2010-04-25

Tax Tips for Musicians

Each year, as the tax season approaches, Allegro publishes these updated tax tips provided by Local 802’s accounting firm, Gould, Kobrick & Schlapp P.C.

Overview and Highlights

The following outline focuses on aspects of the tax law that specifically affect musicians. For additional information on deductions, exemptions or filing status, see a tax advisor or www.irs.gov.

Here is a quick overview of some highlights for this tax year:

• The top four basic tax rates above 15 percent remain the same. (The rates are 25 percent, 28 percent, 33 percent and 35 percent.)
• The basic standard deduction is $5,450 for singles; $8,000 for heads of household; $10,900 for married filing jointly and $5,450 for married filing separately.
• The standard mileage rate for business use of your car is 50.5 cents per mile for the first half of the year and 58.5 cents for the second half of the year
• Wages and self-employment earnings of up to $102,000 are subject to the Social Security tax for 2008. (In 2007, this amount was $97,500.)
• The personal exemption amount was increased to $3,500 in 2008. (In 2007, this amount was $3,400.)
• For 2008 the maximum annual contribution to an IRA is $5,000, but a taxpayer age 50 or older can make an additional catch-up contribution of $1,000.
• A six-month automatic extension may be obtained by filing Form 4868 by April 15.
• In 2008, if the claimed value of a donated car exceeds $500, a qualifying written acknowledgment must be obtained and must be on form 1098-C and attached to Form 1040 or no deduction is allowed. If the charitable organization sells the vehicle without having put it to significant use or improving it, a deduction is limited to the gross proceeds from the sale, which must be reported in the acknowledgment.
• Taxpayers can deduct either state and local income taxes or state and local general sales taxes. The sales tax deduction is based on an IRS table or actual sales taxes. You should get the advice of your tax preparer when filing your return.
• Eligible individuals in 2008 covered by a high-deductible health plan can make deductible contributions to a Health Savings Account (HSA) up to the lesser of the plan deductible or $2,900 for self-only coverage or $5,800 for family coverage.

Income & Related Expenses

Professional musicians may have income from which tax has been withheld (W-2) or income from self-employment where neither tax nor Social Security has been deducted.

If the musician is self-employed, all allowable travel and other expenses should be deducted on Schedule C before the adjusted gross income is entered on page 1 of the tax return.

If the musician has only W-2 wages, these expenses must be deducted on Schedule A.

Reimbursements for expenses (e.g., travel and entertainment) received under an accountable plan do not show up on the musician’s Form W-2, are not reported as income, and do not give rise to deductions.

However, if the employee’s expenses exceed reimbursements, the excess may be claimed on Form 2106 as an employee business expense.

Generally, reimbursements are considered received under an accountable plan if:

• They are made for deductible business expenses;
• The employee accounts for the expenses to the employer; and
• The employee returns any excess reimbursement.

Reimbursements received under a non-accountable plan (any plan other than an accountable plan) are subject to withholding and employment taxes and are shown as wages on Form W-2 and must be reported as income on Form 1040.

The employee may be able to offset the extra income by claiming employee business expenses on Form 2106, but such expenses, along with other miscellaneous itemized deductions, may be claimed only to the extent they exceed 2 percent of adjusted gross income.

Travel Expenses

The deductibility of long-distance travel involving railroad or plane fares is fairly clear. The fares, plus related costs — such as taxis to or from the depot, baggage-handling charges and passports — are all deductible as travel expenses.

If you were away from home overnight, you may also deduct all of the following expenses: 50 percent of meals and entertainment; 100 percent of travel and lodging; laundry and cleaning; tips to bellhops and chambermaids; and transportation at destination.

Musicians may also use their own cars for business travel. The deductible items involved include: depreciation of the cost of the auto; gas, oil and tires; insurance, license and registration fees; parking expenses (e.g., garage rental or parking meters); parkway or bridge tolls. The point to remember in deducting auto expenses is that after you have totaled all of these costs, you must subtract that portion used for personal purposes.

The regulations call for an allocation based upon both time and mileage used, and this is often the most difficult part of the calculation.

An alternate method involves computing the amount of business mileage and then multiplying those miles driven by 50.5 cents (from Jan. 1, 2008 to June 30, 2008) or 58.5 cents (from July 1, 2008 to Dec. 31, 2008).

You may still deduct direct costs such as parking and tolls (but not depreciation, gas or oil).

The real problem in travel expenses is determining what portion of local travel (that is, not away from home overnight) is deductible.

In no case are personal meals deductible if the musician does not sleep away from home.

The regulations say that commuting costs are not deductible. This means that if the musician travels only from home to the hall and back again, the costs of travel are not deductible — even if the instruments are so bulky and heavy that it is impossible to use public transportation.

The costs of transporting instruments to and from work are deductible only if extra costs were incurred.

If you are playing more than one job during the day, you may use the business mileage formula described above for travel between jobs.

Again, except for any additional expenses, there is no auto deduction for travel to the first job or home from the last.

Job Expenses

Bills are required as proof for all job expense items exceeding $75 but there are many items of a lesser amount — such as tips and taxi fares — where no proof may be obtained.

Detailed records must be kept of these expenses (and of business mileage if a car is involved) through a careful diary or log. Keeping such records takes time and effort. If your return is ever examined, however, you could lose your entire deduction in the absence of a good log or diary.

Numerous other items are deductible by the professional musician. Among these are education expenses, accounting fees and fees for investment advice.

Education

With regard to education, you may take a deduction for any training or coaching that sharpens your present job or professional skills, or meets the expressed requirements of your employer for you to retain your job. You may also be able to deduct the cost of a course if you are entering a new specialty within the music field.

Other Expenses

Also deductible are employees’ expenses incurred in the practice of your profession.

In addition to the travel expenses discussed above, they include:

• Union dues, assessments and initiation fees;
• Commissions paid to agents and booking offices;
• Dues to other professional societies;
• Rehearsal hall, studio or office rental;
• Sheet music, transcriptions, arrangements, records, manuscript paper, etc.;
• Stationery, printing and postage used in business;
• Telephone used for business (a portion of your home phone may be deducted);
• The costs associated with your cell phone, as long as the calls are made for business purposes;
• Books and subscriptions to professional journals;
• Advertising and photographs for promotion;
• Other promotional expenses such as entertaining potential purchasers of music and gifts (not exceeding $25 per recipient);
• Repairs and upkeep of instruments;
• Insurance on instruments;
• Substitutes’ pay;
• Legal expenses for drawing up contracts of employment;
• Rental of instruments;
• Depreciation of instruments or recording equipment.

Self-employed musicians (those who use Schedule C) may take tax deductions for contributions made to formal pension or profit-sharing plans for themselves and their employees.

The procedures for this are quite complicated, and we advise that professional assistance be employed.

Note that two items — home office expenses and expenses for uniforms — were omitted from the above list. A word of caution is needed as to their deductibility.

Home Office Expenses

You may claim a deduction if you use your home office exclusively and regularly for the administration or management activities of your business, and you have no other fixed location where you conduct such activities.

Exclusive use means that the office space must not be used for personal purposes. And you may not deduct home office expenses in excess of your net income as a musician.

Expenses for Uniforms

The cost of uniforms and other apparel, including their cleaning, laundering and repair, is deductible only if the garments are specially required in order for you to keep your job and are not adaptable to general or continued wear, to the extent that they could replace your regular clothing.

You may not deduct the cost of ordinary clothes used as work clothes on the grounds that they get harder use than customary garments; that they are soiled after a day’s work and cannot be worn socially; or that they were purchased for your convenience to save wear and tear on your better clothes.

That your job requires you to wear expensive clothing is not, according to the IRS, a basis for deducting the cost of the clothes, if the clothing is suitable for wear off the job.

Deductions have been allowed to musicians for formal wear and the costs of theatrical clothing and accessories, if these items are not suitable for ordinary use.

Proceed with Caution!

A great deal of specific information appears in the booklet every taxpayer is sent with pre-addressed income tax forms.

If you have a complicated return or a particular tax problem, consult your own tax advisor or, if you prefer, contact one of the IRS taxpayer assistance sections at any of its offices.

Getting and Keeping Band Momentum!!!

From: The New Rockstar Philosophy

Momentum
When bands have momentum there is a buzz and an intangible, yet significant, energy around them. It can be seen when they play, it can be felt from their recordings and it is usually the factor that sets them apart from the pack.

I think there are 2 kinds of momentum(s) for bands: Outer and Inner

Outer momentum is what people can see:

• New shows to play


• New music to release


• New merch to sell


• New tangible “real” things

Inner momentum is a different beast.

Inner momentum is essentially a battle for your mind and your heart…. that makes it more difficult to understand and quantify. Even the attempt to define inner momentum on a broader scale is quite ludicrous, because everyone will define inner momentum on there own terms.

Suffice it to say that when you have inner momentum you know it. You feel your band is going places and growing as a musical entity.

When you don’t have that momentum you know that things are slowing down. Arguably the best definition of inner momentum is the lack of it. Things are not moving for you. The music, or the band, or the live show, or whatever, is stagnant and will not get better unless you take back your heart and your mind first.

So here are some of my personal tips for keeping and sustaining your bands inner momentum:

Appreciate what you already have. Bands are typically egotistical. They love their own music and are often puzzled why the Killers are bigger then them. But instead of looking at the glass half empty, flip that script. Look at all that you already have.

• Do you have fans? Awesome!


• Do you have good gear? Great.


• Do you have a solid lineup? Mint!


• Are you alive and breathing?! You Go!

Read the rest...

iTunes Top Selling Albums & Songs Of 2008

Best Selling Albums of 2008:

1. Coldplay - Viva La Vida or Death And All His Friends
2. Jack Johnson - Sleep Through The Static
3. Juno (Music from the Motion Picture)
4. Lil Wayne - Tha Carter III
5. Sara Bareilles - Little Voice
6. Once (Music from the Motion Picture)
7. Jason Mraz - We Sing. We Dance. We Steal Things
8. OneRepublic - Dreaming Out Loud
9. Across the Universe (Music from the Motion Picture)
10. Leona Lewis - Spirit

Best Selling Songs of 2008:

1. "Bleeding Love" Leona Lewis

2. "Viva La Vida" Coldplay
3. "Low" Flo.Rida f/T-Pain
4. "I Kissed a Girl" Katy Perry
5. "Disturbia" Rihanna
6. "Lollipop" Lil Wayne & Static Major
7. "No Air" Jordin Sparks & Chris Brown
8. "Pocketful of Sunshine" Natasha Bedingfield
9. "Love Song" Sara Bareilles
10. "Don’t Stop the Music" Rihanna

Live Nation to Sell Major Label MP3s on Artist Pages

Live Nation, which has been on a tear recently with major artist signings and its own ticketing system that will soon replace a contract with Ticketmaster, has confirmed that it will sell unprotected MP3s from three of the four major labels. Rather than an iTunes-style database, Live Nation's MP3 store will route fans to artist pages somewhat similar to the ones found on MySpace.

The deal represents another major label move away from DRM, but it also strengthens Live Nation's position as a one-stop-shop for all things relating to its artists. With deals worth hundreds of millions of dollars with high-flying artists like U2, Jay-Z, Nickelback and Madonna, the Ticketmaster contract set to expire in December and plans to launch its own ticketing service that will include one of Ticketmaster's biggest former clients, the company now handles everything from merchandise to show tickets to distribution. Add to that list, "DRM-free music store."

Live Nation has deals with Sony Music, Universal Music Group and EMI to sell their music in an unprotected MP3 format from artist pages on its own site, according to Digital Music News. At least one artist has been complaining recently about iTunes lacking a strong "artist page" like the ones found on MySpace, because artist pages can draw fans in ways that just aren't possible with a list of albums -- think blogs, comments, images, videos and all the other stuff that typically surfaces on a band's MySpace page. It sounds like Live Nation's been listening; its direct-to-fan music sales could be just what the labels ordered.

Live Nation is accomplishing most of this through its MusicToday division, a 51-percent stake in which Live Nation acquired in 2006. MusicToday made its name managing direct band-to-fan relationships for clients like the Rolling Stones, the Grateful Dead and the Dave Matthews Band, for whom it ran fan clubs, e-commerce, VIP programs and secondary ticket sales, and now it's ramping up its direct-to-fan business with MP3 distribution, thanks to these label deals. Warner Music Group could apparently sign on as well, giving Live Nation the ability to sell MP3s from all four major labels.

Essentially, Live Nation is turning into a microcosm of the music business at large. If you're a fan of one of its bands, you're going to spend money on them eventually, whether its a concert ticket, a T-shirt, a CD, fan club access to exclusive "VIP" content, an MP3 from an artist page or whatever. And when you do, Live Nation will be there to take a slice of the pie -- a savvy business strategy when no one knows for sure where the bulk of music revenue is going to come from.

Even in advance of its ticketing contract expiring with Ticketmaster, Live Nation's third-quarter results (.pdf) look strong. The company produced 17 percent more concerts than it did in the same quarter of last year, while attendence increased 6 percent and revenue jumped 9 percent.

"Looking ahead, our primary goal remains centered on maximizing our global concert pipe for our client – the artist," explained president and CEO Michael Rapino, "and expanding into direct ticketing/online distribution, completing the world's only concert-to-fan direct platform for artists."

I guess this is part of what he meant by that.

We've asked a Live Nation spokeswoman when the company plans to start selling these MP3s and hope to post an update soon.

Wil.i.am's Barack Obama "It's A New Day" and other video tributes to Obama

Finally the months of campaigning are over and we have our new leader. People across the country (and the world) are rejoicing. And of course the DIYers are making remixes and editing videos!

Music Business Radio - Interview with Chuck Wicks and Monty Powell

Anyone interested in breaking into the country music industry as a performer or songwriter should listen to this.

Music Business Radio

Episode #79 - Chuck Wicks and Monty Powell

Chuck Wicks recently began taking the country format by storm with his hit debut single, “Stealing Cinderella,” which was the fastest rising country single of 2007.

Wicks spent several years paying his dues by parking cars and writing songs. At one time, he was writing over 100 songs per year. He developed his songwriting by apprenticing with some of the top songwriters on Music Row. That hard work can be heard on “Starting Now,” his RCA Records debut as well as on his tour opening for Brad Paisley.

As a music business veteran for nearly 25 years, Monty Powell has successfully honed his craft and found his niche as a songwriter/producer. His work appears on over 50,000,000 records.

He's worked with Keith Urban, Chris Cagle, Rascal Flatts, James Otto, Diamond Rio, and many more…

We talked about how he and Chuck connected, his role in helping Chuck find his voice as an artist, and what it takes to make it in the music business today.

We've got in-studio performance with Chuck and Monty, reviews of demos sent in by Music Business Radio listeners, and a call by Monty for the "next big thing" he is looking for and information on how Music Business Radio listeners can get packages directly to him.

For those not on the podcast...