Tax Help for Musicians (U.S.)

Subject: Tax Help for Musicians (U.S.)
From: GUEST,sharyn
Date: 06 Apr 10 - 11:42 AM

Hello all,

As income tax deadlines approach, I experience my customary terror in trying to report music income accurately. The terror originates in my having no business background and trying to understand the rules for making and selling CDs.

Does anyone have a reference to a simple, well-written text covering basic business terms and the current tax codes? If so, thanks. If not, what do the rest of you do (at least that proportion of you who report your music income)?

I brought out a CD in 2009 and so have to set out the losses of manufacturing costs against a few sales, if that's any help.

Thanks,

Sharyn

Subject: RE: Tax Help for Musicians (U.S.)
From: AllisonA(Animaterra)
Date: 06 Apr 10 - 01:43 PM

I have no such reference, but I do itemize all my music-related expenses and have a "self-employed musician" portion of my taxes. I also pay an accountant big bucks to save me both the agony and a considerable amount of taxes. He included my $699 payment to Oasis for a demo cd last year without a blink.

Good luck!

Allison

Subject: RE: Tax Help for Musicians (U.S.)
From: GUEST
Date: 06 Apr 10 - 02:04 PM

Thanks, Allison,

I'm a big do-it-yourselfer, too poor to pay an accountant.

Subject: RE: Tax Help for Musicians (U.S.)
From: DonMeixner
Date: 06 Apr 10 - 02:20 PM

I have used TurboTax for the last 15 years. My expenses as a musician
include the purchase of
Strings
recorders
PA equipment including monitors, head phones, batteries.
Mics
Harmonicas
picks
Instruments and their Repairs
Mileage to and from gigs can't include mile for practicelodging at jobs away from home and meals
Business cards
advertising
web site
CDs (both recording costs and buying for learning)

PLus more that I can't remember just now.

Don

Subject: RE: Tax Help for Musicians (U.S.)
From: GUEST,leeneia
Date: 07 Apr 10 - 10:02 AM

Check out IRS Publication 17.

Subject: RE: Tax Help for Musicians (U.S.)
From: Barbara Shaw
Date: 07 Apr 10 - 05:18 PM

I keep an Excel spreadsheet by year and record every expense and every bit of income as it happens, including CD sales and gigs. I also throw all receipts into an envelope with the year labeled.

I too use Turbotax and have for several years, although each year I swear I'm going to find an accountant to go through this agony for me, whatever it costs. Turbotax makes it a bit easier by asking all the right questions for a home office and sole proprietorship business as a self-employed musician. My spreadsheet has evolved to include the categories that Turbotax asks for, such as:

Advertising expense (eg flyers)
Supplies (eg cd manufacturing)
Office expense (eg postage to mail cds, paper, printer cartridge)
Professional fees (eg lessons, membership dues)
Maintenance (eg repairs)
Meals
Miles

Just got through with taxes today, in fact. Good luck!

Subject: RE: Tax Help for Musicians (U.S.)
From: GUEST,DonMeixner
Date: 07 Apr 10 - 05:33 PM

I have a more complicated problem as I also run a jewelry business.
It is clear to me that what the IRS views as supplies are not what a manufacturing jeweler calls supplies.

And I swear next year I'll hire Leo's Taxi and income tax service to handle the job.

Don

Subject: RE: Tax Help for Musicians (U.S.)
From: open mike
Date: 07 Apr 10 - 05:48 PM

hmm i should think that if music you buy to learn from counts,
then mileage you travel for practice would be essential too.
(as part of your preparation for performance)

Subject: RE: Tax Help for Musicians (U.S.)
From: GUEST,DonMeixner
Date: 07 Apr 10 - 05:52 PM

According to the IRS it don't. You can practice at home. (Unless there is a band) Actually this is beaten up pretty good on the internet. They have a pretty conveelooted way of figuring miles.

Subject: RE: Tax Help for Musicians (U.S.)
From: GUEST,sharyn
Date: 08 Apr 10 - 11:54 AM

Barbara, I never would have thought of CD manufacturing as "Supplies." I think of CDs as inventory and I think I put recording them under professional expenses, but I always add a note to my Schedule C, explaining how I've created my inventory and what the unit cost of manufacture was. I've only done this once before with a cassette, so I'll look up what I did the last time and do it consistently. There's just a part of me that wants to do it "right." Sigh.

Subject: RE: Tax Help for Musicians (U.S.)
From: Barbara Shaw
Date: 08 Apr 10 - 01:49 PM

I think of CDs as supplies for my business. Every time I order a batch I put that expense under the supplies category. In any case, it's an expense that I definitely claim, and if some auditor questions what category I put it under I'll just move it. Rather than tying it to an inventory, I simply keep track of expenses (like the cost of disk replication) and income. Pretty sure I put the studio time under professional fees as well.

Subject: RE: Tax Help for Musicians (U.S.)
From: Jacob B
Date: 08 Apr 10 - 02:56 PM

Here's a link to a page which has links to all the IRS publications, in both HTML and PDF formats. Publication 17 is a good place to start.

http://www.irs.gov/publications/index.html

Subject: RE: Tax Help for Musicians (U.S.)
From: Barbara Shaw
Date: 08 Apr 10 - 06:05 PM

Having just come from 2-3 weeks spent preparing taxes, I'll pass on reading Publication 17. From the looks of it, that would put me over the edge. I depend on Turbotax, which may or may not be a good idea, but it seems to ask all the questions that cover my situation, and I'm told that many tax accountants use it. I enter all the detail as honestly as possible and ship it off to the IRS with a sigh of relief at the end of the very painful ordeal. More study and a private accountant would likely save me money but I'm done for another year.

Subject: RE: Tax Help for Musicians (U.S.)
From: DonMeixner
Date: 08 Apr 10 - 07:15 PM

Mine are done last nite. I knew business wise this was a bad year for jewelry but I wasn't as aware as I should have been until my taxes were done.

Barbara are you making it to Old Songs this year?

Don

Subject: RE: Tax Help for Musicians (U.S.)
From: Barbara Shaw
Date: 08 Apr 10 - 08:07 PM

I'm actually hoping we can make it to Old Songs this year, for the first time in a few years. The Jenny Brook bluegrass festival in Vermont is the weekend before, so there's no conflict this time, but haven't made any reservations yet. Would love to have another little jam with you, Don. By the way, Frank wears your pin on his banjo strap. You can almost see it in this ShoreGrass Trio Photo.
.

Subject: RE: Tax Help for Musicians (U.S.)
From: GUEST,sharyn
Date: 09 Apr 10 - 01:19 PM

Thanks, Jacob.

I was able to use the link to the IRS to read enough to make my eyes cross. I think I will continue to report income and expenses the way I do -- no one has questioned it yet.

Sharyn