TaxMan123.com

By Roger Chartier

United States of America IRS Tax Information

More Tax Deductions and Allowances For Musicians (1)

As a musician, unless you play music for a company that has you as a regular employee, you are considered “self-employed”. This is almost always the case for gigging musicians for their tax filing purposes.

All music related income such as teaching, studio work, fill in gigs etc. count. The musician or entertainer or performer normally files the Schedule C with the regular 1040 income tax form.

This 1040 is where you have to report the 1099 forms from last year. 1099's have to be sent to you if you earned over $600.00. If you earned less than $600, you still have to report it.

In the past, I had a band that earned a large sum of money every year.

Each of the clubs and venues that hired my band had an accounting department and they felt is was a nice thing to send me an IRS 1099 form that was filled out and stated the income.

They also sent a copy to the IRS so that they know that you earned this money. I was also obliged to send 1099's to the band and roadies.

Since I was unburdening myself from this scary looking pile of 1099's to share the load, life was good again.

Before hand, I had to get a W9 from everybody. That form states the name address and social security# of each individual so that I can send the 1099's with proper info on them. The amount was certainly above $600.00 each. This is how the IRS provides for us to balanced the tax load.

The self employment tax, which is filed on Schedule SE, is for your profit (net income).
You'll have to pay estimated quarterly tax if your tax liability is greater than $1,000.00.
File that using the IRS form 1040-ES - (download the IRS form 1040-ES
You also have to pay federal income tax.

AH! But there is hope! So, now here is the good part.

Deductions

All deductions that you take, have to be considered “ordinary” and “necessary” They can't be lavish or extravagant under the circumstances. The only problem is that these guidelines are not perfectly clear.
The point is that, in an audit, you have to justify the expense.
If you have high expenses, they have to be reasonable for the circumstances and not lavish expenses.
If I take a vacation trip around the world, and claim that it is an expense just to promote my CD's in a single corner kiosk in Hong Kong it is definitely questionable.

Equipment: Form 4562.

Equipment that you bought usually gets depreciated till it is written off over a period of five or seven years.

This is how we "expense" gear that will be useable for more than a year.
The term "depreciable lives" is defined by the IRS. 
Use the IRS form 4562 for the depreciation.

There is a way to expense the more expensive and longer lasting gear. It is covered by the section 179 election.
In 2012, the IRS allowed you to expense up to $139K for gear all at once rather that depreciate it over 5 - 7 years. With that choice, you can deduct that brand new Strat, Fender amp and a P.PA. in one shot.

Things that normally can be expensed in total in one year include stuff like guitar strings, drum sticks, etc. You get the idea.
See Tax Deductions for Musicians 2
See Tax Deductions for Musicians 3

NOTE:
This is only a guide, and before you file you should get it all reviewed with a tax professional. There are a lot of details, and we haven't discusses long term investment, health Insurance and other deductions that are used by all of us. This is designed to be a helpful guide for entertainers, performers and musicians.