“Apart from death and taxes, the other thing certain in this life is that I’ll never be a fashion icon.” – Iron Maiden Lead Singer Bruce Dickinson
A bit of humor as we dive into the timely topic of taxes. April 15th is looming on the calendar, and since I’m a deadline driven type (for better or worse!) the conversation is just beginning with our own tax consultant.
But while in the middle of a recent Q & A with him on the latest changes for our personal filing, I also asked for some thoughts related to musicians who are dealing with their art as a business during tax time.
This may help you now, or in future years, but remember to always get the latest updates on the tax code from a professional.
5 Tips for Bands at Tax Time
What type of musician are you at the present time? And start looking forward–what course is your career taking? Are you in a band? Are you interested in being a music teacher? Do you already offer lessons from your home or at a nearby music shop. Figure this out and it will be easier to keep track of your finances; but especially expenses and tax liability.
No matter what type of musician / classification, if you make more than a certain amount (recently $600.00, but again check with a professional as this number changes regularly), you will be required to report your income to the IRS. This includes tips, teaching for cash, etc. IRS rules indicate it should be reported.
If your music is more business than hobby, you may be able to take advantage of many tax-friendly incentives, including deducting all of your expenses related to it. Keep receipts and records so you can track everything from the purchase of instruments, trade magazines, training, phone, computer, donations, and travel costs, including vehicle use, mileage, hotels, etc.
If you teach music classes from home or a business, you may even be able to classify yourself as a small business owner. And if you have a separate room at home used to run this business, you may qualify for a home office deduction. You may want to explore the need for a small business license, and if your business grows, you may even need to get a federal ID.
4) More Deductions
If you are a music instructor at a school, you may be able to take advantage of several tax deductions available to teachers. One of the most useful is the educator expense deduction. It allows qualifying teachers to deduct $250 worth of out of pocket expenses for class supplies. Other deductions can include, but are not limited to vehicle use/mileage, donations, etc.
5) Quarterly Payments
If you earn income from your music– teaching or performing– then you may want to consider the option of making estimated quarterly payments. If you wait until the end of the year cycle, you could end up with a large tax bill. Unfortunately, I’ve talked to many artists, musicians, and others who have dealt with not only the reality of the bill to be paid, but there can sometimes be fees and penalties based on the payment or plan set up with the IRS.
Free tax assistance, forms, and even classes are available through the Madison Public Library systems. For more information go to Tax Assistance | Madison Public Library