Tattoo studios have an interesting business model, as it's rare for artists to be direct employees of the shop. Tattoo artists are independent contractors who, for all intents and purposes, run their own small business under the auspices of the studio. Independent contracting means handling taxes as a self-employed individual.
Your earnings will be taxed by the Internal Revenue Service through Form 1099. Depending on the arrangement with the studio, the owner may submit a 1099 of annual earnings on the artist's behalf, or the artist may be required to submit his or her own. The amount submitted on the 1099 is the gross earnings for the year, and the amount required to be withheld. The form the artist will submit at filing time is Form 1040, Schedule SE.
Artists who make more than $400 in a calendar year are subject to self-employment tax. The self-employment tax rate is 12.4 percent for Social Security and 2.9 percent for Medicare, tax relief legislation for that year notwithstanding. The tax applies to 92.35 percent of net income, which is defined as total income minus necessary business expenses.
Quarterly Estimated Tax Payments
Employers who report employee income to the IRS on a W-2 must deduct tax withholdings from each paycheck--not so with businesses that host independent contractors, like tattoo studios. Persons paying self-employment tax are obliged to pay their estimated taxes quarterly. Quarterly tax deadlines are April 1, July 1, Oct. 1 and Jan. 1.
Multiple scenarios can play out in terms of the tax deductions available to a tattoo artist, each one tied to the nature of the artist's business relationship with a studio. If a studio owner rents booths to his artists, the cost of the rental can be deducted as a business expense, as can the cost of supplies like ink and needles. If a studio owner does not rent out the booth space and instead takes a cut of artist revenues, the owner may or may not provide supplies; if they're provided, the artist does not have their cost available as a business expense. The artist may have other business expenses available to deduct, such as a home office if the artist has a drawing table used exclusively for designs. Home office deductions are calculated as a percentage of the square footage in the house, the percentage being applied to monthly rent or mortgage payments to determine the dollar amount of the deduction.