The Tax Issues of Being in a Band

[Rooster_Ties]

SOURCE

Blue Note Bulletin Boards

--Miscellaneous

----The Tax Issues of Being in a Band

Author  Topic:  The Tax Issues of Being in a Band 

lars1026

Member  posted June 05, 2001 10:09 AM             

--------------------------------------------------------------------------------

I just got into my first band a few months ago. We are getting a few shows a month, and sometimes we have to travel and stay overnight after the shows. I know that my bandmates "keep their receipts" when we're on these trips, but I don't. I don't know what the hell they are doing, really.

My drummer even told me that he keeps the receipts for any cds that he buys because "you can deduct them as research."

I really would be grateful if one of the musicans on this message board would fill me in on a few things having to do with taxes.

My guitarist said that I can consider the band a small business or something. What do I do next? What form do I fill out when tax time comes around? What are some of the items that I can deduct? How do I keep track of our profits at shows? How do I keep track of our sales of T-Shirts, demos, etc. at shows? How do I account for the fact that I never see any of our profits?

Please tell me anything that you know or do because I would feel like a really big chump if I am losing money somehow for no reason but ignorance. I really feel like a kid today.

IP: Logged

jmjk

Member  posted June 05, 2001 10:22 AM             

--------------------------------------------------------------------------------

Hey lars-

I'm not a Certified Financial Advisor, but I can tell you what I've seen and researched in the past while trying to make some extra bread by playing with a band.

There should be someone in the band who is the designated book-keeper. That person will handle keeping track of the amount of money earned at each gig, amount paid to the band members (if any), amounts spent in hotel, gas, food expenses (with receipts), amount deposited in a "band bank account" (if any).

One thing the band could do is to go to the City Hall and fill out a DBA (Doing Business As) application. If you're going to report this income or deduct any band expenditures, the band or "business" may need to give each member a 1099 for the annual money earned, which actually may need to be reported quarterly through an Estimated Tax or some Schedule C IRS arrangement.

If the band is geting "serious" enough for you to be concerned, and earning a large amount of income, then the best bet may be a consultation with an entertainment lawyer or a tax advisor. The tax rules may have changed since I last looked into them, so

be sure you get the most current info and from a public and credible source (not me )

[This message has been edited by jmjk (edited June 05, 2001).]

IP: Logged

lukrion

Member  posted June 05, 2001 10:32 AM             

--------------------------------------------------------------------------------

I can't give legal advice and I don't want to give you information that could create problems for you in the future.

I talked to my attorney about this before. My wife and I both make income from the arts so I can help you out to a degree.

You should have some idea of what your profits will be during a year. Without this I wouldn't try claiming cd's.

Are you in the U.S.? For tax purposes if you are claiming "income" from your group then you can claim Cd's. If you are more less losing money or barely breaking even the IRS. might consider this a hobby, in which case cd's are not going to be claimable. I don't know what percent or dollar amount you can make off the top of my head, without needing to claim it on taxes and call it a hobby. Thats where you should really consult a professional as it might vary from state to state.

If you ARE making a living AND paying taxes on you music earnings, CDs, books, lessons, Mosaics, instuments etc. are all tax deductable. Save every reciept you have. Some items big items such as instruments can be spread over a certain amount of years. If you need to pay in it is easier to just put money in escrow and pay it back during fiing time but i think a schedule might be an option.

I don't know if currently mileage is included, but I think meal costs and rooming is.

Don't take this as the final word. If you are serious about this talk to a lawyor accountant or tax preparer to cover you yourself.

Good Luck

IP: Logged

JSngry

Member  posted June 05, 2001 12:31 PM             

--------------------------------------------------------------------------------

Mileage is DEFINITELY included, and can be a significant deduction, especially if road gigs are involved. Meals, etc are deductable, but only a percentage thereof, and ONLY when they occur in a gig-related time frame away from home, OR if it is a "business" dinner or some such in your local area. Supplies for both your instrument and your band are all deductable. CDs are deductable if they are relevant to your career. If you only play one kind of music and show a HUGE amount of CD purchases for another, it's gonna look funny, so use your conscience - it's usually right! If you show a loss, the IRS might look at your return funny, especially if the loss is big enough and goes on long enough, and especially if you have other income and it looks like you're just using music as a tax shelter. Don't laugh - it's been done much more than once.

On the other hand, if you really ARE losing money and are making a sincere effort to succeed, by all means claim everything that's legal, but KEEP THE RECIEPTS! Accurate records can make any potential "problems" resolve themselves a lot quicker. So it is ESSENTIAL that SOMEBODY keep accurate records of ALL band expenses and incomes, even (especially) the cash ones. Make sure it's a person with high integrity, though. When there's "band", as opposed to individual, money to be played with, it's amazing how many people can't resist temptaion.

Lars, save all your reciepts, get somebody YOU trust to handle the books, and if it even LOOKS like you're gonna make more than chump change from playing music, see a tax advisor. Once again, get somebody YOU trust, andd somebody who has a reputation for honesty, being current with the tax code (it's CONSTANTLY changing) and especially for standing behind their clients if they get audited. Most audits are really just attempts to clear up inconsistencies or to clarify something that just doesn't "look right". If you don't have the guy with you who gave you the advice, you might very easily (and unneccesarily) get screwed big time. A good tax advisor is also essential if you have two incomes, either individually or as a household.

IP: Logged

Scott Lasser

Member  posted June 05, 2001 03:37 PM             

--------------------------------------------------------------------------------

When I was in a working band (and getting paid for it), I was able to write off all of my equipment that I had to replace: drumsticks, heads, drum pedal beaters, etc.

There was a huge article in either Modern Drummer or Drum! magazine some years ago about this. You might want to contact their archives.

Scott

IP: Logged

Harold_Z

Member  posted June 05, 2001 05:45 PM             

--------------------------------------------------------------------------------

Js hit most of the strong points. One tip for those of you who are really bad at keeping records or just don't want to. Try dedicating a charge card and/or checking account to strictly gig related expenses. At tax time it's all there on the statements, ready for your tax pro to work on.

IP: Logged

lars1026

Member  posted June 06, 2001 10:09 AM             

--------------------------------------------------------------------------------

Thanks a ton everybody. You've given me a good start. We don't plan to make a profit this year because we just got started and we are putting out our EP. We have about 3-6 shows a month at this point around Minneapolis and Milwaukee.

I was really stirred to figure out this deduction stuff this weekend because my local jazz cd store had a 20% off on all Blue Note Titles. $150 dollars later...

IP: Logged

Robert J

Member  posted June 06, 2001 11:34 AM             

--------------------------------------------------------------------------------

I was pretty dumb about everything when I first started as a "professional musician", but then again I was 19. Even the Musician's Union had tax advice, but the world seemed smaller then. Too bad, I could have written off many things then.

When I got married, I acquired a brother in-law who is an accountant, and though dull, he knows the taxman. I imagine US laws are similar to Canadian. Capital Cost Allowances allow deductions over 4 years here, so my computer and music equipment can't be deducted in one shot, just 25% of the value for each year. I kept receipts for travel, business cards, phone calls to clients, my suits, sheet music, union dues, etc. I think you have to demonstrate that you are making an income, however small, for the deductions, even if you project a loss. This is how small businesses do it. It's not like you will get back all your money, rather you will lower your reported income through the deductions, and in turn pay less (or hopefully) no tax. Believe me, it is a small amount of effort and can pay off later. Trust me. "Young and Foolish" so the song goes.

IP: Logged

Looked like some useful info, so here it is - where it can be useful!!

[robviti]

speaking as someone who is "self-employed," there are things you should know and do to avoid paying penalties later on. these include paying social security tax, quarterly estimated taxes, and so on. you should also be informed about things like SEP iras so you can hold onto more of your money. i recommend going right to the source - the irs. here's a "one stop resource" they've set up for the self-employed: irs

and don't forget your state taxes!

Edited January 9, 2004 by jazzshrink