Money made from music work / accountants / tax write-offs...

[mholloway]

Hey guys.

More questions. If you are a regular here and are making actual money from something related to your music work -- album sales, radio royalties, production work, mastering (thinking of you, Tarekith), what is your approach to managing income from music work? Specifically, do you have an accountant who "knows the music biz" and helps you understand such things; do you do your own taxes; and do you write-off music-production related expenses, such as new hardware/software?

2009 saw my "hobby" take a turn toward the "professional" -- got my industrial project signed to a small but solid label, picked up some actual paid-work for multimedia type scoring, and received a possible offer of producing an album for another band. None of this will allow me to quit my part-time day job (I do social work) but nonetheless there will be a trickle of dough coming from multiple music-related directions, and I'm wondering if finding an accountant with knowledge of this sort of stuff might (or might not) be worth it.....suddenly I have all these questions, like can I write off my new iMac and live 8 suite upgrade, and would it even be worth it to do so?

thoughts? some of you out there must be making some actual $ and have thought this stuff through...eh?

thanks,

-M

[shatzer]

There is a certain amount of money you can make without being on the IRS radar. I think its something like anything under 10 grand (where i'm at) This was told to me by a tax attorney (USA) So unless you're making a butt load of money then there would be no reason to file this income. Even tho you're "suppose" to file even if a neighbor gives you 5 bucks. Eff all that shit.

[TRS80]

But, if you make more that 8 or 10k with a combined income from music and other work, you can file and make deductions.

If you make so much from music that you actually need to report the earnings, you can deduct all music expenses. Software, hardware, music subscriptions services, travel expenses...you get the idea. If you generate income from music, and your total earnings are high enough- yes you can write off a good bit of stuff. It gets ethically hairy if you use your computer for work other than music.

Sometimes it makes good sense to get an accountant to help you navigate the waters. If you use the computer for your social work and music work- it really is a business expense.

In my neck of the woods if you make around 8k/year (reported) you don't even need to file. That's one of the nice things about dj work- it's always sweaty wads of cash. They don't report it, you don't report it. And really it's not typically that much anyway.

[shatzer]

But, if you make more that 8 or 10k with a combined income from music and other work, you can file and make deductions.

If you make so much from music that you actually need to report the earnings, you can deduct all music expenses. Software, hardware, music subscriptions services, travel expenses...you get the idea. If you generate income from music, and your total earnings are high enough- yes you can write off a good bit of stuff. It gets ethically hairy if you use your computer for work other than music.

Sometimes it makes good sense to get an accountant to help you navigate the waters. If you use the computer for your social work and music work- it really is a business expense.

In my neck of the woods if you make around 8k/year (reported) you don't even need to file. That's one of the nice things about dj work- it's always sweaty wads of cash. They don't report it, you don't report it. And really it's not typically that much anyway.

Exactly. Just make sure its worth it before doing all that. (As you said check with an accountant or tax attorney) Tax attorneys can get really expensive. The one i use charges $200 an hour and thats half off the price because i know someone who works there!! But then again, making sure everything is right before hand will pay off. Saves a lot of trouble later and a lot of money.

[Tarekith]

It can be pretty tricky, and I guess it comes down to how much risk you want to take in terms of getting audited. Are you an offical business with a UBI number and everything, or just a guy making money on the side? Either way you need to report all your earnings, and be careful about what you claim as a dedution. I've been dealing with my accountant on this the last few days, as well as my book-keeper, and both have said that the IRS is getting much more aggressive about going after audit candidates (something to do with our soaring national debt). It's all computer generated based on how much you claim, how much you made, and some other factors, so it's not like some guy is in an office saying yay or nay.

Things like travel expenses, mileage, office supplies, and home office deductions have a lot of caveats, so I'd be hesitant to do it on my own. Actually, I was initially planning on doing my own business taxes, but it only took two days of research to see that I was WAY over my head. Many people in the 'biz' told me that I'd save way more on taxes than I spent if I got a dedicated tax accountant, and they couldn;t be more right. Looks like a lot up front, but I'll save MUCH more than the accountant is cost me, MUCH more becuase they know things i don't.

Also, it's not just federal taxes, but state, city, and possibly county taxes you need to pay, and many times they are more aggressive about auditing than the IRS. At the very least, meet with someone this year to get your caught up on things, and they will also tell you how to proceed for the next year. Just remember, they work FOR you, not against you. I was a little nervous about this aspect of owning my own business, but my accountant is definitely looking out for my best interests. I don't think you need a dedicated music business accountant, but definitely try and find someone who know small business tax as well as personal taxes. Your local chapter of the SBA can help you find a good one in your area.

[Tarekith]

I should add, right off the bat plan on spending roughly 30% of what you made on federal taxes alone. Might be more, might be less depending on your business structure, but that's a good average. State and city taxes will be in addition to this.

[swishniak]

im a bit out of the loop (being here in germany), but here its the case where if you make most of your income as a "musician" and you claim this as your profession, you write off all kinds of stuff (software / train tickets / clothes).

[alex.the.forge]

I should add, right off the bat plan on spending roughly 30% of what you made on federal taxes alone. Might be more, might be less depending on your business structure, but that's a good average. State and city taxes will be in addition to this.

holy fuck and you guys still get no health care for that?

[SubFunk]

im a bit out of the loop (being here in germany), but here its the case where if you make most of your income as a "musician" and you claim this as your profession, you write off all kinds of stuff (software / train tickets / clothes).

yup, also (i am about to make myself independent again) you charge a different tax rate depending if you offer a service (mixing, recording, etc.) or if you create something like a piece of music for an advertising or a movie, let's say.
and you can write off different things for the two...

one you run as an artist, and the other as a service provider and you are therefor in different tax / profession groups
(at least here in germany it is the case)
and if you manage to make your artistic side to your main filed of income, you also have access to cheaper health insurance, etc. (all this info is pretty fresh and new to me as well, i just go through it all with my future tax advisor, a hell lot has changed here since i left germany and came back... )

[Tarekith]

I should add, right off the bat plan on spending roughly 30% of what you made on federal taxes alone. Might be more, might be less depending on your business structure, but that's a good average. State and city taxes will be in addition to this.

holy fuck and you guys still get no health care for that?

It depends on your business structure too, with certain corporations you can draw a salary that you only pay 15% on, which is closer to what most people pay with income tax. And all this is after deductions, which are the saviour of the small business in the US. But you have to be really careful about what you deduct, things like gas for your car have specific requirements that aren't obvious. Ditto on asset purchases like computers, or expensive music gear. You can also deduct some living expenses if you work from home, but it can have some pretty major consequences when you go to sell your home later on. Way over my head, trust me get an accountant, and start learning QuickBooks.

[Tarekith]

yup, also (i am about to make myself independent again) you charge a different tax rate depending if you offer a service (mixing, recording, etc.) or if you create something like a piece of music for an advertising or a movie, let's say.
and you can write off different things for the two...

one you run as an artist, and the other as a service provider and you are therefor in different tax / profession groups
(at least here in germany it is the case)

In the US it's different, the split is largely if you sell a product and collect sales tax, or if you're a service provider in which case you pay B&O tax. I'm pretty sure the rules about deductions are the same for both here.

[SubFunk]

yeah, i thought so, here we have it like the US plus as i said if you are categorised as an artists you have it 'cheaper' so to say.
so it is basically 3 options... (from what i know and just learn[ed]... i am by no means a tax expert, i wish i was but i actually have no clue... especially after so many things changed since i left, all those new common euro laws, etc.... i need to learn all that stuff right now myself.)