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Posted by Dennis Jao

Tax Tips for Musicians

Tax Tips for Musicians

Musicians are sometimes in the news for one tax case or the other, which can be embarrassing as it is viewed as a dent in their career. From composers to teachers of music, performers, and even writers, they must know how to get things right with their taxes. 

Ideally, the month of January is the best time to recover from the holidays and have a good rest. They use this early part of the year to repair their instruments and plan their musical gigs for the year. Therefore, this is an excellent time to file all income taxes. 

Musicians may have had numerous gigs in the year, and taxes aren't deducted from their pay. If they ignore such taxes for too long, they will have to deal with accumulated taxes which is problematic. By the time they file in April, they are already having difficulties, which can be scary. 

So generally, musicians should prioritize planning their taxes with good record-keeping to make the tax filing process smoother; this will also help them keep some money they earned. Here are five crucial tips for keeping more of your money and having a significant tax experience. 

  1. File the taxes even if you don't owe the IRS

Start filing your taxes yearly even after you've retired. If you earn less than $400 from gigs or as a self-employed person, you don't have to file annual tax unless you've got other income channels. So don't also wait until you owe the IRS before filing: file your taxes as it is a sure way of getting a refund if you are eligible for tax returns. 

  1. Always be prepared to prove that your music is your business and not a hobby.

It is expected that you are making a profit from your business, so you've got to know if you are making a profit. When you think of your music business as a hobby, you will ignore the profit-making aspect, so always prepare to prove that this is a business and NOT a hobby. 

  1. Note all expenditure records and subtract gig expenses.

At this point, you can subtract (deduct) your regular expenses from your total income gotten from the music business. The "Deduction" is removed from the full payment you earn before you start paying taxes on the income. 

When you deduct your gig-based expenditure, you will discover that you owe fewer taxes and can keep more money. This is why you should keep track of ALL your business expenditures. 

  1. Have your income records available and add all gig income

From the start of the year, gather all your income records from the year and get the IRS tax forms related to your taxes. Compare the state's requirements to the amount of money you receive and fill all the records based on what you earned as gig income. 

  1. Understand your tax obligation 

You've got to understand what the Federal government expects of you regarding taxes, and it is quite simple: report EVERY income you earn from ALL sources when filing your taxes. This also includes the income from all your gigs and other regular jobs you may be engaged in while working on music. 

The IRS considers you a self-employed person as a musician, which means you have to pay "Income tax," which is the tax on everything you earn, and self-employment tax. Your self-employment tax includes your Social Security and Medicare Tax. You may have to give away up to one-third to one-half of your net gig income towards taxes. 

The tips above will help musicians get through their yearly tax filing process without issues. However, the central point to make here is that early planning and record-keeping can save you a lot of trouble with your taxes and musical career.



Dennis Jao
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