# Musicians or other performing artists



## halfpint (Jan 24, 2005)

As a solo musician is it best to set up as a business or just as an individual? So far I have done everything gratis (weddings for friends or relatives, teaching at festivals, nursing homes and local fairs). But next year I have several events set up that I am being paid for, and want to know the best way to handle this. 

If either is acceptable, what are the benefits of creating a business vs just putting it on your taxes as an individual. 

Dawn


----------



## clovis (May 13, 2002)

Well, I am not an attorney or an accountant.

Since your likelihood of being sued is small as a musician, I think setting up as a sole proprietor might be your best bet.

If you want a seperate checking account, a DBA should suffice at the bank.

Alot has to do with how much you are earning each year. Lets say you are earning less than a few grand. I think you can just add that income to your 1099.

If you earn more than that...and I do not know where the cut off is....you should consider doing a Schedule C in addition to your 1099. 

A schedule C will allow you to deduct mileage, and expenses. Expenses are wide ranging. 

I *strongly suggest* getting a Schedule C form before you start, and study it with intensity now. It will save you time, frustration, and money if you understand the tax form. For instance, should you keep your gas reciepts? Yes, if you are able to opt for the vehicle operation costs on the C form. In your case, I would bet that you will take the mileage deduction. This means that you will have to keep a log book of the starting and ending mileage on your odometer, and the miles used.

The C form is really not that complicated, nor is it scary to fill out. It is actually quite simple to understand.

I think the thing that gets most people is that they do not keep good records, nor do they understand what deductions they can take.

Be organized in what you do today, keep good records, and April 15 will be a breeze.

Clove


----------



## EarthSheltered (May 9, 2008)

clovis said:


> A schedule C will allow you to deduct mileage, and expenses. Expenses are wide ranging.
> 
> I *strongly suggest* getting a Schedule C form before you start, and study it with intensity now. It will save you time, frustration, and money if you understand the tax form. For instance, should you keep your gas reciepts? Yes, if you are able to opt for the vehicle operation costs on the C form. In your case, I would bet that you will take the mileage deduction. This means that you will have to keep a log book of the starting and ending mileage on your odometer, and the miles used.
> 
> ...


I know nothing about music, but Clovis is correct. Start doing your business as a business right from the start, and you will be thankful April 15. Organization is key.


----------



## clovis (May 13, 2002)

If you complete a schedule C, you will also have to complete another form to figure your "Self Employment Tax."

A simple form, but this is where you are going to pay thru the nose. If you work for someone else, they pay you 1/2 of your social security, which is 7.4%.

With the SE tax, you get to pay all 15.8% yourself!!!!!!

Isn't the government wonderful???

The actual tax...at least for me...has never been bad. The SE tax, on the other hand, almost sank my business many, many years.

Not trying to scare you, but be aware of this tax, and potential land mine. You should set aside some money for taxes, especially the SE tax.

Clove


----------



## Alice In TX/MO (May 10, 2002)

Just as a general rule of thumb, we put 30% of our income aside for taxes.


----------



## halfpint (Jan 24, 2005)

Thank you all for the information, I have downloaded the IRS schedule c, instructions for schedule C, and schedule SE. I've been reading a good bit, I think I'll need some time to digest all this, read over again and figure out what to do. I can see now why some musicians have all proceeds and payments go to their church, then ask the church to pay them a salary that is a percentage of what they bring in.

Dawn


----------



## Sunbee (Sep 30, 2008)

Do you just play venues? Or do you also teach? Because if you will teach out of your home, you probably should have a chat with your home/renters agent about insurance before you start. There may be something prohibiting it in your lease if you're renting--it's standard boilerplate (though I've never had a landlord be unwilling to cross that section out), and if you're in a zoned area, it may be prohibited there too. There may also be a potential suit risk if you play in venus with expensive items--such as grandma's antique vase being used to hold flowers at the wedding. How is your instrument insured? Is the coverage adequete for what you are doing now?
You can file a C or a C-EZ if you don't incorporate. They are pretty straight forward as tax forms go. If you make enough to owe taxes (from this and any other sources) you may need to make quarterly estimated tax payments. Clovis is right on about deductions. The hardest part about the millage deduction is actually writing down the milages: a notebook permanently residing in the glovebox works for me. It's a nice deduction.
Have you talked to other local musicians to find out what the standard rate is? Around here it is $75/musician/hour for gigs. They can probably also point you in the direction of an accountant or two that works with musicians. You will want to talk to an accountant who knows musicians if you have an instrument that will appreciate in actual value but that the IRS considers to depreciate.


----------



## Ed Norman (Jun 8, 2002)

I had a full time day job back in the 80s and played the bars and clubs and dances and dives several nights a week. The way most people I knew handled it was to get paid in cash and be done with it. Wink.


----------



## clovis (May 13, 2002)

halfpint said:


> Thank you all for the information, I have downloaded the IRS schedule c, instructions for schedule C, and schedule SE. I've been reading a good bit, I think I'll need some time to digest all this, read over again and figure out what to do. I can see now why some musicians have all proceeds and payments go to their church, then ask the church to pay them a salary that is a percentage of what they bring in.
> 
> Dawn


Wow!!!! I am impressed!!!!! You will thank yourself down the line for doing this research.

So the next time that someone asks you to buy lunch, because "you can write it off", you will know that only 50% of their lunch is deductable, and none of yours.

You will find that the mileage deduction is your best friend, come tax time. Make sure you write down ALL the mileage that is due to you, even if it is only 3 miles.

Don't forget to keep all your reciepts, even if it is just for a set of cheap strings, or a single cassette tape. 

Legitimate tax deductions will help keep you from paying taxes, no matter how small, KEEP THAT RECIEPT!!!!!!

Clove


----------



## halfpint (Jan 24, 2005)

Clove;
You mention strings and such. Around here, the general consensus that I got from most of the musicians is that you can't have your instruments and equipment as a business expense unless you`use it exclusively for your business. So if you wanted to go jam (musicians term for sit around and play music for fun) with a couple of friends, you could not take an instrument that was part of the business. Do you know of any IRS document or such that I could look at to research this? I purchased a fairly expensive instrument this year, plus a small amp (I already have a nice sound system, but the small amp is good for playing small weddings, nursing homes and such), and it would be nice to be able to include it in my taxes if possible. If I have to be paid this year, it may not be a problem as I can get some paid jobs at Christmas if necessary.

Dawn


----------



## clovis (May 13, 2002)

Dawn,
That is a question you are going to have to research on your own, or consult a tax pro. 

Reason tells me that the IRS will never know if you carried a Martin D-45 to a jam, and why would they care? Does this mean that if I am a landscaper, I cannot use a shovel from the business for use at home? Who is going to tattle to the IRS?

On the other hand, the music business *may* be one of the abused tax businesses, and the IRS might keep a very watchful eye, prone to audits, etc.

One point that I want to make is this: Do your own research and consult a tax pro on your own. I made the mistake of listening to other business owners who really did not know what they were talking about. One guy told me I could depreciate my car and the mileage, which is not true. Lots of myths and half-truths floating around out there. Again, DO NOT rely on your peers for tax info.

Also, before I forget, there are limits to capital investments that can be written off, instead of being depreciated. I am going to suggest that you know what these limits are before you buy another instrument with the hopes of writing it off. There is a difference, if I understand correctly, between an $800 stand up bass and a pre-war Martin. (Do not rely on me for this info...it is just a heads up on something you need to study.) 

Clove


----------

