Are you considering giving music or art lessons from your home? Or maybe you’ve already started. Have you taken into consideration what this will mean when it comes time to do your taxes next tax season?
As an independent contractor, there are some things you should know about when you go file your taxes - things you’ll need to protect yourself should you get audited and things you’ll need to know about business expenses and so on. After all, you essentially become a business owner when you become an independent music or art teacher.
If you receive money for a service, then it’s considered income and does have to be reported on your taxes. So here are tips to keep you organized as an independent music and art teacher when it comes to taxes.
Any payment you receive for your services must be tracked. Income exceeding $600 a year from these sources must be reported on your typical Form 1040. You will likely have to fill out a Schedule C to report your expenses as well.
It’s very important to be organized when it comes to tracking your earnings as well as your expenses. You have to report all income, but reporting expenses will help because that’s going to be what your taxable income is going to be.
Expenses and Deductions
Speaking of expenses and that all-important Schedule C document... you can likely deduct things that you wouldn’t expect you could when you run your own business, especially if you run it out of your home. If you have a specific area of your home that you are using for the express purpose of giving lessons, then you can deduct a portion of your rent or mortgage payment from your taxes. You can deduct $5 a square foot of dedicated space, up to $1500.
Include any other expenses you have for things like supplies that you need for your business. If you’re a music teacher and have to purchase lesson books or you have to purchase extra repair supplies for students’ musical instruments, you can deduct that as an expense. As an art teacher, any supplies or materials (i.e. paint brushes, clay, canvases, etc.) are deductible expenses if they are used for your business.
Advertising expenses can be deducted as well. So if you had to have flyers or business cards created, this is a business expense. If you travel to people to provide the music or art lesson, then you can deduct the gas it takes for you to travel from place to place - and even possibly a portion of your vehicle repairs and expenses (such as leasing or car payment) by taking a ratio of business to personal use.
You are now required to purchase health insurance, as even independent contractors must have insurance. If you do not have an employer who provides your insurance and you don’t qualify for an exemption, then you may be able to deduct your health care premium from your taxes - provided you purchase the insurance through your business. Other things like retirement accounts may also be deductible.
Estimated Tax Payments
In order to avoid large tax bills come April 15th, you might need to consider filing quarterly returns or paying an estimated tax payment every three months if you expect to have to owe more than $1000 in taxes.
There are lots of programs out there to help with this, but you also might want to consider finding yourself a tax professional who can help you make sure everything is on the up and up when it comes to your taxes.