Sound Accounting – Taxes and the Touring Musician by Alyson Miller, CPA

In light of tax season, although it is a bit late, it is important to know what expenses you can write off on your taxes. So many of us artists, pay expenses associated with shows and touring and many of these are deductible. Please do not neglect to handle your taxes, even if it seems small now, the IRS will come back and get you later. We have seen this happen to many times before!

Sound Accounting – Taxes and the Touring Musician by Alyson Miller, CPA

Posted by Alyson Miller
Tuesday, 23 February 2010
Alyson Miller is a CPA who provides specialized accounting and tax services to music and entertainment clients.  She is the founder of Alyson Miller, CPA PLLC a rock and rollaccounting, tax, and business management firm. She has years of music business experience working for both independent and internationally recognized artist and songwriters, record labels, publishing companies and music distributors.

Musicians can save themselves some money and reduce their tax bill if they know what to look for when it comes to filing taxes.   There are many deductions that are specific to being a self-employed musician.

If you are self-employed (i.e., you don’t receive a W-2 from an employer) you will file your income and allowable expenses on a Schedule C as an attachment to your 1040.  The net of the Schedule C is then reported on page 1 or you 1040.

Always keep receipts for everything along with other documentation that you may have such as tour schedules. Here is a list and brief description of the typical allowable expenses.

Travel Expenses

The location has to be far enough away that is it inconvenient to return home otherwise expenses are considered commuting expenses and they are not deductible.

Allowable expenses include:

  • Hotels
  • Airfare
  • Phone calls to home
  • Rehearsal space rental
  • Tips
  • Local transportation like taxis at your destination

Meals

  • Meals associated with overnight travel
  • Meal expenses incurred while discussing or conducting business

You are only allowed a deduction for 50% of the meal costs and the IRS requires a receipt and documentation on who, what, where, and why you incurred the meal expense.

Equipment

  • All equipment (guitars, amp, strings, etc.)
  • Repairs and maintenance on equipment

Any item that generally costs more than $500 is depreciated over 5 years.  What this means is that you can take one-fifth of the costs as an expense each year for 5 years.  You may be able to take a 179 deduction which means you can take the entire cost as an expense in the year you purchase the item.

Vehicle Expenses

There are two methods allowed for vehicle expenses.  You can choose one or calculate both and choose the one that gives you the biggest deduction.

Method 1 – keep actual receipts for:

  • Gas
  • Repairs & maintenance
  • Insurance
  • Property Tax

The IRS also allows a depreciation deduction for your vehicle under this method.

Method 2

  • Keep mileage log of every mile traveled
  • Use standard mileage deduction for each mile traveled (55 cents for 2009; 50 cents for 2010)

Home Office or StudioIf you have a room in your home used exclusively for your business such as a studio you may be able to deduct it.  You can take a percentage of the square footage and apply it to:

  • Rent
  • Mortgage Interest
  • Utilities
  • Property Taxes

Health Insurance

  • Premiums that you pay as a self employed musician are fully deductible on the front page of the 1040.

Other Items

  • CD’s and music downloads
  • Concert tickets
  • Music publications
  • Wardrobe

Don’t get greedy with these items!  Wardrobe must be used exclusively on stage.

Always consult your tax professional about your individual situation.  One size does not fit all so finding a music business accountant is always preferable.

from: http://www.knowthemusicbiz.com/index.php/BIZ-BLOG/BIZ-BLOG/Sound-Accounting-Taxes-and-the-Touring-Musician-by-Alyson-Miller-CPA.html

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