🔦 A Complete Tax Guide to Fiscal Sponsorship

Whether you’re a deductions nerd (👋) or an artist with a zest for building something in the world (❤️‍🔥), this guide offers quick, actionable information for navigating the tax implications of fiscal sponsorship with confidence and ease. With a little planning, research, and tidy documentation, tax season can (and should!) be a breeze. Begone, tax headaches!

Before we start, please note that Fractured Atlas does not provide tax, legal or accounting advice, and if you have questions about your taxes, please contact an accountant or tax attorney. This material has been prepared for informational purposes only. But lordy lord, do we have some information for you to dig into:

• 🔆 Fund Releases are Taxable Income
• What FA Does 💜 + What We Don’t ❌
• 👤 Why Your Legal Entity Matters
• ➕ Your Other Tax Responsibilities
• 🎁 the Noncash Donation Head-Scratcher
• ☁️ the Silver Linings of Documentation
• 🪓 When (and How) to Call in the Experts
• 💬 4 Questions to Ask Before S*** Hits the Fan
• ♿ Navigating Fiscal Sponsorship as a Disabled Artist
• 🕷️ Common Fears (And How to Handle Them)
• ⚡️ Your “Take Action, Feel Calm” Checklist
  
  

🔆 Fund Releases are Taxable Income

If Fractured Atlas could get one tattoo, it would be “Fund Releases are Taxable Income.” Probably on our forehead, because it’s the absolute first thing we need you to know before you get a project off the ground with us. However, just because the funds that Fractured Atlas releases to you are taxable, doesn’t necessarily mean you will pay taxes on them! See below about documentation and deductions.

While we’re at it, here are some more tattoos (for the forearms maybe?): 

When donors give to a fiscally sponsored project, it’s tax-deductible (to the extent permitted by law). But the money you raise and release is still taxable income — yes, even though your donors got a tax deduction.

What FA Does 💜 + What We Don’t ❌

👤 Why Your Legal Entity Matters

Common legal entities for artists include a sole proprietorship, an LLC, or an S-Corp. As you can imagine, different entities get different tax treatment — it’s sort of why they were created. If your legal entity changes after you are approved for fiscal sponsorship, that’s fine! However, on our end, we can't change a thing until the IRS recognizes it. So when the government is shut down…so does our ability to change or update your legal entity on file.

➕ Your Other Tax Responsibilities

• 👥 Collaborating? You likely need to issue 1099s to your vendors and contractors.
• 🛍️ Selling merch or tickets? You likely need to pay sales tax.
• ⭐ Hiring? Figure out W-2 vs 1099 for your team.

These are YOUR responsibilities — not Fractured Atlas’s. But we do have some thoughts and resources available on staffing a creative project, selling tickets, and creating a project budget.

🎁 the Noncash Donation Head-Scratcher

Your best friend owns a bakery and donated some pastries for your fundraising event. When our 1099-Misc. arrives, you notice that the value of the baked goods is showing up as income. What gives? Here’s a quick rundown of how noncash donations work, tax-wise:

• 🍪 The monetary value of in-kind donations (like pastries) show up on the 1099-Misc. issued by Fractured Atlas
• 💸 If a donor got a tax benefit, the IRS needs to see value somewhere — here’s a handy table of tax deductibility that breaks it all down!

☁️ the Silver Linings of Documentation

Every flyer you print, every lighting designer you hire, every monthly Canva bill — they’re part of a bigger business picture. Documenting your project’s income and expenses can be tedious work, but it’s an essential part of running a healthy, financially-sound creative operation, and will help when filing any deductions. If you save receipts, label clearly, and organize as you go, taxes have no reason to be scary or stressful.

• Our fund release documentation process = a leg up on organized tax prep 😌
• It’s not hard to do taxes if you keep documentation!

🪓 When (and How) to Call in the Experts

Calling an accountant or lawyer shouldn’t feel like dialing 911 when the fire is already blazing. Ideally, you bring them into the process early to plan ahead, build a sound structure, and step confidently into your new business or project. Here are some providers, and a decision tree for figuring out if it’s time to call in the experts:

• Accounting and Financial Services for Artists — including pro bono options!
• Do-It-Yourself or Hire: When Should Artists Bring in the Pros?

💬 4 Questions to Ask Before S*** Hits the Fan

Here are some questions to ask a professional early on (and an info sheet to share with them before meeting), to prevent headaches down the road:

• 1️⃣ How will fiscal sponsorship affect my taxes?
• 2️⃣ Do I need quarterly estimated payments?
• 3️⃣ What records should I keep?
• 4️⃣ Should I change my legal entity before launching?

♿ Navigating Fund Releases as a Disabled Artist

Individuals receiving benefits or monthly payments from Supplemental Security Income (SSI) or Social Security Administration (SSA) should be aware that funds released through Fractured Atlas’s fiscal sponsorship program are considered income by the IRS. This could impact your benefit eligibility, and we recommend contacting a legal professional to confirm any potential impact ⚡️P.S. We support abolishing income and asset limits for disabled people ⚡️

🕷️Common Fears (And How to Handle Them)

Tax anxiety is normal. Money stress is universal. Looking frankly at your worst case scenarios can be a great way to get out of panic mode and back to doing the next right thing — even if you made a mistake. Here are the fears that come up most often, and what actually helps:

🚨 "I saw my 1099-Misc. amount and panicked" | That number looks big because it's your gross project income—before expenses. Most of that money went right back out for project expenses such as venue rentals, collaborator payments, materials, and marketing. When you file, you report income AND expenses, which will likely dramatically reduce what you owe. This is why documentation matters.

🕳️ "I don't know if I can afford to pay taxes on this" | Set aside a percentage of fund releases for taxes as you go. Already in over your head? The IRS offers payment plans, and quarterly estimated payments prevent the giant April bill. Talk to a tax professional about your options.

🧮 "What if I make a mistake and get audited?" | The IRS isn't targeting artists. They're looking for major red flags, not honest mistakes. Keep receipts, track expenses accurately, report income honestly — you're doing the right things. Most "audits" are just letters asking for clarification.

⚡️Your “Take Action, Feel Calm” Checklist

☑️ save all your receipts
☑️ set aside a percentage for taxes
☑️ ask questions early
☑️ find an accountant!

You're not uniquely clueless, and you're certainly not alone. Millions of artists, movers, and shakers across the country file their taxes every year. What makes the process more manageable? Information, documentation, and asking for help before crisis mode. You don't need to become a tax expert — just keep good records and find the right support. We’re rooting for you!

What’s been your biggest tax breakthrough or epiphany? Let us know in the comments!