I received an art grant and I used it to purchase a lot art supplies and equipment. I did sell some of my work but only made about $2500 all year, and my grant was $5000. I invested the entire thing plus some so I really didn’t profit and don’t want to pay taxes on all this money. Does it make sense to start a side business before the year ends so I can write off all my expenses? I want to just start a sole proprietorship. And hopefully next year I will actually make a profit.

  • pomnabo@alien.topBEnglish
    1·
    1 year ago

    First, careful read the specifics of the grant award and it’s purpose. I’m not an accountant (you should consult an accountant; financial services), but if you are required to pay any taxes on that grant, you will have to pay em no matter what; likely whomever funded the grant reported that as their own write off. You don’t want to be audited.

    If the grant was specially for equipment costs, then you cannot write that off as a business expense (at least as far as I’m aware). Only your income outside of that grant that was used for equipment could be written off.

    Now, if the grant was not specified on its purpose, then you might need to prove that the grant money “wasn’t” used on supplies; then you might be able to write it off.

    If you’re in the US, and make over $600 in income from something, then it needs to be reported as self employment income(aka sole proprietor). So having already made $2500, you are already in business as far as the IRS is concerned.

    Again, I am not an accountant, and you should contact a local financial planning service to consult with them on it. Operating a business that includes grant money for its reported income can be tricky. If it’s incorrectly reported, you could end up being required to pay it back in full, or even with a fine attached. Consult a professional. It will be worth the money to do so.