June,
I contacted you 3-4 years ago regarding my website business that is a sole proprietorship and 1099s. I have another question. I sold my main revenue generating website. It used to make me money through advertising. I'm going to give a simple rundown to clarify things. Let's say it made $1,000 every year. This was posted with a yearly 1099 by my web sponsor. [I think he means that the guy who paid him the $1000 per year sent him a 1099 stating the income.] However, this year I got a buyer that wanted to pay me $10,000 for it. So I sold it.
My question is: the website includes the domain, website assets, and full ownership of the website. Does that $10,000 become a capital gains tax? Also, I've worked on this website and filed taxes on it since 2006, so does this mean it becomes a long term capital gains tax?
Thanks!
Justin
And another …
June –
I do music composition/instrument sales. Question: I re-sell some instruments and sometimes there is a profit other times a loss. End of the year I have a net loss. Do I owe social security tax [I think he means self-employment tax] on those items sold for profit.
If there is a profit from the total sale of instruments BUT after including business expenses there is a net loss - do I owe social security tax on the profit sales?
Thanks for your time.
Jeff
St. Louis, MO
Hi Guys,
Earned income is money you receive for services you perform or products you sell. It is on your net earned income that you pay self-employment (SE) tax.
Justin, you sold a website. Unless you are in the business of selling websites or domain names the income from that sale is not earned income. It is gain from the sale of an intangible -- can't pick it up in your hand -- business asset. It is long term. It is not part of your self-employed income.
Jeff, you say that you are in music composition and instrument sales. If you write music and then simply sell instruments that you don't use anymore then the sale of that "equipment" is not part of your earned income. You would have a capital gain or loss on your tax return. That gain or loss is not part of your self-employed income.
If,however, you are in the business of buying and selling musical instruments, then they are the products you offer for sale and any income or loss is part of your self-employed income. It is subject to SE tax.
-- June
Showing posts with label MUSICIAN-COMPOSER-SINGER. Show all posts
Showing posts with label MUSICIAN-COMPOSER-SINGER. Show all posts
Tuesday, December 7, 2010
Monday, May 3, 2010
Songwriters: Please take a look at this.
The Authors Guild and The Songwriters Guild of America (SGA) told the U.S. Copyright Office on Friday that there is an urgent need to eliminate a potential “gap” in termination rights granted under the Copyright Act. The joint filing, announced today by Authors Guild executive director Paul Aiken and SGA president Rick Carnes, was in response to a request for comments by the Office on the issue. The “gap,” if not addressed, might prevent as many as 100,000 creators from being able to exercise termination rights they – and Members of Congress – thought had effectively been granted to them under the law.
In establishing termination rights for creators – allowing them to end transfers of their copyrights to publishers after a set number of years – Congress established rules for terminations for both pre- and post-1978 works. However, because of a quirk in the drafting of the law, there may be an inadvertent gap for works governed by pre-1978 contracts that were not published or registered for copyright until 1978 or later.
“The legislative drafting error dates back to a major revision of copyright law in 1976,” said Aiken. “The potential problem is serious and pressing – the time to file thirty-five year termination notices for post-1978 works commences in 2011 – but it’s a technical problem that can be resolved with a straightforward legislative clarification.” Carnes added, “We simply need to make sure that, as a matter fairness, certain categories of works that may have fallen through the cracks in drafting the 1976 Act are now clearly included in the law.”
There are various scenarios in which confusion may arise under the law as currently written. Songwriters often sign exclusive agreements with music publishers covering the transfer of all songs written prospectively over a period of several years. For example, Charlie Daniels’ classic “The Devil Went Down to Georgia,” released on his band’s 1979 album, almost certainly was subject to a pre-1978 contract and might fall into the statutory “gap.” Moreover, nearly all books published in 1978 and most books published in 1979 were subject to pre-1978 contracts and therefore could fall within the suspected gap as well. John Irving’s “The World According to Garp,” published in 1978, and Beverly Cleary’s “Ramona and Her Mother” and Tom Wolfe’s “The Right Stuff,” both published in 1979, are all likely to be in this category.
“Authors, particularly those early in their careers, frequently have little or no bargaining power with publishers,” said Aiken. “The termination right effectively recognizes that imbalance, giving authors the power to renegotiate their contracts in the rare cases where a book has a commercial life far longer than expected.”
The legislative record of the 1976 Copyright Act is clear in expressing Congress’ intent that termination rights be granted to all authors. According to the House and Senate Reports accompanying the legislation, “[a] provision of this sort is needed because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work's value until it has been exploited.” Both SGA and the Authors Guild were instrumental in fighting successfully for the inclusion of termination rights in the 1976 law.
“Our shared interests in the representation of the creative communities in our respective fields have prompted us to act together on this initiative, as we will in the future on other legislative matters of mutual concern” said Carnes. “Our organizations worked hard together in gaining termination rights for creators under the Copyright Act, and we continue to work together to ensure that all creators benefit from these hard-won gains.”
The Authors Guild (www.authorsguild.org ) is the oldest and largest society of published authors in the U.S., representing more than 8,500 book authors and freelance writers. Its members represent the broad sweep of American authorship, including authors of literary and genre fiction, nonfiction, and academic works, as well as children’s book authors, textbook authors, freelance journalists and poets. It advocates for fair contracts, effective copyright protection, and free expression.
The Songwriters Guild of America (www.songwritersguild.com) is the nation’s oldest and largest organization run exclusively by and for songwriters, with more than five thousand members nationwide and over seventy-five years of experience in advocacy for songwriters’ rights. It is a voluntary association comprised of songwriters, composers and the estates of deceased members. SGA’s efforts on behalf of all U.S. songwriters include advocacy before regulatory agencies and the U.S. Congress, and participating in litigation of significance to the creators of American music.
Feel free to foward, post, or tweet. Here is a short URL for linking: http://tiny.cc/43mez
Sent to June from
The Authors Guild 31 E 32nd St Fl 7 New York, NY 10016 US
In establishing termination rights for creators – allowing them to end transfers of their copyrights to publishers after a set number of years – Congress established rules for terminations for both pre- and post-1978 works. However, because of a quirk in the drafting of the law, there may be an inadvertent gap for works governed by pre-1978 contracts that were not published or registered for copyright until 1978 or later.
“The legislative drafting error dates back to a major revision of copyright law in 1976,” said Aiken. “The potential problem is serious and pressing – the time to file thirty-five year termination notices for post-1978 works commences in 2011 – but it’s a technical problem that can be resolved with a straightforward legislative clarification.” Carnes added, “We simply need to make sure that, as a matter fairness, certain categories of works that may have fallen through the cracks in drafting the 1976 Act are now clearly included in the law.”
There are various scenarios in which confusion may arise under the law as currently written. Songwriters often sign exclusive agreements with music publishers covering the transfer of all songs written prospectively over a period of several years. For example, Charlie Daniels’ classic “The Devil Went Down to Georgia,” released on his band’s 1979 album, almost certainly was subject to a pre-1978 contract and might fall into the statutory “gap.” Moreover, nearly all books published in 1978 and most books published in 1979 were subject to pre-1978 contracts and therefore could fall within the suspected gap as well. John Irving’s “The World According to Garp,” published in 1978, and Beverly Cleary’s “Ramona and Her Mother” and Tom Wolfe’s “The Right Stuff,” both published in 1979, are all likely to be in this category.
“Authors, particularly those early in their careers, frequently have little or no bargaining power with publishers,” said Aiken. “The termination right effectively recognizes that imbalance, giving authors the power to renegotiate their contracts in the rare cases where a book has a commercial life far longer than expected.”
The legislative record of the 1976 Copyright Act is clear in expressing Congress’ intent that termination rights be granted to all authors. According to the House and Senate Reports accompanying the legislation, “[a] provision of this sort is needed because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work's value until it has been exploited.” Both SGA and the Authors Guild were instrumental in fighting successfully for the inclusion of termination rights in the 1976 law.
“Our shared interests in the representation of the creative communities in our respective fields have prompted us to act together on this initiative, as we will in the future on other legislative matters of mutual concern” said Carnes. “Our organizations worked hard together in gaining termination rights for creators under the Copyright Act, and we continue to work together to ensure that all creators benefit from these hard-won gains.”
The Authors Guild (www.authorsguild.org ) is the oldest and largest society of published authors in the U.S., representing more than 8,500 book authors and freelance writers. Its members represent the broad sweep of American authorship, including authors of literary and genre fiction, nonfiction, and academic works, as well as children’s book authors, textbook authors, freelance journalists and poets. It advocates for fair contracts, effective copyright protection, and free expression.
The Songwriters Guild of America (www.songwritersguild.com) is the nation’s oldest and largest organization run exclusively by and for songwriters, with more than five thousand members nationwide and over seventy-five years of experience in advocacy for songwriters’ rights. It is a voluntary association comprised of songwriters, composers and the estates of deceased members. SGA’s efforts on behalf of all U.S. songwriters include advocacy before regulatory agencies and the U.S. Congress, and participating in litigation of significance to the creators of American music.
Feel free to foward, post, or tweet. Here is a short URL for linking: http://tiny.cc/43mez
Sent to June from
The Authors Guild 31 E 32nd St Fl 7 New York, NY 10016 US
Tuesday, March 30, 2010
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.
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
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
Wednesday, February 17, 2010
An Inconvenient Truth: It's income.
June --
I am a Freelance Violinist and Violin Teacher.
Does the rule of not factoring the first $600 of the income from a given "employer" apply to self-employed people?
For example, if I teach a student and had only $599 income from him during a year do I factor that money in anyway?
I realize you've mentioned that indies do not have "employers" but I noticed some of the contractors I played for in recent years did not send me 1099 if the combined income from the gigs did not exceed $600. I would really appreciate clarification in this matter!
Great blog - very helpful.
Unfortunately makes me realize how little I know about the taxes I should be paying... Dominika
Houston, TX
Hello Dominika,
I assume "factoring" is your euphemism for "should I include it as income?
Yes, you should. Any money -- in any form -- that you receive for services performed is income. Intentionally not including income is fraud.
Your students are not your employers. They are your clients or customers to whom you sell your services. If you taught in a school and received a salary from the school, then the school would be your employer.
Anyone who pays an indie $600 or more is supposed to send the indie a 1099-MISC stating the amount of money paid. A lot of people neglect to send any 1099s.
If because your income is under $600 a client doesn't send you a 1099 it is still income. Think of it this way: If you had 100 clients, all of whom paid you $599, you would have earned $59,900. Would you claim zero income?
Dominika, you really need information. I suggest you read these posts 1099s W2s W4s W9s.
You might want to pass on what you learn to alert your fellow musicians. Bands and many music groups tend to get paid in cash and then pay the musicians in cash. The leader then doesn't know or forgets to send 1099s. The band members then conveniently forget that they are supposed to include the cash as income.The inconvenient truth is that all income must be claimed on your tax return.
You can offset that inconvenience by knowing more about legitimate deductions. Check out my book at the library or buy it at a sale price here: Self-employed Tax Solutions . It will give you a basic understanding of indie taxes. It is written like my blog -- which you say you like, THANKS! -- in a clear easy-to-understand style. Educate yourself. You'll feel good about it. It will give you indie-business confidence.
Cheers,
June
Wednesday, September 9, 2009
Backup! Backup! Backup!
June --
I'm a Brooklyn, NY muscian - filing as self-employed for about 5 years.
I have been filing with the IRS as self-employed but for 2008, records of my gigs and how much they pay got destroyed as they were on my hard-drive and I didn't have a paper copy. What are my options?
Thank you!
Jeremy
Hi Jeremy,
First, make sure that you have proof of the hard-drive's destruction. Then go about reconstructing your life for 2008.
For instance, printout a page from a club's website where you played. Estimate your income. Ask the guys you played the gigs with for any records they have. If the clubs advertise in print get copies. Go take pictures of the clubs. Use the previous or following year as a guide.
For expenses, ask your credit card companies for back statements. Do the same with your bank.
Very important to know for you and all indies: Something logged in a computer -- in Word or Excel, or Quicken -- is not proof to the IRS. Any just slightly clever person can make the records say anything he or she wants them to say. You must have proof. Documents. The document can be on computer but it must be something that proves income or an expense -- cancelled check; credit card receipt; store receipt.
-- June
I'm a Brooklyn, NY muscian - filing as self-employed for about 5 years.
I have been filing with the IRS as self-employed but for 2008, records of my gigs and how much they pay got destroyed as they were on my hard-drive and I didn't have a paper copy. What are my options?
Thank you!
Jeremy
Hi Jeremy,
First, make sure that you have proof of the hard-drive's destruction. Then go about reconstructing your life for 2008.
For instance, printout a page from a club's website where you played. Estimate your income. Ask the guys you played the gigs with for any records they have. If the clubs advertise in print get copies. Go take pictures of the clubs. Use the previous or following year as a guide.
For expenses, ask your credit card companies for back statements. Do the same with your bank.
Very important to know for you and all indies: Something logged in a computer -- in Word or Excel, or Quicken -- is not proof to the IRS. Any just slightly clever person can make the records say anything he or she wants them to say. You must have proof. Documents. The document can be on computer but it must be something that proves income or an expense -- cancelled check; credit card receipt; store receipt.
-- June
Monday, May 4, 2009
Audit Choice
Hi June,
Graphic design / music. Three years.
I'm being audited by the IRS this year for 2006. I don't know why. I made nothing. My accountant says it's because I made $1000 but we deducted $3000. It was the year I bought my laptop. I'm so glad I purchased your book, Self-employed Tax Solutions, a year ago.
I've been gathering my receipts and realized that about 5 of the important receipts i used for 2006 actually are dated jan-mar of 2007. If didn't use them for 2007 tax year, is it okay to have used them in 2006? I should have looked more carefully.
Best,
Sandy
Hi Sandy,
Just about all audits are randomly chosen. You might also think of them as chosen from batches. An unmarried photographer with a loss for a several years may be in one batch. Another photographer with several years of loss but married to a high-earning spouse may be in another batch because the situation may look like a home-made tax shelter -- an expensive hobby supported by a spouse. So, none of us laymen knows why you were chosen. I doubt your accountant is correct.
You are a cash-basis taxpayer -- explained here. You cannot use 2007 receipts for 2006. Yes, you should have been more careful. As careful as you would be were you designing my promo material and had to approve proofs before having 5000 printed.
Best,
June
Thursday, February 5, 2009
Pianist's Dad
Isn't it interesting how certain events happen at just the right time? I have many, many questions from my readers sitting in my DO bin. I answer as quickly as time allows and pretty much in the order received. But this one from Carlos I received this morning and it fits so well with yesterday's post Writer's Mom that I wanted to juxtapose in order to further my point to parents of indies.
A while back I received a request for my business expense list from Carlos, a Pianist/Organist/Cantor. He mentioned in the request that he was blind. When I sent him the expense list I asked if he were blind or were he using that to mean blind to understanding taxes. Here's his response.
Good Morning June,
Thank you for sending me the expenses list for musicians. Actually, my father always help me prepare my tax and he was the one who recommended me to send you an email because your website helped him to discover what are the expenses that could be legally deduct on my income tax as a self-employed musician. He didn't know this before because we only have a tax preparer not a tax adviser or advocate like you do. Even I don't prepare my own income tax, it is nice to learn things about taxes and the legal things around it. Sorry to mention my being blind in one of your questionaire, it really has no relation on your advice. I have read some of your advice to the indies like me, I could compare you to my spiritual director who only advise me for the good of my soul. No cutting corners. God bless you, you are one of a kind.
carlos
Fairfax, VA
Hi Carlos,
Thanks for getting back to me. You have a good -- and smart -- father. I am glad he had you contact me. So many parents think that the way to help their children -- even kids in their 20s and 30s -- is to do for them instead of teaching them how to do. Check out this most recent blog post "Writer's Mom" at http://junewalkeronline.blogspot.com/2009/02/writers-mom.html .
I am mailing you -- and your dad -- a gift. Listen and learn.
Thank you for your blessing. I very much appreciate it.
Best regards,
June Walker
Friday, December 12, 2008
Reimbursed expenses: Income or not?
Hi June,
I found your site very relieving to a current new gas reimbursement situation.
I'm a musician from Altamonte, Springs, FL. 13 years as an indie with a clean tax record using an accountant every year .
I'm in a band. My drummer drives his own van for me to the gigs with equipment and me inside, but I own the band. He's a good guy. Since the cost of gas has gone up, he has begun charging me gas mileage at approx. $.59 per mile plus tolls. I pay him that with no problem... he's doing me a great service and has done so for 13 years. Recently, my new accountant advised me to put the whole amount (reimbursements and gigs) on my 1099 to him at the end of the year.
I never have done this even when he sporadically charged me for gas w/wear and tear as according to the govt. approved numbers.
However, my drummer (who is not happy about what my new accountant advised) would prefer that I put only the amount of the gig on this year's 1099 (not the reimbursement) since only the gig is real income.
Things are a bit tense.
Usually, before this, I've deducted mileage expenses anyway in my categories at the end of the year should the IRS question it. It's all above board and honest. I'm a chapter "S" corp. and my friend is viewed a subcontractor to me not an employee.
My drummer is afraid/concerned about being red flagged if his 1099 looks different from years past this time around.
Please give me insight and or opinionated options (or hybrids acceptable to the IRS) to maintain my friendship with him should I put or not put both the mileage and the gig total as one at the end of the year. He would rather divide the two amounts himself. I see his point. What are your thoughts? I need some piece of mind between my friend and myself. I appreciate your time and look forward to hearing from you.
Dan
Well, Dan, the big questions may be how good a friend and how good a drummer?
Whatever you pay the drummer, whether for his drumming or driving is income to him. You can give him a statement with his 1099 showing how much is for drumming and how much is for driving.
The drummer then claims the entire income and deducts the cost or running his van using either the mileage method or the actual method. See a little more about auto expenses here More about Business Auto Expense .
You deduct as an expense the total amount that you pay the drummer for both.
In order for you to deduct the amount you pay the drummer for his driving, the drummer must claim what you pay him as income.
There are other ways of treating expense reimbursements -- see here expenses -- reimbursed (6) -- but the upshot is: In order for somebody to deduct the cost of reimbursements for expenses somebody else must include the reimbursement as income. If the drummer did not claim the driving reimbursements as income then he could not deduct the cost of using his van to drive you around.
Best,
June
I found your site very relieving to a current new gas reimbursement situation.
I'm a musician from Altamonte, Springs, FL. 13 years as an indie with a clean tax record using an accountant every year .
I'm in a band. My drummer drives his own van for me to the gigs with equipment and me inside, but I own the band. He's a good guy. Since the cost of gas has gone up, he has begun charging me gas mileage at approx. $.59 per mile plus tolls. I pay him that with no problem... he's doing me a great service and has done so for 13 years. Recently, my new accountant advised me to put the whole amount (reimbursements and gigs) on my 1099 to him at the end of the year.
I never have done this even when he sporadically charged me for gas w/wear and tear as according to the govt. approved numbers.
However, my drummer (who is not happy about what my new accountant advised) would prefer that I put only the amount of the gig on this year's 1099 (not the reimbursement) since only the gig is real income.
Things are a bit tense.
Usually, before this, I've deducted mileage expenses anyway in my categories at the end of the year should the IRS question it. It's all above board and honest. I'm a chapter "S" corp. and my friend is viewed a subcontractor to me not an employee.
My drummer is afraid/concerned about being red flagged if his 1099 looks different from years past this time around.
Please give me insight and or opinionated options (or hybrids acceptable to the IRS) to maintain my friendship with him should I put or not put both the mileage and the gig total as one at the end of the year. He would rather divide the two amounts himself. I see his point. What are your thoughts? I need some piece of mind between my friend and myself. I appreciate your time and look forward to hearing from you.
Dan
Well, Dan, the big questions may be how good a friend and how good a drummer?
Whatever you pay the drummer, whether for his drumming or driving is income to him. You can give him a statement with his 1099 showing how much is for drumming and how much is for driving.
The drummer then claims the entire income and deducts the cost or running his van using either the mileage method or the actual method. See a little more about auto expenses here More about Business Auto Expense .
You deduct as an expense the total amount that you pay the drummer for both.
In order for you to deduct the amount you pay the drummer for his driving, the drummer must claim what you pay him as income.
There are other ways of treating expense reimbursements -- see here expenses -- reimbursed (6) -- but the upshot is: In order for somebody to deduct the cost of reimbursements for expenses somebody else must include the reimbursement as income. If the drummer did not claim the driving reimbursements as income then he could not deduct the cost of using his van to drive you around.
Best,
June
Friday, August 29, 2008
You cannot deduct the price of something you did not pay for.
Dear June,
As an independent composer, one of my revenue sources is from the sale of my sheet music. I occasionally give away copies of my sheet music as a way of nurturing relationships with prospective commissioning clients. Digital technology makes this a simple and inexpensive way for me to reach out and keep my name out there. Can I claim a deduction for the retail value of the sheet music I give away?
Thanks so much!
Rick
State College, PA
Dear Rick,
No, you may deduct cost only.
The same would apply to musicians who give away their CDs as promotion.
The same would apply were a musician to give a free performance for a charitable organization. The only deductible expense would be any out of pocket costs.
The reason. You cannot deduct the price of something you did not pay for.
Best,
June
As an independent composer, one of my revenue sources is from the sale of my sheet music. I occasionally give away copies of my sheet music as a way of nurturing relationships with prospective commissioning clients. Digital technology makes this a simple and inexpensive way for me to reach out and keep my name out there. Can I claim a deduction for the retail value of the sheet music I give away?
Thanks so much!
Rick
State College, PA
Dear Rick,
No, you may deduct cost only.
The same would apply to musicians who give away their CDs as promotion.
The same would apply were a musician to give a free performance for a charitable organization. The only deductible expense would be any out of pocket costs.
The reason. You cannot deduct the price of something you did not pay for.
Best,
June
Friday, April 11, 2008
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
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
Wednesday, March 12, 2008
A Terrific Mother-in-Law
June--
My future son-in-law is a full time student. He plays with a band most every weekend. To his surprise, the band gave him a 1099 MISC. He of course had no clue this was going to happen and had not paid any taxes.
I figure the band is treating him as a self-employed musician. I'm trying to help him reduce his taxes. Can we deduct the expenses of the silly suits he had to buy for the band and the microphone he had to buy? What about mileage to and from the gigs? Am I overlooking anything else? He uses his computer for school, but also to communicate with the band and get the music to practice. Can he deduct part of the cost of the Internet? Anything else?
Thanks!
Deborah
Baton Rouge, LA
Deborah ... "to his surprise the band gave him a 1099-MISC." Did he think that because music is so loved in this country that musicians are exempt from paying taxes? No way. Big tax credits and loopholes are only for the very rich. How naive of him.
You say "the band is treating him as a self-employed musician." Well, that's because he is a self-employed musician
Click here for a complimentary list of 100+ Indie Business Expenses to get started on knowing what expenses he may deduct.
You'll be a terrific mother-in-law!
Best,
June
My future son-in-law is a full time student. He plays with a band most every weekend. To his surprise, the band gave him a 1099 MISC. He of course had no clue this was going to happen and had not paid any taxes.
I figure the band is treating him as a self-employed musician. I'm trying to help him reduce his taxes. Can we deduct the expenses of the silly suits he had to buy for the band and the microphone he had to buy? What about mileage to and from the gigs? Am I overlooking anything else? He uses his computer for school, but also to communicate with the band and get the music to practice. Can he deduct part of the cost of the Internet? Anything else?
Thanks!
Deborah
Baton Rouge, LA
Deborah ... "to his surprise the band gave him a 1099-MISC." Did he think that because music is so loved in this country that musicians are exempt from paying taxes? No way. Big tax credits and loopholes are only for the very rich. How naive of him.
You say "the band is treating him as a self-employed musician." Well, that's because he is a self-employed musician
Click here for a complimentary list of 100+ Indie Business Expenses to get started on knowing what expenses he may deduct.
You'll be a terrific mother-in-law!
Best,
June
Friday, February 8, 2008
Database of Indie-Savvy Tax Pros
Hi.
I'm a private math tutor and a musician, and this will be my third year doing my taxes as 100% self-employed. I'm about to order your book. I've done my taxes myself the past few years, with some advice from unpaid volunteers (retired big-company CPAs) which I'm now suspecting may have been poor advice. This year I want to hire someone to review my past 2 years, plan for next year, and educate me so that I can do my taxes myself with confidence that I'm not screwing myself. So my question is: How do I shop for a CPA with assurance that I won't get a Sammy Segar?
What questions should I ask to gauge if someone is knowledgeable about self-employment issues? And not just knowledgeable- but someone who really know the ins and outs and what questions to ask me so that I'm maximizing every possible expense and deduction.Thanks for any tips!
Lacie from Austin, TX
I responded -- see Two Parts to Finding the Tax Professional Right for You -- and Lacie said:
Thanks June. I've been learning so much from your website since I discovered it a couple of weeks ago, and am looking forward to reading your book when it arrives. I especially dig that you take the time to answer the little subtleties that make each case unique. I can imagine that from your point of view as an expert, a lot of the questions you get sound like the same one over and over. It’s nice that you’re sensitive to our difficulty translating general information to our own situation--and so friendly and patient-sounding about it to boot!I'm still a little nervous about knowing *how to know* if "this guy is any good".
Last year I thought the city volunteer I used was super nice and helpful and felt less stressed after meeting with him because I came home with answers. Then all these months later, I'm learning that these answers were wrong and cost me money. Each person that answers my questions in this field does so with such authority, it's easy to think I’m done when really I should triple and quadruple check the answer. So my plan is to meet next week with the CPA (actually I'm not even sure now if she is a CPA- didn't even think about there being a difference between one and a tax preparer before reading one of your posts yesterday- that's how much I don't know), read your book, revel in the relief of having been armed with some knowledge, then attempt to give an educated review of the meeting and this particular tax professional. The only screening I did was ask her on the phone if she worked with indies. She said that was her primary clientèle, so that's hopeful. I'll let you know how it goes.
Lacie
I asked Lacie to please let us know about her new tax pro. I am attempting to compile a national database of indie-friendly tax pros but so far the list is very, very small!
So, I ask all of you:
Please help your fellow indies. If any of you has a tax preparer that you think really understands the indie tax situation, please let me know. I am being inundated with requests from around the country for recommendations. Let's build my database of indie-friendly tax pros
Thanks.
June
I'm a private math tutor and a musician, and this will be my third year doing my taxes as 100% self-employed. I'm about to order your book. I've done my taxes myself the past few years, with some advice from unpaid volunteers (retired big-company CPAs) which I'm now suspecting may have been poor advice. This year I want to hire someone to review my past 2 years, plan for next year, and educate me so that I can do my taxes myself with confidence that I'm not screwing myself. So my question is: How do I shop for a CPA with assurance that I won't get a Sammy Segar?
What questions should I ask to gauge if someone is knowledgeable about self-employment issues? And not just knowledgeable- but someone who really know the ins and outs and what questions to ask me so that I'm maximizing every possible expense and deduction.Thanks for any tips!
Lacie from Austin, TX
I responded -- see Two Parts to Finding the Tax Professional Right for You -- and Lacie said:
Thanks June. I've been learning so much from your website since I discovered it a couple of weeks ago, and am looking forward to reading your book when it arrives. I especially dig that you take the time to answer the little subtleties that make each case unique. I can imagine that from your point of view as an expert, a lot of the questions you get sound like the same one over and over. It’s nice that you’re sensitive to our difficulty translating general information to our own situation--and so friendly and patient-sounding about it to boot!I'm still a little nervous about knowing *how to know* if "this guy is any good".
Last year I thought the city volunteer I used was super nice and helpful and felt less stressed after meeting with him because I came home with answers. Then all these months later, I'm learning that these answers were wrong and cost me money. Each person that answers my questions in this field does so with such authority, it's easy to think I’m done when really I should triple and quadruple check the answer. So my plan is to meet next week with the CPA (actually I'm not even sure now if she is a CPA- didn't even think about there being a difference between one and a tax preparer before reading one of your posts yesterday- that's how much I don't know), read your book, revel in the relief of having been armed with some knowledge, then attempt to give an educated review of the meeting and this particular tax professional. The only screening I did was ask her on the phone if she worked with indies. She said that was her primary clientèle, so that's hopeful. I'll let you know how it goes.
Lacie
I asked Lacie to please let us know about her new tax pro. I am attempting to compile a national database of indie-friendly tax pros but so far the list is very, very small!
So, I ask all of you:
Please help your fellow indies. If any of you has a tax preparer that you think really understands the indie tax situation, please let me know. I am being inundated with requests from around the country for recommendations. Let's build my database of indie-friendly tax pros
Thanks.
June
Tuesday, January 22, 2008
Define Your Business Creatively and Carefully
Hi, June:
I'm a self-employed musician in Denver, Colorado. I started my music career in 2004 and became fully self-employed in the fall of 2005.
I took interest in the Jack or Jane of All Trades: How does an indie define a business? post on your blog and would like to know how an indie treats several "irons in the fire" that are more difficult to combine under one heading.
In my case, I currently make very little money from music efforts and so I clean houses to pay my bills (sort of the introvert's version of waiting tables). I find and work for my own clients so I pay my own taxes on the housecleaning income just like I do on the music income.
It seems like a bit of a stretch for me to combine music and housecleaning under one heading unless I say this: because many of my music endeavors focus on healing (prayer services, hospice music therapy, rituals of celebration, etc.), and some of the performances I offer also take place in homes, the best I could argue would be that I create spaces of health and well-being through music, decluttering, and cleaning services.
But if this seems too far-fetched, could you offer a brief explanation of how I would declare both streams of revenue (music + housecleaning) on Schedule C?
Best wishes,
Rebecca
Wow, Rebecca! You are great. You are thinking just the way an indie should think -- creatively and in a businesslike fashion.
However, yes it is too much of a stretch. you must keep the two indie businesses separate. That means two set of records -- one that tallies income and expenses for your music business and another that records income and expenses for you cleaning service.
Your tax pro will need to file two Schedules C. A loss from one may be subtracted from the profit of the other when she calculates your taxable income.
Keep up your creative thinking!
Best,
June
I'm a self-employed musician in Denver, Colorado. I started my music career in 2004 and became fully self-employed in the fall of 2005.
I took interest in the Jack or Jane of All Trades: How does an indie define a business? post on your blog and would like to know how an indie treats several "irons in the fire" that are more difficult to combine under one heading.
In my case, I currently make very little money from music efforts and so I clean houses to pay my bills (sort of the introvert's version of waiting tables). I find and work for my own clients so I pay my own taxes on the housecleaning income just like I do on the music income.
It seems like a bit of a stretch for me to combine music and housecleaning under one heading unless I say this: because many of my music endeavors focus on healing (prayer services, hospice music therapy, rituals of celebration, etc.), and some of the performances I offer also take place in homes, the best I could argue would be that I create spaces of health and well-being through music, decluttering, and cleaning services.
But if this seems too far-fetched, could you offer a brief explanation of how I would declare both streams of revenue (music + housecleaning) on Schedule C?
Best wishes,
Rebecca
Wow, Rebecca! You are great. You are thinking just the way an indie should think -- creatively and in a businesslike fashion.
However, yes it is too much of a stretch. you must keep the two indie businesses separate. That means two set of records -- one that tallies income and expenses for your music business and another that records income and expenses for you cleaning service.
Your tax pro will need to file two Schedules C. A loss from one may be subtracted from the profit of the other when she calculates your taxable income.
Keep up your creative thinking!
Best,
June
Monday, January 21, 2008
Define Your Business Broadly: music is music is music
Hi June,
I love your book, it has given me so many ideas.
I have a question about something mentioned in an early chapter, about defining your career as "broadly and honestly" as possible. I'm an aspiring singer-songwriter and am taking guitar and singing lessons, as well as purchasing truckloads of music, equipment, and attending lots of concerts, in the hope of becoming a true professional.
For a "day job" I teach piano. As you can imagine, I would love to write off as many of my music expenses as possible, however, I've yet to earn any "income" as a singer-songwriter. While I can make the case that all these expenses inspire me as a musician and have honestly given me ideas as a piano teacher, I do not consider them to be indispensable to my piano teaching. Is there any justification for deducting these expenditures, or would you recommend against it?
Kristin from Mountain View, CA
Hi Kristin,
This is a great question. So many indies have the same dilemma when there really should be no doubt at all.
First of all, forget about calling your piano teaching your "day job." I have a client who is a jazz drummer. His love is free jazz but he gets bigger audiences and so makes more money when he plays Dixieland. Do you think he should not think of those performances as part of his music business?
If a song writer writes a jingle for a commercial -- not his love but it pays the rent. Should he not consider that part of his music business?
Is there no connection between your teaching music and your writing music?
You are a music business. Everything you do to make money or to try to make money that involves music is part of your business.
And, thank you for your generous comment about Self-employed Tax Solutions. Please tell your friends and colleagues. Sing all about it!
All the best,
June
I love your book, it has given me so many ideas.
I have a question about something mentioned in an early chapter, about defining your career as "broadly and honestly" as possible. I'm an aspiring singer-songwriter and am taking guitar and singing lessons, as well as purchasing truckloads of music, equipment, and attending lots of concerts, in the hope of becoming a true professional.
For a "day job" I teach piano. As you can imagine, I would love to write off as many of my music expenses as possible, however, I've yet to earn any "income" as a singer-songwriter. While I can make the case that all these expenses inspire me as a musician and have honestly given me ideas as a piano teacher, I do not consider them to be indispensable to my piano teaching. Is there any justification for deducting these expenditures, or would you recommend against it?
Kristin from Mountain View, CA
Hi Kristin,
This is a great question. So many indies have the same dilemma when there really should be no doubt at all.
First of all, forget about calling your piano teaching your "day job." I have a client who is a jazz drummer. His love is free jazz but he gets bigger audiences and so makes more money when he plays Dixieland. Do you think he should not think of those performances as part of his music business?
If a song writer writes a jingle for a commercial -- not his love but it pays the rent. Should he not consider that part of his music business?
Is there no connection between your teaching music and your writing music?
You are a music business. Everything you do to make money or to try to make money that involves music is part of your business.
And, thank you for your generous comment about Self-employed Tax Solutions. Please tell your friends and colleagues. Sing all about it!
All the best,
June
Sunday, May 20, 2007
Not filed a return for many years? Here's where to start
Hi June,
Received your book, Self-employed Tax Solutions, from Amazon and can't wait to dive in and then to tackle my 6 years of back taxes. Hopefully with the book holding my hand, I can do it.
I just discovered boxes of tax materials and bank statements from up to 20 years ago. I hope I'll find (in your book?) that I can toss them.
Thanks again for your help.
All the best,
Beth ... music business
Hi Beth,
Here's a link to my site on how long to keep records, How long to keep tax records . There is a longer explanation in my book starting on page 138 and there's also something about record storage which starts on page 189.
When tackling six back years of tax returns, the task can be daunting. While you're doing it, rather than overdoing it, take your time; take lots of breaks. It’s a lot like cleaning out a closet. Here’s some steps to get you on the right path:
Received your book, Self-employed Tax Solutions, from Amazon and can't wait to dive in and then to tackle my 6 years of back taxes. Hopefully with the book holding my hand, I can do it.
I just discovered boxes of tax materials and bank statements from up to 20 years ago. I hope I'll find (in your book?) that I can toss them.
Thanks again for your help.
All the best,
Beth ... music business
Hi Beth,
Here's a link to my site on how long to keep records, How long to keep tax records . There is a longer explanation in my book starting on page 138 and there's also something about record storage which starts on page 189.
When tackling six back years of tax returns, the task can be daunting. While you're doing it, rather than overdoing it, take your time; take lots of breaks. It’s a lot like cleaning out a closet. Here’s some steps to get you on the right path:
- Get one file box for each year. Go through each paper looking at dates only. Put each paper into the "year" box to which it belongs. Pay no attention to what the paper relates to.
- Now go through each box, sorting the paper into the following piles.
- Personal, nothing to do with taxes
- Income
- Expenses
- Investments
- Other money related things
- Ask tax pro
- OK to throw away [But don’t discard these until you’ve had the returns prepared … just in case.]
- Get out Tax Solutions and sort and tally your records as explained in the Most Simple System.
Now you’re ready to go see your tax preparer.
Cheers!
June
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