[Dixielandjazz] Playing for Schools and Taxes
TCASHWIGG at aol.com
TCASHWIGG at aol.com
Fri Mar 11 20:56:43 PST 2005
In a message dated 3/11/05 6:15:34 PM Pacific Standard Time,
sign.guy at charter.net writes:
> Better not try it. Your labor has no value to the IRS only actual expenses.
Nothing could be further from the truth my friend, just like other uninformed
folks who know nothing about the entertainment business, the IRS has to be
shown that it is indeed legal and bonafide. You just have to keep records and
report ALL your income and run your band like a business. They cannot argue
with you and win.
I know having been audited Seven Times and I have never lost, even with a
Federal Tax Attorney sent to California to audit me.
You have to establish reasonable and explainable ordinary expenses in
operating your business, and this certainly is easily explainable. They get paid by
the hour for their labor, so do Doctors, Lawyers, Accountants, Politicians and
everyone else if you break it down that way. Stand up to them and do not
back down when you are correct.
When they audit you they are generally looking for folks that do not claim
their income and thus EVADE taxation, like getting paid in cash and not claiming
it, or donating 10% of your income from an event to a nonprofit organization
that declares it and tell them where they got the money from.
That is how and why most musicians get into trouble, trying to be slick and
avoiding taking care of business.
For example I could value my donated time at $100,000 an hour and never pay
any taxes. Or I could go to church and take the offering at $500 per hour.
Only legitimate expenses can be deducted for example:
You are a band leader and your sidemen get $100 each and you pay them and
send out W2's or 1099's to them. You collect nothing on the gig but pay the
sidemen $500. That you can deduct. You can contrary to popular belief also
avoid the paperwork of the 1099's
if you know how and stand up to them and let them know that you are not the
accountant nor collection agent for the IRS, and that if they want and think
they are going to get any tax from underemployed musicians than you will be
happy to give them their last known address and telephone numbers.
Most of them do not make enough money to owe any taxes anyway so the IRS is
again barking up the wrong tree. If you did do the paper work and send the
IRS the payroll deductions they would just have to return it to the musicians
anyway provided they were smart enough to actually file their returns, to get it
back. Many do not and do not claim their cash income so stay on the run in
the underground circuit avoiding the IRS until one day when they do get caught,
then they have hell to pay.
You can also deduct the donation of the time at your normal performance rate
if you and the organization put it in writing, as a barter deal.
The IRS will also tax you on bartered deals as income based upon the value of
the bartered goods or services that you received. That is the justification
you need to stop any IRS auditor cold. You just have to know it and not be
afraid to play the card, send him away to research it on his own and tell him to
come back when he finds the authoritative answer to deny it. This usually
shuts them up quick.
The pay you did not collect serves to offset other income that you did
collect at the same rate, example, you performed a gig for $500.00 and a similar
gig worth $500.00 for free, you count the income for the paid gig and also
count the income of the non paid gig, however you deduct the non paid gig as
advertising as a legitimate expense of doing business and it reduces the tax
liability on the income side while driving up the operations costs of running the
business. Usually results in a paper loss at the bottom line which is
deductible from all other gross income on line #12 as a business loss. Unless of
course you make a profit from you band.
Now if you did not collect and you paid out your sidemen at $100.00 each you
still deduct their pay as an expense which creates a direct loss to you which
you hopefully will recoup from CD sales, or better paying gigs where you make
more than the sidemen.
If you want to deduct something take up car racing and put your band name on
the car then all expenses including your mileage to races is deductible.
Budweiser and all the big companies do it. This could even extend to model
airplanes, cars and boats if you put your company name on them. The same is true
of a little league ball team with your band name on it. There are many
deductions out there but your labor can't be one of them. Simpler yet put the
damned sign on the sides of your own vehicle as advertising just like any other
legitimate business can do. Now go drive around looking for those Television
news trucks with the cameras and try to drive into the scenes for subliminal
advertising on Television for free on the news channels. :))
Again this is simply not true: Refer to my comments above, stand up and fight
for it man.
I have done it from both sides of the fence for over forty years, been
audited from the band business, side and from a nonprofit organization side. And it
has flown every time when you take the time to explain to the IRS person who
generally knows absolutely nothing about how the entertainment business works.
Unfortunately we have to educate the bastards that come after us to harass us
and charge us taxpayers to do it.
If you don't believe me call the IRS or a tax person. You can call H&R
block for free if you have a question.
As I stated above Larry, most of them know nothing about our business and of
course they are going to say it is not legal, but they are wrong buddy. I
would not trust H&R Block to do my dog's taxes, and as far a tax experts, I hired
one thirty years ago when I had my first audit, and after I finished that
audit I was a consultant for his tax firm for thirty years for all his
entertainment clients and they too never lost an audit.
The government tells us all kinds of crap, that does not mean it is true,
call em on it man and make em prove it. The IRS Tax codes are so complex even
they don't know how to interpret them except for blazon cases of evasion and non
declaration of income.
The last audit I had the IRS agent said they should be paying me as a
consultant, I agreed but told them they did not pay well enough.
By the way your Tux and other clothing you wear on gigs should have your name
on them. The best thing is to call them uniforms because a Tux can be worn
off stage and not for business. Have your band name sewn on the pocket then
there is no problem.
If you establish that your band wears uniforms and that they are worn
exclusively for performances you can deduct them just like policemen, firemen,
nurses, etc. But again you have to stand up to them and convince them that while
the tax code says if you can wear them as street clothes they are not considered
uniforms and necessary or deductible.
You can thank Willie Nelson for that little change. However if you can prove
and justify it you can still deduct the uniforms. I collect all of mine
after every gig and take them to be laundered, and yes I get a receipt for the
laundry service too which is deductible under repairs and maintenance on sch. C.
You can also expense out the entire costs of all the uniforms under
supplies. But not as an individual musician, as a band Business.
If you are doing a schedule C you can deduct mileage too. That can be a lot
so don't ignore it. Yes, but you have to again keep records and you cannot
deduct commuting miles, This one is tricky. I prefer to own two vehicles and
just right off one entirely for business use. Including Insurance, repairs,
gas and oil, car washes, etc., with the price of Gas going through the roof it
is often a better deduction than the standard mileage the government allows.
Avoids BS about the mileage, you can also depreciate the costs of the vehicle,
and all your instruments, CD Master productions are considered Section T-38
depreciable personal property with a life expectancy of 12 years per master.
Again you need to know what you are doing to evaluate the costs basis of the
master correctly to arrive at the reasonable fair market value of the master.
Some are worth $5000.00 to $30,000. For our kind of music if you do them
Major record labels routinely evaluate theirs at $250,000.00 and more
depending upon the artist, and they even have appraisers estimate and certify them
for those numbers. Most recordings produced by a major record label are merely
tax deductions to offset the great profits they make from the winners like
Norah Jones, Michael Jackson etc.
You can donate to charities actual cash like the Boy/Girl scouts, Churches,
red cross\ etc.
Yes, but those are generally red flags that the IRS loves to use to select
you for audits, I do not donate to any of them or if I do I do not claim it as a
deduction on my sch. A.
Most important thing to remember folks is that you have been programs to play
by the rules, but they don't show you all the rules most of the time, ONLY
the ones they want to use to scare you into giving them what they want, YOUR
MONEY that they already have out of any paychecks you or your spouse have earned
and had deductions made from.
Stand up and make them fight and earn their money, or simply roll over and
play dead and let them keep dipping deeper and deeper into your pockets every
year which is exactly what they are doing to all those that allow them to do so.
It might be more beneficial to donate through y9\our business than personally
on a schedule A. It's becoming more and more difficult for the average
American to use the schedule A unless there are four people who have terminal
cancer and a three mil home with a whopping interest payment and you give lots to
Case in Point Larry: We are not average Americans, we are Musicians with
special situations and business idiosyncrasies that they must deal with if we are
smart enough to do our homework and learn about them and call them on it.
Unfortunately most musicians can't even figure out how to go out and get a gig
much less understand how to legally circumvent the Grim Reaper Tax man.
For the rest of us it's best to write a business check then In my case that
amounts to 15% SS tax, 6% State tax and about 20$ fed tax. That adds up to
41 cents on the dollar I don't pay. The charity is happy and I'm happy. And
I can do the same thing by hiring another musician on a gig Larry.
Don't try to deduct payments to a parochial school to send the grandkids.
That doesn't float either.
The only way you could make the above work is if they wrote you a check for
your normal price and you wrote them back a check for the donation. But
that's silly paperwork. The only reason you might do that is to let them know
what you really charge.
Exactly what I was talking about above Larry: Establishing the paperwork to
justify what you are doing and proving to the IRS that you indeed do it and
quite often as promotion and advertising for your business to attempt to attract
more gigs that pay. It is the same value as buying a $500.00 ad in a damned
newspaper man, only this way you actually get to see the potential customer at
the gig as you perform. Every such performance does indeed cost you actual
cash out of your pocket to go there set up and perform, not to mention the
rehearsal time and arranging of the musical program to be presented, etc., etc.
Count every dollar of income but learn how to deduct every dollar spent as
well and you will rarely be in a taxable situation, unless you play 2 or 3
hundred good paid gigs a year and start to come out on the other side, which is
possible if you treat it like a business and not like a hobby, and or let the IRS
try to tell you that you are trying to write off your HOBBY.
You have to let hem know how difficult this business is to make a profit in
and explain to them how your business suffers from all the wannabes and Doctors
and Lawyers playing on the weekends and under cutting your normal income
opportunities and taking away many of your good paying gigs that could make you
more profitable and owe taxes.
I occasionally discount for charities in my sign business but I give them an
invoice for the full amount with a negative charitable discount added in.
That keeps someone associated with the charity coming to me wanting the same
price. There is no paperwork associated with this and I don't try to deduct the
Take a good look at your Sch. C. Part I INCOME:
Line one asks for gross income
line 2 ask for discounts or allowances
line 3 says subtract line 2 from 3 Hello it is deductible
line 4 asks for the costs of the goods sold deductible also
line 5 is then your gross profit
line 6 asks for any other income if any.
Line 7 is 5&6 added for your reportable gross income.
Then you go to Part II for all your other deductions.
Stop treating your Band/music business like your sign business Larry, they
are two different worlds and have different deductible circumstances. If H&R
Block tells you what you stated above, go to the library and read up on it for
yourself and go back and charge them for doing Musicians taxes.
That is like the musicians that used to come to my record company office with
their divorce lawyer to negotiate a recording contract. :)) ROTFLOL about
Sounds like you guys in St. Louis could benefit by flying out here and having
me show you how to do your tax returns and find gigs as well. :))
One more reason for Jazz Societies to hire guys like me and Barbone to do
seminars at your festivals, hey it would also be tax deductible too folks.
Sheesh, I give up,
Time for me to sell that house you were talking about above and moving to
I am tired of paying all the taxes on it anyway, good thing they are
deductible or I could not afford to live here much longer. Nor would I have bought
the place if it did not have specific tax advantages for doing so.
The tax man taketh, but he can be made to give it back.
Remember folks we are taxed about three times on everything we do anyway.
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