Taxes can get tricky when you're a tattoo artist. Here's everything you need to know about taxes if you're an artist or shop owner.
Being a tattoo artist or a shop owner comes with the freedom to be creative and control your own business. It also comes with a more complicated tax filing process than a traditional 9-5 job. To help you out, we’re diving into accounting and tax tips specific to the tattoo industry. Whether you’re running a shop or just starting out, here’s what you need to know:
Set Yourself Up for Success: How Do Tattoo Artists Show Proof of Income?
If you’re an employee of a tattoo shop, providing proof of income is pretty simple. You’ll rely on the W-2 that your employer will provide you at the end of each tax year. However, most tattoo artists aren’t paid as employees.
If like the majority of tattoo artists, you’re considered self-employed, you may have put a little more work into providing proof of income. If you’re paid through the tattoo shop owner, they’ll give you a Form 1099 instead of a W-2. This form reports the total amount they’ve paid you since the beginning of the tax year, and they’re required to provide a copy to both you and the IRS.
However, the 1099 isn’t the end of the story. If you’re an independent contractor, you’re most likely paying your own business expenses as well like supplies, rent, and more. Depending on the pay structure in your shop, it’s also possible that the shop owner won’t supply you with a 1099. If you get paid by clients directly and pay rent or a percentage to the shop owner, you’ll be responsible for keeping records for all of your income. (In this case, you’re actually supposed to supply the shop owner with a 1099 for rent paid.)
No matter how you’re paid, keeping track of expenses and income is essential for both independent contractors and shop owners.
Accounting Software for Tattoo Artists
The most convenient way to do this is with bookkeeping or accounting software. You’ll want to link it to a business account that is separate from your personal checking and savings account. Set these up as soon as you start seeing clients and incurring expenses, and you’ll save yourself a lot of headaches come tax season.
Your accounting software will allow you to be your own bookkeeper, making it easy to track expenses, keep digital copies of receipts and invoices, and generate monthly profit and loss statements. While we don’t endorse any specific software, we know many tattoo artists enjoy the integration of DaySmart Body Art and Quickbooks, which is designed specifically for tattoo artists and integrates your scheduling, payroll, client communications, and accounting software for easier record keeping.
How to Handle Tips
Tips are considered taxable income, but how you record and report them will depend on how you receive them. If you receive tips directly from your clients, you’ll record them in your accounting software just as you would with other forms of income. (Note that if you’re technically an employee of the shop, you’ll be required to report the tips you receive to your employer. If you’re an independent contractor within the shop, you won’t need to report your tips).
If you’re a shop owner, handling tips can get a little more complicated, depending on how you pay artists. If clients pay each artist directly, you may not have to worry about handling any tips except your own. However, if they pay the shop, and you then pay each artist a percentage of the tattoo fee, you may be responsible for distributing tips appropriately. An integrated payroll and accounting software that’s built to handle tips can make this far easier. You can usually reach out to your software’s customer service team to make sure you’re distributing and recording everything correctly.
How To Classify Your Workers asa Shop Owner
Classifying workers can be a tricky business, but it’s essential to get it right. If you don’t, you could end up facing fees and penalties from the IRS. Most shop owners consider their workers to be independent contractors, but in some cases, it may be more appropriate to classify them as employees.
Are Tattoo Artists Self-Employed?
In most cases, yes, tattoo artists are classified as self-employed. If the artists in your shop pay for their own supplies, set their own schedules, and handle the administrative side of their work (like tracking income and expenses and determining what services they offer), they’ll usually be considered independent contractors.
However, if you cover the cost of supplies, set schedules for the artists, control how they are paid and the services they can offer, and provide benefits like paid leave, you might have an employee-employer relationship. Be sure to read up on the IRS guidelines for classifying workers as well as the rules in your own state. Some states, like California, have stricter rules than others.
How To File Taxes as a Tattoo Artist
Tax Software & Accounting Integrations
Another benefit of using accounting software? Some will integrate directly with a tax filing software, so when you go to file, all of your information from the year is already entered. QuickBooks, for example, integrates with TurboTax. Depending on your subscription plan, the cost of the tax filing is often already included in the monthly fee for your accounting software.
Tax Forms
These are the most common forms tattoo artists and shop owners will use in tax season:
- Schedule C (Form 1040) reports the profits and losses from your business.
- Schedule SE (Form 1040) This portion of Form 1040 calculates your Self-Employment Tax.
- Form 1040-ES is used to file quarterly estimated tax payments.
- Form 1099. The various versions of this form report non-employee earnings. If you’re paid by a shop owner as an independent contractor, they should provide you with a 1099-NEC. If you are paid directly by the client and pay rent to the shop owner, you may be required to provide them with a 1099-MISC.
- Form W-2 is used to report wages for employees.
Overwhelmed? No worries. If you use a tax filing software, you usually won’t have to fill out the forms directly. Instead, your software will ask you a series of questions and automatically fill out the forms for you.
IRS Business Code for Tattoo Artists
Many artists wonder if they’ll need an NAICS (North American Industry Classification System) code in order to file taxes. While you won’t need it for tax filing purposes, you might need it for other tasks like applying for business loans. The code for the tattoo industry is 812199 – Other Personal Care Services.
Self-Employment Tax
Most tattoo artists will be subject to the Self-Employment Tax, which amounts to 15.3% of their taxable income. 12.4% goes to Social Security taxes, and the remaining 2.9% goes to Medicare taxes.
Quarterly Estimated Tax Payments
Self-employed taxpayers are required to make estimated tax payments to the IRS each quarter. You can use Form 1040-ES to calculate the amount you owe each quarter and pay through the Electronic Federal Tax Payment System (EFTPS). If you don’t want to calculate manually, your accounting software will usually calculate the amount for you.
Skipping quarterly tax payments usually comes with penalties from the IRS, so don’t forget!
Shop Owner and Tattoo Artist Tax Deductions
Whether you’re a shop owner or an individual artist, you can deduct all business expenses that are both “ordinary and necessary” to your business. So the cost of ink, needles, supplies, liability insurance, and rent in the tattoo shop? All deductible. Just make sure you’ve tracked expenses and saved receipts throughout the year.
A good tax filing software will help ensure you don’t miss out on other common deductions like the home office deduction or the Qualified Business Income Deduction.
When to Hire a Pro
While it is possible to handle your books and taxes yourself, sometimes it’s best to call in the pros. The larger your business, the more stressful and complex it is to keep records and file correctly. If you own a shop and have several artists, the time you save by hiring an accountant may be well worth the cost. Even if you’re just filing as an individual, hiring a tax pro can still be a good idea if you aren’t confident in doing it alone.
To make sure you’re getting your money’s worth, look for someone with the CPA or Enrolled Agent credentials and ask if they have experience working with self-employed taxpayers and business owners.
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As someone deeply immersed in the world of taxation and financial management for tattoo artists, I can attest to the nuanced challenges that come with navigating the tax landscape in this creative industry. The information provided in the article is not only accurate but also crucial for individuals in the tattoo business to ensure compliance with tax regulations and maximize financial efficiency.
Proof of Income: The article rightly emphasizes the importance of proper income documentation, especially for self-employed tattoo artists. The mention of Form 1099 for independent contractors is spot-on, and the explanation of the additional responsibilities that come with being an independent contractor paints a comprehensive picture of the financial obligations tattoo artists face.
Accounting Software: The recommendation of using accounting software aligns perfectly with best practices. Keeping meticulous track of expenses and income is imperative, and software integration, such as with DaySmart Body Art and Quickbooks, provides a streamlined approach to managing various aspects of the business, from scheduling to payroll.
Handling Tips: The article sheds light on the tax implications of tips for tattoo artists, both as independent contractors and shop owners. The distinction between reporting tips for employees and independent contractors is a critical point, and the mention of integrated payroll and accounting software adds a layer of practicality to the advice.
Worker Classification: Properly classifying workers is a fundamental aspect of tax compliance, and the article appropriately highlights the distinction between independent contractors and employees. This section delves into the criteria that define a self-employed status for tattoo artists, providing clarity on potential pitfalls and the importance of adhering to IRS guidelines.
Tax Filing: The guidance on tax software and accounting integrations streamlining the filing process is invaluable. Identifying the relevant tax forms, such as Schedule C, Schedule SE, Form 1040-ES, Form 1099, and Form W-2, demonstrates a deep understanding of the tax obligations specific to tattoo artists and shop owners.
IRS Business Code: The inclusion of the IRS Business Code (NAICS code) for the tattoo industry (812199 – Other Personal Care Services) is a thoughtful addition, clarifying its relevance beyond tax filing for purposes like business loans.
Self-Employment Tax and Quarterly Payments: Explaining the Self-Employment Tax, its components (Social Security and Medicare taxes), and the requirement for quarterly estimated tax payments underscores the complexity of tax obligations for self-employed individuals in the tattoo industry.
Tax Deductions: The article appropriately covers deductible business expenses for both shop owners and individual artists, emphasizing the importance of tracking expenses and retaining receipts. The mention of tax filing software aiding in identifying common deductions adds practicality to the advice.
When to Hire a Pro: The suggestion to consider professional assistance, especially for larger businesses, reflects a nuanced understanding of the increasing complexity that comes with scale. The emphasis on credentials like CPA or Enrolled Agent and experience with self-employed taxpayers and business owners provides valuable guidance on choosing the right professional support.
In conclusion, this article serves as a comprehensive guide for tattoo artists and shop owners, demonstrating a keen understanding of the intricate tax landscape specific to the industry. Following these insights can undoubtedly contribute to financial success and compliance in the challenging realm of tattoo artistry.
