Money Management for Creative Professionals

Nerissa Street of Ten Thousand Women Ten Thousand Stages Podcast interviews art-centric tax expert Hannah Cole about her influences as an artist and as a tax expert for creative freelancers. This interview is available as both a podcast and a video, so you can choose the medium that you prefer.

Hannah Cole and Nerissa Street of Ten Thousand Women Ten Thousand Stages podcast

What do creative people need to know about the differences in tax laws between gig workers and employees? How much should you be saving in self-employment tax? How has the landscape changed in the current economy?

Hannah had two messages growing up: "Do what makes you happy!" and "Art won't make any money." How did that and her other experiences as an artist help her translate design needs into practical commercial benefit? They also talk about the stimulus bills and payments, deductions, and what you can look forward to in July if you have children.

Who benefits from the latest tax legislation? What has changed with business meal deductions this year?

You can either listen to the hour-long podcast here, or view it below via YouTube:

What’s in the $1.9 Trillion stimulus plan?

Photo by BarBus via Pixabay

The American Rescue Plan, Biden’s $1.9 Stimulus Bill, will be an enormous boost to the US economy. Here’s a brief rundown of the items most likely to affect freelancers.

Stimulus payments:

New $1400 stimulus payments will go out per person on the return. This means that children and other dependents will get the full $1400 each, in addition to the taxpayers. Households with income under $150,000 (married filing jointly) and individuals with income under $75,000 will receive the full benefit. Households with income between 160,000 and 150,000 will get a reduced payment, as will individuals with income between $75,000 and $80,000. 

Unemployment:

Unemployment benefits have been expanded by an extra $300/week, and extended to September 6. In addition, unemployment benefits from 2020 will not be taxable up to $10,200 per person ($20,400 in a married filing joint couple). This benefit is retroactive, meaning that it will take effect on your 2020 tax return. If you have already filed your 2020 return, the IRS will do the calculation for you and send you a refund of the taxes you paid on your 2020 unemployment. Do NOT file an amended return. 

Money for families with children:

The American Rescue Plan will help families enormously. For 2021, the Child Tax Credit will be expanded from $2000 per child to $3600 per child under 6, and $3000 per child age 6-17. Notably, taxpayers will not need to wait until tax time to claim the credit. Payments will be sent directly to families in monthly installments starting in July 2021. These payments will go to married-filing-joint families earning under $150,000, heads of household earning under $112,500, and married-filing-separate families earning under $75,000. You may calculate your credit using a choice of either your 2019 or your 2020 income - whichever gets you the bigger credit.

The dependent care credit is enhanced for 2021. It will increase to $8,000 for 1 child or $16,000 for 2 or more children. The credit is for 50% of the costs of childcare, which include (as always) babysitters and summer camps so that the parent(s) can work. This means that the maximum credit will be $4000 for one child or $8000 for 2 or more (that is 50% x the cost of care up to $8000 for one child or $16,000 for two). The credit phases out starting at household income of $125,000 (married filing joint), to a reduced benefit of 20% of costs, but a reduced credit amount is still available for families with income up to $400,000.

The Supplemental Nutrition Assistance Program (SNAP) benefit will be increased 15% through September. And K-12 schools will receive over $120 billion in additional funding.

Earned income tax credit (EITC) expansion:

The Earned income tax credit is expanded. It will now include several groups who were not previously eligible:

• Age 19 if not a student

• Age 24 if a student

• Age 18 if an eligible foster child

• The age 65 upper limit for the EITC is repealed

Whereas the EITC in its original form was targeted primarily at working families with children, the EITC formula is now enhanced for single people with no children.  As with the child tax credit, you may calculate your credit based on 2019 or 2020 income; whichever provides you the bigger credit.

Teacher deduction:

The $250 deduction that K-12 teachers currently receive for classroom supplies paid for out of pocket has been expanded to include the purchase of PPE/sanitizer. The deduction amount remains $250.

Student Loans: 

The bill does not provide forgiveness for student loans, as many had hoped. However, any student loans forgiven between 2021-2025 will be tax free. This is a benefit, because forgiveness of debt would normally be considered taxable income.

Healthcare:

For those who have lost a job or had hours cut, the government will cover the full cost of COBRA health coverage through the former employer from April 1 through September 30th.

If you bought health insurance through a government exchange, the cost has been lowered to no more than 8.5% of your total income. This will be automatically applied--so there is no need to take additional action. 

For those who would consider buying marketplace health insurance if the prices were more affordable, the open enrollment date has been extended through May 15. You may also use the open enrollment period to switch from your current plan to a lower-priced plan.

Premium tax credits--the advanced payments made to taxpayers that subsidize the cost of their marketplace health insurance--are affected by the law, too. Normally, taxpayers are only eligible for premium tax credits if they have income between 100% and 400% of the Federal poverty level. For 2021, that cap is removed, making more people eligible for premium tax credits. Additionally, under normal circumstances, a taxpayer whose income rises above 400% of the poverty level has to pay back some or all of their advanced credits. For 2020 taxes, this payback will be forgiven altogether. And lastly, if unemployment income raised your income level above the threshold to qualify for premium tax credit health care subsidies, it will not be counted as income in consideration of the premium tax credit. 

Grants for Restaurants:

There is a new $30 Billion grant program called the Restaurant Revitalization Grant program. This will give money to struggling restaurant and food service businesses, with $5 Billion earmarked for businesses with gross receipts under $500,000. To check your eligibility and application requirements, see the Small Business Administration website for details and the latest updates.

All in all, the Biden stimulus bill, the American Rescue Plan, will put money in the pockets of the people in the US who need it most. It takes a big step toward a guaranteed income for families with children, lowers healthcare costs, and knits up some of the holes in our social safety net.

ArtWitch Podcast: Permission to Thrive + Money Mindsets

In this episode artist and tax expert Hannah Cole joins ArtWitch host Zaneta to talk all about money.

Art Witch Podcast with Zaneta

Tax expert and artist Hannah Cole discusses all things money with Art Witch Podcast host Zaneta of Brooklyn, New York. They also talk about mindfulness in this nearly hour-long podcast interview. How did Hannah go from being an artist to also being a tax expert and running a membership program?

Hannah speaks about empowerment for creative people (especially for BIPOC people and women) and they talk about smashing the patriarchy. They discuss issues people have with earning and having money and how to change your attitude. What can you accomplish when you are not trying to run from money issues and fear of the IRS? Taking control of your money and finances will give you the time and space you need to thrive in your creative career. We can shift what we think we're allowed to access, and we can find permission to thrive in our art practices.

What action steps can we take to get control of our money and our taxes? Hear about how to take advantage of the new tax credits from the recent American Rescue Plan stimulus bill that freelancers need to know about. “Involuntary” home schooler parents need to take advantage of the family leave credits. What can you do as a freelancer to prepare for tax season? What is the brand new retroactive change to unemployment tax laws from the stimulus? What advice does Hannah have for people who haven’t filed their taxes yet?

Listen to the interview below! Check out all of Art Witch’s podcast episodes here. Sign up for the free March 30 Masterclass that Hannah mentions in the broadcast here.

Unemployment Tax Savings from the 2021 Stimulus Bill

If you or your spouse collected unemployment in 2020, you need to watch this video!

Photo by Nataliya Vaitkevich from Pexels

President Biden recently signed the American Rescue Plan into law, and it has some very exciting provisions for people who collected unemployment during 2020. Hannah Cole of Sunlight Tax created the following short video to give you the latest information about how the new law will apply to unemployment income.

Hannah goes through specific information about the unemployment taxes affected by this retroactive legislation. Hannah covers what you need to know about filing, whether you have already filed your 2020 taxes or whether you have not filed yet. She goes through a few scenarios to show how much you can save depending on your current tax rate and whether more than one person in your household was collecting unemployment last year.

Here’s what Hannah has to say:

What the tax savings is on $10,200 of unemployment income (thanks Democrats!), and a shoutout to those of you who called, texted & knocked to get out the vote--you had a hand in this tax bill that will lift 50% of American children out of poverty and take a meaningful step towards guaranteed income for families with children. You made a difference. Americans (of all parties) will benefit from your work! Thank you!!!❤️🇺🇸

Watch the blog for a longer post about the entire stimulus bill coming soon!

What Do Arts Organizations Need to Know About the Federal Shuttered Venue Operators Grant?

Congress earmarked $15 billion in grants for performing arts venue operators impacted by the pandemic and here’s what you need to know.

On December 27, 2020, a congressional stimulus bill that was passed and signed into law by then President Trump had several provisions to help US residents through the COVID-19 crisis. Among these are additional stimulus payments, enhanced and extended Federal unemployment benefits, additional Paycheck Protection Program (PPP) money, simplified PPP forgiveness rules, an extension of the temporary charitable contribution deduction for taxpayers who take the standard deduction, and a doubling of the business meals deduction from 50% deductible to 100% deductible for the years 2021 and 2022 so long as the meal is purchased from a restaurant. (Takeout meals are okay.) These provisions should provide some help to all of us as we continue to weather the economic crisis.

But one item in the bill will specifically help people in the arts. Congress earmarked $15 billion in grants for arts venue operators whose income decreased due to the pandemic crisis. The money is meant to help these organizations weather the rest of the crisis, with priority given to the hardest-hit venues, and $2 Billion set aside for smaller, so called, “main street” venues. The funding is targeted primarily towards live venue operators, movie theaters, talent representatives, and live performing arts organizations. Museums (including zoos and aquariums) are eligible with some additional restrictions.

So, what do these grants look like? The Shuttered Venue Operators (SVO) Grant money, which will be administered by the Small Business Administration (SBA), provides grants of up to 45% of the organizations’ gross earned revenue (or $10 million, whichever is less). …read more…

This article first appeared on Hyperallergic on February 23, 2021.