose funding budget shortfalls by increasing the sales tax (which is one of our most regressive taxes), or politicians quietly double the threshold on the estate tax (one of our most powerful tools for fighting the widening wealth gap)? Do these actions trigger the same sense of alarm?

Our founding fathers recognized that the maintenance of our democracy would require a population educated in basic civic responsibility. The establishment of a public school system was a part of this understanding — without public education, civic education would be reserved for the wealthy, and the uneducated masses would be subject to the whims of tyrants. Public schools and civic education have been a deliberate cornerstone of our democracy since the American Revolution.

We should all be educated in the basic structure and functions of our government so that we can advocate for ourselves, and keep our democracy healthy. While civic participation is not as robust as it could be, it exists. People do vote; they do advocate for different policies and appeal to their legislators, or run for public office themselves. So why in our democracy is the one part of civic engagement that is mandatory — paying taxes — not also a part of our basic civic education?

From my vantage as a tax accountant for artists, I can see how acute this lack of information is. In my tax practice, I regularly explain the basic mechanics of tax-sheltered retirement plans and clear up the near constant confusion between itemized deductions and the business deductions one takes on one’s Schedule C. I give workshops to packed room after packed room of professional artists who have never had a lesson on how self-employment tax works, how to pay estimated quarterly taxes or how their self-employment tax pays into Social Security and Medicare. 

I say this with deep respect. Artists and creative professionals are generally better educated and more civically engaged than the average citizen. So, if this population is under-informed on basic tax issues, I think the problem is much bigger. I think we have a civic education crisis.

Again, the point of civic education is to cultivate an engaged, participatory population. One that engages in honest, intellectually rigorous debate and makes good faith arguments about fairness and the society we want. And what place is more important than the mandatory civic engagement of tax-paying? What shapes our society more than the money we all pay into it? What is more worthy of scrutiny than who pays a disproportionate share of their income compared to everyone else, and why? What is a more important civic question than how our tax dollars are apportioned? What is a more fundamental civic question than what kind of society do we want to build with our tax dollars? 

I see a direct link between the general lack of understanding of our tax code and the thorough lack of advocacy on the part of the people most affected by it. Without this education in how our tax system is structured and who pays what proportion of their income, we can’t engage in shaping a fairer tax policy. When politicians lie about who pays taxes, these lies don’t get called out properly, because they aren’t obvious to everyone. When regressive tax policies are floated — such as increases to sales tax, which are disproportionately paid by the poor, people often don’t realize that these taxes are regressive, so fairer alternatives don’t get surfaced. The estate tax (the “death tax” label is dishonest) — which is a clear solution to a widening wealth gap, based on centuries of evidence and decades of policy work, gets chipped away at constantly, without enough defenders rising up to support it. 

As the massive new tax law changes were being passed, I kept wondering why were people not more up in arms over:

–the dramatic reduction in charitable contributions that would likely result from doubling the standard deduction

–the punishing of electorates in high-tax states with the capping of state and local income tax deductions and

–the boon provided to the wealthiest families in the US by doubling the estate tax exemption. In 2017, before the tax law change, only 5,500 estates paid any estate tax. The Tax Cuts and Jobs Act of 2017 is expected to reduce that number to 1,900).

All of these policies are the opposite of what most Americans want. Polling from the months before the passage of the bill made clear that Americans want higher — not lower — taxes on the wealthy and on corporations. But where was the debate? The bill was passed with breakneck speed – that is one reason for the lack of debate. But was our society’s general lack of tax education another reason?

But there’s hope. I want to tell a story of a tax victory won by artists. The last time a tax bill this big was passed was The Tax Reform Act of 1986. In that law, Congress forced artists, writers and performers to portion out the costs of producing their work and take the expenses on their taxes only when that work was sold. The law was so broad that even small amounts of material were to be accounted for in this way — so a painter was supposed to calculate the amount of paint she used on one canvas, and then only take that expense on her taxes when that painting sold. This left artists with an accounting nightmare as well as a dramatic reduction in their ability to claim expenses. Julia Child, the author and chef, protested the ridiculousness of the provision by saying, “How do I allocate the oregano?” 

But the part I love is that we won. Artists understood the impact of this law, and they organized and protested. And what’s more, when the resulting law change did not go far enough, they stuck with it, protested more and got it changed again. The result is that independent artists, writers and performers no longer have to keep inventory. We are allowed — by the sweat of our protesting peers — to expense all of our supplies in the year we buy them. 

So disengaging and accepting our fate is not a given. Correcting unfair tax laws is possible. But first, we do need to understand the laws.

I personally do a lot of education on taxes. But the problem is nationwide. And I’m just using the tools I have — I don’t think it’s the role of business to fill this gap. This is a failure on a societal level that needs a policy solution.

When we have the education, we make better decisions, and we stop unjust laws from being passed. But when we check out or succumb to the idea that taxes are too complicated, we leave the laws to be crafted by lobbyists for well-funded groups that typically have a lot to gain.

Everyone pays taxes. That is the one civic engagement with the most participation, and taxes are at the root of all other policies. Our advocacy won’t be possible until we understand how we pay, who pays what, and who is getting the worst impact. We need tax education so we can better engage as citizens.

DISCLAIMER: True tax advice is a two-way conversation, and your accountant needs to hear your full situation to apply the rules correctly in your case. This post is meant for general information only. Please don’t act on this alone. 

If you DO want to track your inventory, Artwork Archive is an excellent tool for tracking your art inventory. And yes, this is an affiliate link, because I think it is a good product.

The Nitty Gritty: How To Prepare for Filing Your Taxes

This article originally appeared on Art F City and was updated 1/21/22.

Nobody likes filing taxes. But thinking ahead and getting your documents lined up reduce the stress of the process. Here are some key ways to prepare yourself for tax season, and get you ready to sit down to your own tax prep software or deliver an organized package to your tax preparer.

1. Download a current tax year organizer. There are many available online. Here’s one from TurboTax. This will be your guide and checklist, and will help you see what’s you still needed, and tell you when you’re done. Follow this guide.  Every accountant has a horror story about someone who, in an the attempt to save themselves time, doesn’t read the organizer carefully, and causes no less than six follow up phone calls to chase down the information. Believe me when I tell you that a busy accountant in the heat of tax season will charge you extra for that kind of hand-holding. If you want to save yourself time (and money) on the tax process, have these materials fully prepared before heading to your accountant. 

2. Put your receipts, 1099-MISCs, W-2s and all your other tax documents in a folder. This can be virtual or manilla. But keep in mind that there is a lot of sensitive personal information in your tax documentation – so wherever you are storing your documents online, be sure you’re using a high security password. Never email sensitive information – you can grant access to your accountant through your secure system (Dropbox, Google Drive, etc.), or you can use theirs. (I use Canopy.) As your various tax statements arrive in the mail, drop them or scan them into this folder.

3. Ask yourself if your address has changed this year or last.  If your address has changed this year or last, it has, immediately call your employer, bank, taxing authority or anyone who will be issuing you a tax document – and make sure they have your current address on file. Outdated or incorrect mailing addresses are the chief culprit for missing documents. You should, by law, receive all of your 1099-MISCs and W-2s by January 31. If you don’t, call the sender.

4. Ask yourself if you’ve had a baby this year. (This won’t be difficult to answer.) If you’ve had a baby in the last year, and haven’t yet received their social security card, check in with the Social Security Administration. New legislation means you can no longer amend a prior year return to receive the Earned Income Tax Credit for years that your child didn’t have a social security number.

5. Don’t bother making medical expense calculations, unless you’ve had a lot of costs this year. Save yourself some time on medical expense calculations by knowing you probably can’t take any deduction. Generally, medical expenses can be deducted only by those who itemize deductions, and are older or who had a catastrophic health event. So unless one of those situations apply to you, you don’t need to bother tallying up your medical expenses for the year.

(More specifically, you can’t take any deduction if you take the Standard Deduction, or if your medical expenses were under 7.5% of your adjusted gross income (AGI). For a 35 year old with an adjusted gross income of $50,000, this means you can only deduct your medical expenses over $3,750 (7.5% of $50,000). So if you had $6,000 in medical expenses, you can deduct $2,250 of them ($6,000 – $3,750 = $2,250).

6. Tally up your total income and expenses in each category from your freelancing/arts business. For many of the arts workers reading this, you will be filing a Schedule C for your freelance income or your arts business. Organizing for your Schedule C means you have to finish your bookkeeping for the year. If you use bookkeeping software, run a Profit and Loss report for the year, and include that with your tax documents. But you’re not done there. In all cases, you will need to gather and tally up the total amounts for your income, including your 1099s (and please note which income items you received/are providing 1099s for, and which you are not – you don’t want your tax preparer double-counting your income). List the total amounts for each of these expense categories:

• advertising/marketing

• asset purchases (such as phones, computers, or equipment)

• contract labor

• dues or subscriptions

• insurance premiums (including health)

• legal and accounting fees

• meals/entertainment

• postage

• printing

• professional development

• repairs

• rents

• supplies

• taxes and licenses

• telephone & internet

• travel

• utilities

• website hosting

•  for home office, provide:

  • total square footage of your home and

  • the square footage of your office space

  • Please indicate the date you began using your home office for business

• If you use your vehicle for business purposes:

  •  indicate the date you began using your vehicle in your business, and

  • either: a) the total actual expenses, such as gas, repairs, lease payments, etc.,

  • or b) both total miles and business miles driven this year

Let me take a moment to clarify a common misconception. While you definitely want a clear and detailed breakdown of your expenses for your own books, you do not need to lay out more detail than this in order to do your tax return. Your books are for your records and for the health of your business. If you are audited, you will need to show them to the IRS. But for the purposes of preparing your taxes, you need only the totals in each category. Taxes are the “Cliff’s Notes” of your financial picture – they should accurately capture all of the plot points. But the finer-grained details will remain in your books.

7. Don’t show me, or any other accountant, your receipts. While the law requires you to maintain all your receipts, your accountant will burn you in effigy if you actually bring them in. They stay in your records. Your accountant will likely have you sign paperwork testifying that you have all the receipts to back up your claims. She, or your spreadsheet, in the case of TurboTax, wants to see only the category totals in order to prepare your tax return.

8. Note any estimated tax payments you made throughout the year. List these by quarter. You want to make sure you’ve been properly credited for any tax payments you’ve already made.

9. Consider maxing out your retirement savings plans to reduce that taxable income. The contribution limit to a traditional individual retirement account (IRA) for tax year 2021 remains at $6,000. If you’re over 50, there is an additional catch-up contribution allowed of $1000. You don’t need to contribute to your IRA until April 15, 2022 for it to count in 2021. For the average taxpayer, putting money in a traditional IRA is their greatest point of leverage in tax savings (as well as retirement saving). So give it some thought before you’re in a tax-deadline panic.

Here’s a grossly simplified* illustration: Let’s say your adjusted gross income is all from self-employment income and is $100,000. Your federal tax rate is 25%, your state tax rate is 5%, and your self-employment tax is 15.3%. You will pay

$100,000 x 45.3% = $45,300 in tax.

Now let’s say you max out your traditional IRA with a $6000 contribution. You will pay 45.3% tax on $94,000 (that’s $100,000 – $6,000, because the contribution lowers your taxable income dollar for dollar). So that’s:

$94,000 x 45.3% =$42,582 in tax.

You saved $2,718 in taxes.

So effectively, while you contributed, on paper, $6,000 to your traditional IRA, you only had to use $3,282 of your money to do it. The government has given you $2,718 extra dollars to grow (with compound interest!) in your retirement fund.

10. Disclose all money you had in foreign bank accounts during the year. The law has tightened up on offshore accounts, and failure to disclose yours comes with a severe penalty. If you had any money in a foreign bank account during the tax year, you’ll need to provide the foreign bank account information – location, name of bank, account number, peak value of account during the year. The “nonwillfulness” penalty (“Whoops! I genuinely didn’t realize I was required to report this!”), is up to $10,000, but the “willfulness” penalty (“I was trying to hide the fact that I have an overseas bank account by not reporting it!”) has a ceiling of $100,000 or 50% of the balance in the account at the time of the violation, whichever is greater.

11. Finally, remember that finishing up your annual bookkeeping and gathering your tax materials takes some effort. Accountants get busier with every passing week of the tax season. And gathering your materials may reveal other errands – like chasing down a missing 1099 or opening a new IRA account. So reduce your stress by setting aside some time, and getting things together as early as you’re able. You’ll feel better that you did.

*I’VE ELIMINATED THE STANDARD DEDUCTION, THE PERSONAL EXEMPTION, THE DEDUCTION FOR HALF OF YOUR SELF-EMPLOYMENT INCOME, THE PRESENCE OF DIFFERENT RATES FOR CAPITAL GAINS, ASSUMING THERE’S NO INCOME FROM SOURCES NOT SUBJECT TO SELF-EMPLOYMENT TAX, AND MAKING UP A TOTALLY THEORETICAL 5% STATE TAX RATE, AS WELL AS NIXING THE SUBSTANTIAL COMPLEXITY OF THE GRADUATED INCOME TAX SYSTEM. SO LIKE I SAID – GROSSLY SIMPLIFIED.