Help: Taxes for Music Groups?

Subject: Taxes for Music Groups?
From: Charley Noble
Date: 28 Mar 02 - 09:28 AM

I'm sure that every music group has someone who at least thinks about this question. Based here in the US our group functioned informally for over 12 years with one member filing a Schedule C on his personal return as Profit or Loss from Business. This procedure seemed to work fine given that we didn't generate a lot of income and whatever we did earn went for obvious expenses such as travel, printing, phone, mailing, and office supplies. However, once we began planning for producing CD's, it seemed to make sense to reorganize more formally. Now we are incorporated and are filing a 1120-A U.S. Corporation Short-Form income tax return.

A perlexing question is how best to deal with the expenses and income generated from producing a CD. It makes sense to us that the production expenses (recording, studio rental, mastering, manufacturing) would all be deducted as expenses but we also hear that the inventory produced is a taxable asset even before any sales; is this an option or are we all screwed up?

We would appreciate advice others who are trying to deal with this question in some logical and responsible fashion, which probably leaves out over 90% of Mudcatters.;~)

Subject: RE: Help: Taxes for Music Groups?
From: JohnInKansas
Date: 29 Mar 02 - 01:47 AM

Sorry I can't really help, but I'll refresh just 'cause I'm curious too.

One note: it may be different under corporate filing, but inventory is most notoriously taxed by states - and it's different for each state. For a privately held company, it's my impression inventory is only of interest to the Fed if you intend to take a depreciation on it???????

I know that all the "unsold" airplanes at Boeing used to show up in Wichita when Washington State inventory was being filed, and then went back to Seattle when Kansas inventory was being toted up. At >$20K/hour flight costs per plane, they must have been saving quite a bit(?).

John

Subject: RE: Help: Taxes for Music Groups?
From: Charley Noble
Date: 29 Mar 02 - 08:49 AM

John - the others intersted in this question are still procrastinating. After all, it tooks our group 12 years to seriously consider ourselves as a legal entity, and some of our 6 members still have their doubts!

Subject: RE: Help: Taxes for Music Groups?
From: Gypsy
Date: 29 Mar 02 - 10:12 AM

Before you get your instruments siezed due to a picayune error...run, do not walk to a tax person. An EA is probably what you need, or a CPA. You are beyound filing the short form for yourselves.

Subject: RE: Help: Taxes for Music Groups?
From: Charley Noble
Date: 29 Mar 02 - 10:20 AM

Gypsy - good advice except we get totally inconsistent feedback from the local IRS people and my regular tax consultant isn't that familiar with folk music groups. The question of what to do with CD production and sales has to be one that some Mudcatters have dealt with responsibly, well, at least one...?

Subject: RE: Help: Taxes for Music Groups?
From: Mark Ross
Date: 29 Mar 02 - 12:03 PM

Charley, You need to find a Tax Lawyer! I hate to say it, but that is the only way. Maybe a CPA, but you'll probably get a different set of answers from everyone you talk to.

Mark Ross

Subject: RE: Help: Taxes for Music Groups?
From: Charley Noble
Date: 29 Mar 02 - 01:41 PM

Maye I'll just compose a new set of verses to "Haul Away, Joe!" Mark and Gypsy are undoubtably correct and if any IRS staffers are monitoring this thread that's EXACTLY what I'm going to do.

Subject: RE: Help: Taxes for Music Groups?
From: Robin2
Date: 29 Mar 02 - 09:54 PM

Make music. It's what you're good at. Hire an accountant for the numbers stuff. It's what they are good at.

Your time is better spent promoting your craft, and making more money because of it. You'll keep more money in the long run if you turn the tax stuff over to a tax professional. (unless of course, someone in your band is an accountant...that would be great!)

Good luck! Robin