[artshow_photo] Re: Newbie question re Federal Income Tax on startup photography bus

I'm a bit late in responding to this, but I am a CPA with a tax practice, and I specialize in artists .

I wrote an article on taxes for artists here:

http://www.greendragonartist.com/CAC/taxes.htm

As for the business/hobby thing, yes, the IRS will give you a more detailed look if you don't make a profit in the first 4-5 years. However, there is one way to 'prove' you are a business and not a hobby - incorporate. As an S Corporation, while it costs a little more in paperwork and fees, you are a business, even if you consistently make a loss. It's the Schedule C businesses that can be reclassed as hobbies. The 3 out of 5 rule isn't really a rule, and it's not published anywhere, it's a guideline. More important is whether you are treating it like a business. They look at things like: Do you have a separate bank account/record keeping system from your personal stuff? Do you advertise? Do you have a local business license, if required? Do you attempt to make sales? (Website, business cards, art shows) Keeping good records and being professional is sometimes more important than making a profit in the eyes of the IRS. Intent goes a long way.

Let me know if you have any questions!

Christy Nicholas, aka
Green Dragon, Artist
www.GreenDragonArtist.com
GreenDragon@bellsouth.net

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