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Category: IRS

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The tax collector

“Focus,” 2009, flashe on gessoboard by Susan Crile.

“Focus,” 2009, flashe on gessoboard by Susan Crile.
Susan Crile ought to be the patron saint of artists. Despite being in the collections of the Metropolitan, the Guggenheim, and other museums, the IRS decreed that her work was “an activity not engaged in for profit.” She owed $81,000 in back taxes for five years’ returns. Ultimately, Crile lawyered up and prevailed. In 2014, the tax court ruled that Crile 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.”
Through her art, Crile has been an outspoken critic of our war conduct, raising awareness of the human and environmental damage being done in the name of the American people. A cynic could be excused for wondering if her politics had anything to do with her tax question.
Years ago I had the hobby-vs-career conversation with an IRS auditor. She couldn’t have been nicer, but she made it clear that I needed to earn more or stop taking the self-employment deduction. For non-artist readers, that might be an oh-duh point. Why work if not to make as much money as you can?
“Daylight Darkness,” 1991, charcoal and pastel on paper, by Susan Crile.

“Daylight Darkness,” 1991, charcoal and pastel on paper, by Susan Crile.
Such a threat shapes your work by reducing your tolerance for risk. It was at that point that teaching became so important for me, because teaching gives you a reliable taxable income. So does painting “safe” work, which Ms. Crile was decidedly not doing. The Crile decision gave us back the room to take risks, which is a very big part of artmaking.
It’s not just artists who make the choice to operate at a loss for a while. This happens with any project that bleeds money at the research and design phase. Investors know the potential rewards outweigh the high risks.
For me, letters from the IRS are an almost-annual rite. Being self-employed makes me a high audit risk. It’s part of the cost of doing business.
“Guantanamo: The Black Box Detainee with Stinging Insects,” 2010, black gesso, acrylic and white chalk on paper, by Susan Crile.

“Guantanamo: The Black Box Detainee with Stinging Insects,” 2010, black gesso, acrylic and white chalk on paper, by Susan Crile.
This year was unique because, as of the end of October, I had two IRS inquiries outstanding. The first was trivial: they didn’t have a record of a payment. I sent them a copy of the check, expecting it to go away. So yesterday, when I received a demand for the money—with interest—I started to boil. “They’re really on your case,” my accountant friend observed mildly.
Well, actually, they aren’t. It was an ordinary cock-up where their computer is outrunning their staff. Their representative couldn’t have been more diligent in researching the problem. However, it consumed hours of my time and gave me the sour stomach and headache one gets from interfacing with an intergalactic power. And of course it ain’t over until I get the final notice in the mail.
I personally don’t think our Federal taxes are too high, but I do think they’re way too complicated. They either eat up time that the taxpayer could be using elsewhere, or eat up the money he uses to pay lawyers and accountants. I think they also encourage people to overpay. I’ve heard many times from friends that they don’t take every deduction to which they’re entitled because they’d rather not be in the IRS’ sights.
Why do we tolerate this system, I ask as my paints dry up on my palette.
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Hobby losses

The Au Sable River at Jay, 12X9, oil on canvasboard. Painted on the side of the road in Jay, New York.
I once had the following discussion with an IRS auditor:
She: “Your mileage log doesn’t identify destinations. You need to show destinations.”
Me: “I’m a plein airpainter. There are no ‘destinations’. I drive until I find what I want to paint, and then I paint it. The best I could come up with is something like ‘cows at the side of the road’.”
She (unmoved): “For the purposes of a mileage log, you need to show destinations.”
Teaching on the side of a road somewhere near Lincolnville, ME.
At the end of the interview, she suggested to me that I’d better start showing a profit or the IRS would consider my work a hobby. She was (contrary to popular opinion) very nice. But I am keenly aware that my tax returns are a red flag: we have high W2 income and Schedule C losses.
That’s actually typical for artists. Even the most successful of us usually do something else, like teaching or graphic design, to cobble a living together. But if you ask us our profession, we are artists. The big money on our work will be made after we’re dead. Denying us the tax advantages other businesses get is adding insult to injury.
Sunset over Saranac Lake, by little ol’ me. Painted on the side of a road somewhere in the Adirondacks.
In 2010, the IRS accused Professor Susan Crile of underpaying her taxes by more than $81,000, saying that her work was not a profession but something she did as part of her job teaching Studio Art at Hunter College. (See Forbes’ coverage hereand here, and the NY Times’ coverage here.)
The IRS’ determination was based on her lack of a written business plan (!) and the idea that she made art not primarily to sell but to keep her job as a teacher. Never mind that her work hangs in the Metropolitan Museum, the Guggenheim, the Brooklyn Museum, the Phillips Collection, the Hirshhorn, and at eight colleges and universities. 
Painting at the side of the road near Lake Placid, NY.
Mercifully, the judge saw it differently:
She has worked for more than 40 years in media that include oil, acrylic, charcoal, pastels, printmaking, lithograph, woodcut, and silkscreen. She has exhibited and sold her art through leading galleries; she has received numerous professional accolades, residencies, and fellowships; and she is a full-time tenured professor of studio art at Hunter College in New York City. (Judge Albert Lauber)
“Bottom line is that, in general, lawyers have much better educations than accountants,” wrote Peter J Reilly. He went on to note that Judge Lauber holds an MA in Classics from Clare College, Cambridge.
Painted at the side of a road in Camden, ME. (Available from Camden Falls Gallery)
While Professor Crile has prevailed on the Section 183 (hobby loss) question, she still has to answer the question of how much of the quarter million or so in losses she claimed over the last five years will be deemed legitimate. That’s a reminder to us to be honest, even conservative, in our bookkeeping.

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