Tax court judge rules in favor of artist accused of underpaying IRS

On Behalf of | Oct 7, 2014 | Back Taxes or Tax Debt

Many Americans dream of being an artist – a painter, an actor, a musician, a poet or any other medium that allows for creative expression. The problem with this career path, however, is that few artists are successful enough to make a profit, much less a living.

Therefore, many artists pursue their creative work either as a hobby or as a supplement to other paid work like teaching. But when its time to pay taxes, The Internal Revenue Service might have a bone to pick when it comes to calling yourself a professional artist.

This was the problem faced by one woman who has been both a professional artist and a college art professor for decades. Although her art has been critically successful, there were only three years in which she netted a profit. Teaching was the source of her steady income.

According to the New York Times, the woman’s art brought in an average of $16,000 per year. However, the tax deductions she claimed for art-related expenses often exceeded that income. In 2010, the IRS alleged that she had been underpaying her taxes and owed at least $81,000. Moreover, the IRS alleged, she had erroneously listed herself as both a teacher and an artist. The agency felt that her status as an artist was not professional, which meant that she could not claim tax deductions “in excess of her income.”

Recently, a tax court judge ruled in favor of the woman, saying that she should be considered a professional artist. This is because she had “met her burden of proving that in carrying on her activity as an artist, she had an actual and honest objective of making a profit.”

This ruling could be an important one for all Americans trying to pursue a similar double career doing creative work in addition to a more “sensible” job to supplement income.

Source: The New York Times, “Tax Court Ruling Is Seen as a Victory for Artists,” Randy Kennedy, Oct. 6, 2014