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Rocking Out: It’s hard to make it in show business. If you’re a Musician, you might be looking for all the help you can get. Did you know the IRS can give you a helping hand? If you play your cards right, you can receive lots of deductions doing what you love most.
Classifying It: What is making music to you? Is it your hobby? Or is it your business? If it’s your business, you have clear tax advantages. If your music is your business, you can usually deduct the cost of your equipment and other expenses on your Tax Return. If it’s your hobby, you can only deduct up to the amount of income you earn from your music.
Playing the Part: If you’ve decided that your music is your business, you have to be prepared. The IRS is going to attack your claim. They are aggressive about saving money, so you need to play the part. Make sure you know exactly what you can deduct as expenses. You also must report all of your earnings. Here are some good ways to ensure all of this gets done:
-Seeking Professional Tax Help
-Hiring An Accountant or Bookkeeper
It’s Also a Good Idea To:
-Get a business license
-Keep business cards on hand
-Advertise your band
-Join Musician’s organizations and Unions
-Copyright your music
*Keep all of the documents involved with your business. You’ll need them to prove your music is indeed your business if the IRS gives you trouble.
File Correctly: If you want to deduct your music expenses, fill out Schedule C and file it with Form 1040. If you’re self employed, file Schedule SE as well. If your net earnings are more than $400, you also have to pay self-employment taxes.
Rock On: This is the first part to knowing your IRS advantages when you’re a Musician. Part II will discuss what you are allowed to deduct, and ways to prove to the IRS that your music is indeed your business. I’ll also list ways to be prepared for the IRS’s questions.
Now You Have the Smoking Gun…Use it!
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