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Old 05-12-2013, 05:51 PM
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Midnite Zephyr Midnite Zephyr is offline
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Default Re: Drums and American taxes

Quote:
Originally Posted by bermuda View Post
If you're declaring (and can prove) income from music, then you are entitled to take deductions.

And, declare everything you can. No amount is too small. I keep receipts and submit expenses for a couple of screws or washers used on my gear. 50 and 60 adds up over the year, and could easily bump you down into the next lower tax bracket.

But, get a tax guy, don't try this yourself with TurboTax. If you get audited for one year, the IRS can also go back and examine prior returns. If you're walking a fine line with your deductions, you don't want to answer their difficult questions. Play it straight and you'll be fine.

Bermuda
Ya, I wanna play it straight. I just know that people are getting deduction for all kinds of stuff these days. We should be able to do the same regardless of whether we are showing a profit or not. I had a business a couple years ago with my ex-wife and we showed a net loss for a couple years. It helped our taxes overall for sure.

Quote:
Originally Posted by DrumEatDrum View Post
Hobby income is still income.

The only difference in hobby income is you can't declare a loss. You can declare your deductions equal your income giving you a net zero taxable profit, but you can't declare a loss. The main advantage of declaring your music a "hobby" is taxble agencies (IRS, state and local) are less likely to scrutinize you.
Yes, this is a confusing area and exactly why I should consult a tax specialist. Thanks for the info, I'm sure this is good information for all these guys with up and coming bands. I'm pretty much clueless when it comes to taxes. Probably because I've never been in a band that makes money, but I sure do seem to spend a lot.

Quote:
Originally Posted by toddbishop View Post
Follow DED's advice re: "stage" clothing-- that's kind of a classic red flag for getting audited. And contrary to your consultant's advice, you do not want to get audited, even if you come out a net winner. Otherwise, go nuts. And try to show at least a small profit most years-- if you show a loss for (I think) more than 2 out of 5 years, the IRS declares you a hobbyist and disallows your expenses. A couple of musicians in Minnesota are getting royally screwed by the state revenue people on that front right now. In the context of taxes, "hobbyist" just refers to whether or not you are profitable, not whether or not music is your main source of income-- of even a major one.

You do have to show a minimum amount of income-- $800/year, I think?-- to use a Schedule C, and deduct expenses.
Ya, the last thing I wanna do is get into trouble with the IRS, but things like rent, gas, expenses on the road, etc. These are all legitimate deductions. Not so much the gas it takes to get to the studio and back home,but the gas it takes to go from the studio to the gig and back - that should be deductible.

Quote:
Originally Posted by larryace View Post
I get W-2's from both my main bands so it all gets reported. I deduct gear, tolls, gas and parking. It all gets lumped in with my electrical business though, they don't have to be separate. Even if my musical expenses are more than my musical income, it gets mixed in with my "real" job stuff. I'll have a loss on the music side next tax year because of the the Guru's. It will serve to lower my net taxes because I will still show a profit from my electrical business.
Yes, you got it made because, if I'm not mistaken, you are already a sole proprietor. I had a Drafting Service last year, but it parlayed into this full-time position that I do now (for tax reasons), but I was scared to lump in my musician expenses with the drafting service expenses. Now, if I had consulted a tax specialist, I probably would have paid a lot less to Uncle Sammy.

Quote:
Originally Posted by JohnnySomersett View Post
I'm a firm believer that you should get what you can back from the government... they're quick enough to take it from you, and I bet they take plenty! So, if you're entitled to anything then grab it.

The guitarist in my band, she's a guitar teacher by trade so she claims EVERYTHING she can back that she can get away with and she saves a fair amount of money each year!
I agree with everything you just said, which is the whole point of this thread...

Thanks again for all the great replies, I hope this thread is useful information for a few others out there too. Cheers!
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