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#192263 - 02/23/01 05:24 AM Musician tax tips
Tom Cavanaugh Offline
Senior Member

Registered: 12/06/99
Posts: 2121
Loc: Muskegon, MI
Any U.S. tax tips out there for the performing musician? What are the normal items of expense? What are depreciation schedules for electronic keyboards or are they expensed out the year purchased? How about purchased sheet music, MD recorders, mics, mileage, and so forth? Thanks,



#192264 - 02/23/01 08:00 AM Re: Musician tax tips
Jim Henry Offline
Junior Member

Registered: 10/12/00
Posts: 30
Loc: Surprise AZ USA
DISCLAIMER: I'm not a tax advisor and nothing I've written here should be construed as tax advice. I'm just talking as one tax payer to another about my own experiences, techniques, and ideas.

First of all, except for a couple years, I've done my own taxes (with and without Turbo Tax and its clones) for 30 years. My finances are pretty simple, without a gazillion sources or investment portfolios or vague property holdings. The times I've tried a professional tax accountant/preparer, I saved no money. If your financial life is complex or if doing taxes panics you, gather your receipts and lists and head for H & R Block. Like telling your sins to a priest, they've heard it all and know what you need to do to come clean with Uncle Sam.

As for how I approach taxes:

I Section 179 anything that I can't list as "Supplies." I scrapped the headache of figuring depreciation years ago. (I forget the actual allowable maximum for totally deducting Section 179 puchases, but I think it's around $20,000--which covers most musicians I know! Yeah, I know, not the music store owners.)

I keep, review, notate, and categorize every single receipt. I have a box on my bathroom sink counter into which I empty every receipt from my wallet. Every receipt. I also notate the receipts right when I get them at the cash register because the registers sometimes list the items quite cryptically and, after a few months, I forget what the hell I bought. (CAUTION! Receipts that are generated at some gas station pumps have sun-sensitive ink that disappears after a few weeks' exposure on your visor or in your drink holder. Treat them carefully!) I claim nothing for which I haven't a receipt. (I've been audited and receipts saved my butt.) I save all worksheets, receipts, everything for years afterward, not just to protect against audit, but to remind myself of how I've done things in the past . . . and to catch stuff I may have missed before which can be claimed on this year's taxes.

I claim only the fair portion of the dry cleaning/laundry expenses for my "stage clothing." (The law says that, to claim work clothes, they must be worn specifically for that job and not applicable for non-work wear. I fudge on that. But I can prove that the percentage I claim is true.)

Never deduct "time and talent" costs. You may have volunteered 68 times to play at the care center, but you can't claim it. Deductibles are limited to stuff you spent cash for or made as "capital gains" through plus-side trading of equipment.

Write down your odometer reading every year when you return home from your New Year's Eve gig.

If you don't keep a daily mileage record, come up with a credible, defendable way of calculating auto expenses. Don't just pull a figure out of the air. You must show intent to be as precise as possible. (I use my gig calendar and my receipts and a map to calculate the actual business miles I drive. To that I add the number of trips I went to, for instance, the music store to just check out new stuff, the miles to the bank to deposit my paychecks, and about 500 miscelleneous miles. I subtract last New Year's Eve odometer reading from this year's, then figure the business mileage percent. I use that percentage to calculate the business (deductible) portion of oil changes, repairs, gas, etc. Then I decide which is better--the mileage deduction allowed by the governement or actual cost? Remember, you can't do both--it's one or the other.)

Be very careful about deducting "Home Office" expenses. If you can prove that part of your home is used to generate actual income and isn't used for other things, you may deduct the fractional expenses of that room (mortgage/rent, utilities, phone, etc.) based on the actual square footage of that area vs. your entire residence. If you have to hem and haw about this one, you probably shouldn't claim it.

Do yourself a really big favor--pay your quarterly tax estimates.

Before wondering if you have enough to do a Schedule A (deducting interest, medical expenses, etc.), read your Tax Guide to see what percentage of your income must have been spent on those allowable items. If it looks close, go for it. But, if not, don't waste the hours and brain cells needed to do the Schedule A worksheets and forms.

I picked up a second job (church choir directing) and arranged my withholdings so that my actual paycheck reads $0.00. Really! I use that job to pay the taxes for my self-employment earnings. It's a good way to have a little tax security for people like myself who have poor savings habits.

If you get behind a real 8-ball on April 15th, file for sure, pay what you can, and attach a request for a monthly pay-the-balance-due from the IRS. I've done that in the past. The interest is a killer, but it'll get you off that panic hook you put yourself on.

Use SEPs, IRAs, Keoghs, etc. as you see fit to force yourself to not become a candidate for the Old Musicians Home.

Talk with people who have incorporated themselves, become actual employees of the place where they are the house band, formed an LLC, etc. to see if there exist further tax-cutting approaches that suit you.

May April 15th treat you better than the Ides of March treated Julius!

#192265 - 02/23/01 01:46 PM Re: Musician tax tips
freddynl Offline
Senior Member

Registered: 11/17/99
Posts: 1150
Loc: netherlands
Interesting stuff, due to my normal work.
(which is auditing and annual reports for companies.)
Overall exactly the same rules apply in the Netherlands.
I am missing something though, where I am sure this applies in USA as well!
Pretty hard to translate, but didn't you forget to deduct a percentage for yearly investments?
Let's say you buy a Solton for US $ 3000,--
I would write it off in three years, so deduct 33,3% of the investment each year, untill the value of trade in, and start writing off with the new then bought equipment and so on!
PC's I write off in two years.
Keyboards/Sound Units: Kurzweil 2600S, Roland VR-760, Acces Virus C, Roland G-800, Akai AX60, Minimoog, Machine Drum, Roland R8-M, mediastation x-76

#192266 - 02/23/01 05:58 PM Re: Musician tax tips
Equalizer Offline

Registered: 02/12/01
Posts: 525
Loc: Scotland

Baaaaah! Who needs 'em?!!!


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