Saved before the tax bell tolls
How to take advantage of the IRS's last-minute changes
By Mark Battersby
As a professional artist or craftsperson, especially one who travels the show circuit, you may want to miss the deadline for filing your annual income tax returns — if you have not already filed. The reason? The passage, late in December, of the Tax Relief and Health Care Act of 2006 extended, simplified and even created tax deductions and write-offs that are not on the tax returns. You still must pay by April 17, but filing for an extension and taking that extra time to review the changes may end up saving you money.
All told, the extension of expiring and expired tax breaks, along with several new tax provisions, are expected to save taxpayers a whopping $38 billion over the next five years. Few would say that there is anything earth shattering in the new legislation, but there are many areas that artists, crafters and their businesses may have overlooked, ignored or not understood in the past. Plus, the fact that the new tax law was passed so late in the year has both the Internal Revenue Service and tax professionals in tizzy.
Every artist and crafter, regardless of whether their annual tax returns have already been filed, whether they took advantage of the automatic extension of time to file those tax returns or whether they — or their tax advisers — are in the process of preparing those income tax returns, should review these tax breaks. Among those most likely to be of interest to art and crafts professionals, as well as the owners and operators of art and crafts shows and businesses, are tax breaks on health savings accounts and on improvements to leased properties.
Health savings accounts
In recent years, many business owners have discovered the cost-effectiveness of so-called health savings accounts or HSAs. Similar to an Individual Retirement Account (IRA) but earmarked for health-related expenses, the HSA has caught on among artists and crafts professionals, especially those who travel the show circuit, as an excellent, tax-favored fringe benefit for themselves as well as their employees.
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