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IRS TAX TIPS FOR WRITERS, MUSICIANS, ARTISTS *
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> What steps are required for a Songwriter to use the Schedule C. I have made no income from Songwriting, yet i have several expenses working out of my home. Would this be considered a part-time thing. Never thought about using this form until a co-writer mentioned it.. just wanted to make usre all was legal.
I believe this question is addressed on the web page if you read through the Q&A's. Normally a business shows income and expenses.
If you have no income yet, although you might technically be within the law, I would suggest keeping track of current expenses, then when you do make income, count the previous years' expenses, such as "Tax Year 2009 Expenses $532.50" and maintain precise records. This way you get to claim legitimate expenses but not until you show legitimate income.
> 1. As a songwriter, what can I deduct?
You can deduct all expenses directly attributable to your writing, e.g. pens, paper, cassette & CD blanks, instruments, travel, professional membership fees, and so on. You can also deduct a reasonable percentage of computer and telephone expenses, and even floor space and utilities if you have a room in your house that you use entirely for songwriting and nothing else.
For the computer, you figure what percentage of your total use is strictly songwriting (your business) and then take that %age of the total. For phone, we just take the specific ld call charges, but you could also take a %age if you wanted.
Keep receipts of EVERYTHING. There's a box to check, either you have substantiation or not. You want to mark that box if you can, because then the Feds know if they audit you, you've got everything in records and receipts.
> 2. Is Songwriting considered a business?
Yes. You'll file a Schedule C, Profit or Loss from a Business.
> 3. Someone told me only if I make money then it will be considered a business. Is this true?
In general this is true. However, if you can show reasonable expectation of making money soon, you can write off losses now. You might show $10.00 income and $500.00 of expenses, for instance, with a net loss in this case of $490.00. You'll have to claim the income on your Schedule C. And naturally your expenses are debit or outgo.
> 4. How do I get extra forms I need for filing, like the Schedule C?
You can find the forms online each year at http://www.irs.gov and you can order with the 1 800 number. Just call 1 (800) 829.3676 (1 800 TAX FORM) and request the forms and publications you need. The publications are free and give detailed instructions on completing the various forms.
> 5. What forms do I need and what are their numbers?
You'll need Schedule C - Profit or Loss from a Business, and if you use an office at home, you'll need Expenses for Business Use of Your Home. Don't forget the Schedule SE, Self-Employment Tax. You pay your own social security tax when you run your own business.
> 6. As a military employee what can I deduct?
Forms 1040, Schedule C, and other related IRS forms do not show any different rules or strategies for military employees. Use the same legal deductions everyone does. Always read forms carefully before filing.
> 7. Should I trust that H&R Block and other big tax companies are out there for my best interest?
As for tax filing services, keep in mind they file millions. If you can stand it, we suggest using tax software and filing yourself. If not, our answer begs a question: How big is your music/arts investment, and what dollar figure are we talking about on expenses? If it's several thousand, it will be worth your while to obtain a good tax attorney or accountant. If it's $10, ... it might not be a big deal.
> 8. FREE ASSISTANCE
IRS provides free tax advice and assistance by telephone. We recommend them highly. Find the 800 number on your tax forms.
Here are some forms::
Form 1040 -- U.S. Individual Income Tax Return -- Cat. No. 11320
Schedules A&B -- Itemized Deductions and Interest and Dividends -- Cat. No. 11330
Instr. Sch. A&B -- Instructions -- Cat. No. 24328
Schedule C -- Profit or Loss From Business -- Cat. No. 11334
Schedule SE -- Self-Employment Tax -- Cat. No. 11358
Form 3903 -- Moving Expenses -- Cat. No. 12490
Form 8829 -- Expenses for Business Use of Your Home -- Cat. No. 13232
Form 941 -- Quarterly Federal Tax Returns -- Cat. No. 17001
Form W-7 -- Individual Taxpayer Identification Number -- Cat. No. 10229
Form W-9 -- Taxpayer Identification Number -- Cat. No. 10231
Form SS-4 -- Employer Identification Number -- Cat. No. 16055
> 9. Do I need a buiness license to be a independent song writer? Is there such a thing as a independent songwriters license and where would i optain one?
Normally writers don't need a business license. Usually business licenses are for doing business with the public, in a walk-in capacity, such as a music store or ice cream shop, for instance. If you have walk-in traffic who pay you for songwriting, you may need a business license. Check with your local City, County, or Clerk of Court for information.
> 10. I'm an indie jazz-soul singer/songwriter based in Nashville. My company "XYZ MUSIC" started out as a basic entertainment company and now has mrophed into a music label. Is there any difference tax-wise? It's still a sole-proprietorship. ALSO, we made about $4,000 in 2006, but we our expenses are at least $15,000. Can we file under someone else other than myself (the sole-proprietor) who made say $20,000? B/c otherwise wouldn't we get $0 back from our taxes and expenses?
No difference tax-wise, as long as it's a sole prop. Sole prop's run under the owner's social security number, and the only difference is the name, which is superfluous to the IRS.
For your second question, with $4K in income and $15K in expenses, you would show a net loss of $11K. You may qualify for Income Credit refund this way, as you could be under the poverty level, depending on your income from other sources, of course. In other words, if you made $2K working at MacDonald's, and $4K in your company, and ran expenses of $15K, you would be under poverty level and you would qualify for Income Credit. (Earned Income Credit.)
If, on the other hand, you made $27K working at Kinko's, business income of $4K and business expenses of $15K, your net would be $16K on your 1040 Form.
To our knowledge if the sole prop is yours, the Schedule C MUST be filed under your name and social security number. To our knowledge, filing under anyone else's could constitute fraud, and the IRS is the last group of people anyone in their right mind would knowingly attempt to defraud. Our advice is NOT legal advice. We are NOT tax attorneys and we are NOT IRS agents, however we have filed Schedule C's and Corporate taxes for ourselves and other parties for years. Always seek the advice of an accountant or IRS representative before making decisions. We have ALWAYS had good luck calling the IRS 1 800 number and talking to their people. They will tell you what you need to know and they're the IRS.
george mcclure, President & CEO
> 11. I'm in a musical group and have been given a 1099-miSC by one of the group members. My income was $11,090 from 2006. My question is what is the best way to do this. Shouldn't each band member be responsible for their own 1099 reportable income? I'm wondering why one member of the band is giving out 1099's. Should we incorporate?
Tom, if you're wondering why one member of the band is giving our 1099's to the rest of you, you need to ask that member. You have some communication things to take care of in your group. Each group member IS responsible for his or her reportable income. You're really asking "should one band member file the taxes for the group?" You need to have a meeting and find who is doing what.
RE the tax question you asked, "Should we incorporate?", we need more information. There are many pros and cons. Give us a call by telephone and we'll talk with you about it.
> 12. hello...i am in a band which is formed as a partnership, and this is the first year we will be filing a partnership return. i am having some trouble on a few particular issues i can't find any specific information about...... any help is greatly appreciated. i have 3 questions............
A. if all of the members of the band i am in live at our respective homes, do most of our band administrative business, practicing, and composing at home, yet cannot claim a home office, do our homes still count as a "tax home"? will we be able to deduct the mileage & other costs involved with going to and from gigs in other cities, even if we do not stay the night there at times? for example, we live in Orange County, travel in 2 cars more than 70 miles to a show in San Diego, and return home late at night. can we deduct this, or is it just considered "commute"?
TAX ANSWER: Caveat: We are not experts in partnership tax preparation. Each person who legitimately works at home can claim a home office. You get to deduct the actual square footage, as a percentage of overall floor space, and you can factor in the percentage of time that space is dedicated too, if you want. You'll need the proper form for filing with the IRS.
TAX ANSWER: Yes, you can deduct all travel expenses to and from gigs. You are an independent contractor, not an employee of a company drawing a paycheck with taxes deducted. You get to file your own taxes (a little learning curve), but - and it's a big but - you get to write off all kind of expenses employees can't.
B. if we occasionally borrow an SUV from a friend in order to tow our trailer when we go on tour, how do we calculate the deductions? i know we won't be able to use the standard deduction for mileage since the vehicle is not owned by us, and for that same reason we wouldn't depreciate it. do we then only go by gas costs deducted as current operating expense?
TAX ANSWER: You CAN use the standard mileage deduction. (Who told you you can't?) Or, deduct immediate out of pocket costs such as gasoline, oil, car washes; actually used that trip. You can only depreciate the vehicle if it is dedicated 100% to the business and is owned by the business.
C. are per diem meal/entertainment rates applicable to each individual?
TAX ANSWER: Yes.
> 13. I'll be retiring soon (non-music career) and will be pursuing song writing. If I set up a company (self-employed) can I deduct my medical insurance on my income taxes? Thanks.
TAX ANSWER: Not as a business expense. You would expense your medical as all your life, on your 1040 Form "deductions and exemptions".
We are not tax accountants. Verify everything with the IRS http://irs.gov before acting.
*[Advice is caveat emptor and "as is". We are not certified IRS tax agents. Always check with your IRS representative before filing your tax forms.]
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