[Dixielandjazz] I am not a Paid Tax Preparer folks.

David W. Littlefield dwlit at cpcug.org
Sun Mar 13 09:15:36 PST 2005


At 01:53 PM 03/12/05 -0500, TCASHWIGG at aol.com wrote...

Some additions to Wiggs's essay.

I've used form C since I got into the band biz, and a tax program since I
got a computer in 1988. I used "Managing your money" financial program for
all my data until it left the market, at which time I created my own (flat
file) databases.
(I'd like to have used Quicken, but the memo field was way too small
because I use it for all sorts of info. Also, it scattered my data all over
its modules, so I couldn't get my hands on it readily; this aspect is
probably a personal quirk...Also, Quicken uses a proprietary format rather
than .dbf for it's databases, which could be a killer if they went out of
business like MYM did!)
I operate as an unincorporated sole proprietor with no employees, just
independent contractors.

I've always had more withheld from my pay, now my pension, than I needed
to, to cover the unexpected, since the music biz is so unpredictable.

I keep my business and personal finances totally separate--separate
checking accounts, separate databases. I even have an EIN--normally you
have to provide info on having employees to get one, but I lucked out--so
my SSN relates only to my personal finances.

I keep all paper, and am very careful to enter data as necessary so it
doesn't back up and get lost. I make sure I have full justification for all
business expenses. I deduct my car expenses 100%, and have a small notebook
that shows when I used the car, what for, and the mileage. (This works
because I don't have a life, as they say; actually, my life is mostly
related to music, and I don't try to deduct my TV, DVDs, classical music
CDs; what travel there is relates to gigs and selling my books) 

The IRS audited my 1987 tax return, a $100k "gig" year.
The best advice I ever got was from a musician tax lawyer: the audit is NOT
out to get you, but to see whether you need to be gotten. Therefore, you
should view it as an educational *opportunity*. 

If you've been demonstrably careful and straight, they won't hold small
mistakes against you--you just pay the bill and penalties. I had an
examiner in my office for 3 full days, and she took stuff with her. She
went over literally every cent I made, spent on business, viewed all
account statements, telephone bills, etc., line by line, and generated a
big pile of calculator paper. I was able to answer all her questions, show
the evidence, and she answered all my mine willingly. At the the end there
were but two deduction issues involving $260 each; one I had to pay, the
other she took with her, came back in my favor. 

People get into trouble mainly because they are S-T-U-P-I-D. When you take
a deduction, you must be *reasonable*. It helps as you go along to be
afraid of what they'd discover in an audit; you have to ask yourself "What
would their reaction be?" People are often so intent on increasing their
refund that they use their own "logic" to talk themselves into taking
unjustified deductions. 
No! No! No! Ya gotta be *objective*. 

As I noted, I use a tax program, and each year I go through the
"interview", which includes discussions of tax law changes and stuff to
watch for. If you send in a computer generated return, I speculate that
you're less likely to be flagged.


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