Musicians and Taxes

[willyz]

We're getting into that time of year...

I've kept almost every one of my receipts from any gig-related purchase over the past year (gear, gas, food, clothes, etc) and have a calender with all the dates I played this year. I'm wondering if I could use all this stuff to file in when doing taxes...

The only conflict I see is that you don't exactly fill out a W9 for say, a bar gig, you know? How I can I prove (should I even try?) that my gigging is practically a second job?

Thoughts?

[YamahaPlayer]

Taxes, what taxes? Ha!

Like you said, most gigs fall under the radar. Bigger ones don't, so anything where it's being filed they usually send me a w9 or 1099. In those cases, you'll have to do some math and maybe sit down with an accountant.
I would say if you are clocking more then $25,000 on the books, file taxes and of course, try to write off what you can (drumheads, travel, etc) odd's are you have more that you can write off then you'd be able to use.
If what you make on the books is less then 20-25K, then it's kinda up to you if you want to file or not. You may get money back, particularly the closer you get to the poverty line (I think 19k/year?) or you may still owe.
Again it's a bit of looking to find out what bracket you fall under, also how your state handles self-employed income. In most cases because we are self-employed we aren't paying taxes when we get paid, we're supposed to pay them at some point (quarterly, 6 months, yearly).

IMO it's useful to find an accountant who either specializes in the music business or self employment. They will be able to answer all your questions a lot more effectively and point you in the best direction. I found a nice CPA who specializes in self employment and it is well worth it.

You mention "2nd job" so if you have a first job and pay taxes on that, I wouldn't so much worry about your income as a musician unless you are getting taxes forms from studios, artist, etc

[deseipel]

call a tax accountant.


I'm actually interested to know if anyone has ever incorporated themselves in a sole-proprietorship and what the benefits of that are vs. just doing it the self-employed way.

[DSOP]

If you add up all your valid expenses, chances are your income from music is much less, so you can use that "loss" against your income from regular non-music employment and reduce those taxes. BUT, you can only claim a loss from a business for 2 or 3 years. Any more and you'll get audited.

Incorporating allows you to get taxed at a lower rate (usually), but there are lots of start-up and regular annual costs that will add up. I would say it only makes sense if you make well over $100,000 annually and you live in a state that is corporation friendly.

[smoggrocks]

well, if you are listing your occupation as musician, and you are indeed getting paid for your gigs, all of those things, as well as some meals and entertainment, are deductible up to a cap [an accountant can advise on said cap]. and as was stated, you can state a loss on income for 3 years, after which point your musical involvements are considered a hobby. so for the immediate, you can go ahead and deduct. worst-case scenario, you will have just enough deductions to break even, which is still better than owing.

technically, if you have another main job, you can still pool all your earnings [main job + music gigs] under one umbrella income. so long as you have proof of income for the music stuff, such as the w's or 1099s, you can declare that income and thus deduct those related expenses. you can also self-report cash income if that's how you get paid, but i say if there's no paper trail...

as for estimated taxes: i paid them twice in my life as a freelancer. one doesn't HAVE to do it, it's just a good habit to get into if you're not good at setting aside the dough. i used to just set it aside and pay come tax time.

i actually am able to deduct my lessons, studio rent and gear purchases, and i'm not even a paid musician. because i work in advertising, there's a lovely little 'media' clause deduction, which allows me to deduct anything media-related as unreimbursed business-related expenses. thus all my books, dvds, cds, cable tv, concert tickets as well as the above stated expenses, get deducted, up to a cap. it really comes in handy.

as for the corporate thing--that's really only necessary if you hold a true liability risk. as an example, my x was a music instructor/performer, and often gave lessons in peoples' homes. to protect against lawsuits for theft and creepy stuff like child molesting, he incorporated. it's good to have, but you really do pay quite a bit in fees and what-not throughout the year, and oftentimes are taxed more, not less, than being a hired gun/self employed cat. so while income factors in, i'd say it's more about risk being the main determinant of needing corporate protection or not. it doesn't seem to be the case for you. but if you do choose to do it, you can incorporate in another state other than where you live. my understanding is that maryland and nevada are the 2 most corporate-friendly states.

i haven't done the freelance thing in a few years, and some tax laws can differ state-to-state. so please don't take my pov as gospel. i'm just giving general guidelines i ran into as a hired gun, and letting you know that there are sometimes loopholes that allow you to write off some things depending on your line of work. **talk to your accountant. s/he can best advise if tax law x is right for you...**


this reminds me...i need to do my taxes.

[YamahaPlayer]

reminded me too... stupid taxes..

Willyz, all said and done. Don't bother....

...not really, talk to a CPA.

[Riddim]

Do you use Quicken?

f so, buy Turbotax home and business. You can deduct equipment, supplies, mileage, sideman wages, and several other items.

The thing is that you want to show a profit in 3 of 5 years. Otherwise, your income will be declared hobby income and you'll lose your deductions.