It may look like more but it is only one business.

hi,
I'm from Portland, OR and have been self-employed as a guitar tech with my own shop for 3 years, and was paid as an independent contractor working through another shop for 2 prior to that.

i have been digging myself a hole with my record keeping and tax knowledge (lack thereof) and dread doing my books and preparing taxes, so I'm behind.

one thing that makes my situation complicated is that i have income from 2 and sometimes 3 or more sources in a year-- i tour as a guitar tech and am paid as an employee by the bands i work for, mainly one band but in some years 2 or more. i have income as a sole prop in my repair shop, with all the bills, ordering, and so on to juggle-- and i sometimes also have income as a performer.

since my expenses often overlap, I'm not sure of the best way to claim deductions-- if i buy tools that i use at the shop, and also when touring, how can i best make that deduction work for me? i know there are options-- I've even heard of some people setting up as an LLC, buying their tools through the LLC, and renting them to themselves for traveling or specific jobs-- but that's very confusing to me. I'm trying to decide which book to buy-- should i get "the confident indie" or "self-employed tax solutions?"

thanks,
Brian

Dear Brian,

Take a breath. I am going to simplify all this for you right now.

If I understand correctly you:
* are a guitar tech
* repair guitars in your shop
* play guitar as a performer alone
* play guitar in different bands

Those are all part of the same indie business. They do not need to be kept separate. You use related knowledge and experience in all aspects of your business. You may use the same equipment. Your clients likely overlap from one area to the next.

You are a musician. Or you offer music services. Or you offer guitar performance and instruction and repair.

So keep it simple. Keep it honest by claiming all income. And keep accurate records. Which brings me to your question: Which of my books should you buy? Since you mention a lack of knowledge about taxes you need to start with Self-employed Tax Solutions. It will give you the foundation you need to understand income, deductions, taxes, and basic recordkeeping. Before you can keep records you must understand the basics.

BTW -- you say that the bands pay you as an employee. Are you sure? Typically bands that you play for irregularly pay you as a self-employed and they do not withhold taxes. If they send you any income statement it's a 1099 not a W2.

Best,
June

Independent Creative Services

Dear June,

I am a graphic artist, writer and musician - sometimes separately, sometimes in combination. Currently, I make revenue from all three endeavors, but only profit from two. Do you think these three activities make sense as a single business?

I was thinking "independent creative services" might be the ticket. Am I on the right track or way off base?

Thank you for your help!

Jamie
Los Angeles, CA


Hello Jamie,

Yes, you are not only on the right track you're on the right train. And independent creative services is a perfect business description.

So many people in the arts combine many creative endeavors. Their thinking, supplies, equipment, business acquaintances, clients, books, and more cannot be separated into different businesses.

Don't get too creative though by trying to combine dog walking with graphic design.

This post Jack or Jane of All Trades: How does an indie define a business? will give you more info.

Best,
June

Exotic Dancer and more ...

I choose questions from indies that I think will be most helpful to the most people. I stay away from questions about unique situations that won't be informative to a lot of you. The situation below, from Michelle, although unique has a number of situations that apply to a lot of indies.

I've noted the distinct points or questions in red.


Hello June!

I have a very complicated question...or so I think! I am confused about pro vs hobby and what deductions I can take for this year.

My main job for the last 15 years has been as an exotic dancer. I am an independent contractor and have always filed a schedule C. I deduct traveling expenses (when working out of town) and supplies (costumes, shoes)

I am also a fine art photojournalist who is currently working on a photo documentary project to be published as a book. I plan on traveling often this year to shoot various photo projects and complete my book. I have also purchased plenty of supplies and equipment in this tax year as well and I have a home office dedicated as my studio. Since this is a ongoing project but I have received no income from it as of yet...can I still deduct travel expenses, equipment costs, home office, etc without profit?

Also, I have third business! I attended a yoga teacher training this year and will start teaching classes out of my studio (separate from the art studio) as of April 1st in my home. I have had to pay for paint, carpet, supplies to ready the studio for classes. I have been working on the studio since January and paying the extra rent myself. I do have a registered business name and business account. I will have very little profit by April 15. So am I entitled to deduct the home studio and start-up costs for the business this year? How about the teacher training and yoga classes as an education expense?

Since I have 3 separate businesses I am afraid of an audit due to all these deductions! What is proper protocol for multiple small businesses? Should I be worried about claiming too many deductions?

I would really like to do my taxes myself to avoid extra costs due to the fact I have paid a lot out of pocket to start up the yoga teaching and for photography equipment.

Your help will be greatly appreciated!

Thanks in advance!

Michelle
Portland, OR


Here's my response to Michelle:

The goal of a hobby is not to make money. The goal may be to have fun, help others, perfect a skill. A hobby may make money. You may deduct expenses only up to the amount of hobby income.

The goal of a business is to make money. As long as making a profit is your goal you don't have to actually make money. You may also enjoy yourself, help others, or master skills or develop a nascent talent. You may deduct all legitimate business expenses regardless the amount of income.

If the business is not yet "open for business" meaning you are not yet ready for clients or customers, then you are still in the start-up stage. Expenses may be deducted when the business opens. You may not deduct education costs to learn a new skill.

You say: I will have very little profit by April 15. April 15 is the first deadline for filing a tax return. It is, however, immaterial to income or profit. Calendar year taxpayers -- that's just about all of you -- group income and expenses from January 1 through December 31.

It would be unwise, time- and money-wasting to try to do your own tax return in order to save accounting fees. You have a complex three-indie-business tax situation; you lack knowledge of basic indie tax treatment; you have not had the time, or the rigor, to review my site and blog where you could have found all the answers to your questions. Would you teach yoga without first studying it? I wouldn't .

Put your time and energy into your businesses -- yoga classes, dancing, photos -- you'll earn more money, achieve success, and have the money to pay a tax pro.

Jack or Jane of All Trades: How does an indie define a business?

Hi,

I'm a writer/designer/wearable art & life style accessories maker, thus my question: How broadly can I define my business?

If I do all of these things and make money at all of them, can I have one umbrella company that does it all? Or do I have to bifurcate the writing and communications activities from the design and manufacturing? To clarify, I'm primarily a technical communicator, but I have also started a jewelry and lifestyle accessories business. I plan on trying to get some writing published in jewelry and accessories publications, so where do I have to draw the line?

So how many "plates" can I have in my "cafeteria business" under one name and under one sole proprietorship? If you know the cartoonist Larson, it's a little bit like the one with "Lou's FillDirt and Croissants."

Regards,
Christine, from Belmont, CA


Hello Christine,

What a great question. So many indies have irons in many fires -- fill-dirt and croissants is stretching it a bit too much, of course. The goal is to legitimately combine as many of aspects of your money-making activities under one profession or one business as you possibly can. The biggest reason: It simplifies your recordkeeping.

Here's the test that will help you decide: Write one press release announcing your business. In it combine all your services and products. If you can comfortably put them all together in one press release, and if you would not have a problem sending out that press release, then you're OK with one business.

Often the skills in one area give authenticity or credibility to another area. I see no stretch between designer/wearable art & life style accessories maker. And if you write about these things, that you write about other subjects as well does not make writing a separate business.

Best,
June