We're expecting about 2-feet of snow here in the People's Republic of Maryland during the next day and a half. Because of the forecast, two locations called and cancelled, for which I'm glad. (I hate winter and DO NOT DRIVE IN SNOW!)

Now, this is a question for all you tax gurus. Since they cancelled the jobs, can I write off the monetary losses caused by the cancellations due to weather conditions? So far I have not been able to determine via my tax program whether or not this can be done. I'll continue to search the IRS codes and see what I can find, but if someone has an answer and can point me in the right direction for the IRS codes, I would love to see it. Could be a substantial tax savings.

Cheers,

Gary

From my understanding, if $$ comes out of your pocket, you can write it off.

You cannot write off $$ that doesn't come into your pocket.

That's just the downside of being self-employed.

Beakybird

Sorry Gary....but Beakybird is right. I can't cite the ruling, but I know from previous business experience the IRS doesn't consider anything a loss until if comes OUT of your pocket.
Eddie

I wonder if the taxman considers what they "take out of your packet" a loss. Nah!

Maybe what you need to consider is a written contract that has a cancellation rider on it.

Something to the effect that if either party cancels within a certain timeframe before the contract date that half is still owed to the performer. Or whatever deal you think is worth it.

There are plenty of examples of music performance contracts to peruse if you websearch.

Ever since I put that rider in there, it is amazing how GOOD the worst of weather has become to these folks...

Mac,

They are contracted jobs, and I have the option to cancel for bad weather. However, so do the folks that contracted me to do the job. That's not the point, though. I just want to be able to deduct the loss from my income tax if I can legally do it. That's why I was asking if someone knew the exact IRS code that either allowed, or disallowed the deduction.

Cheers,

Gary

I can't find any IRS codes related to cancelled jobs. However, consider this: If a waitress normally works a 40 hour week and the boss tells her he doesn't need her for the full 40 hours, she takes the hit. There is no provision for her to claim a deduction for hours not worked...or tips not received.

If she donates 7 hours of her time for IRS recognized charities, she can claim a deduction in income from the wages and tips she would have received...but she has to work the time in order to claim the deduction.

Eddie

That's true, Eddie, but she isn't self employed.

Gary

I'm looking at it this way ... income tax is tax paid on INCOME ... if you have no income, you pay no income tax ...
what would you categorize the loss under on a tax form? - I realize that is your question, Gary, so I guess I am partially answering it with another question ...
loss of wages is something you can get insurance against, but I don't know if it would cover the loss of a gig or two ...
t.

There's the write off: You don't pay taxes on the income you didn't make. But you still have to pay taxes on the income that you did make.

And yeah, if you're self-employed, you do deduct your self-employment taxes - small help.

Beakybird

Gary,

I have a minor in accounting. My instructors always said that you can deduct anything. It's getting caught that is the problem.

Seriously, the answer is no. You can't deduct income that you never made, but hey, you are getting up there in age and a life sentence really might not be that long so , why don't you give it a try and let us know?

Tom

[This message has been edited by Tom Cavanaugh (edited 12-18-2009).]

One more scenerio. You are self-employed. You have a contract to play a restaurant gig which requires you to buy a piece of gear...say an extra long, heavy duty extension cord. You buy it. The restaurant calls and cancels the gig.

1. Can you claim the lost wages from not performing. Nope.

2. Can you claim the expense of the extension cord. Sure.

Years...light years ago...I played a gig and got stiffed. I did the work. I didn't get paid. My tax guy said I could not claim a monetary loss as a deduction because I didn't lose any cash already in my possession.

I could sue in small claims...but only the legal costs would be deductible as a business expense...not the lost wages. And, if I would have been lucky enough to get the judgment and cash from the client, then the income would be taxable less the legal costs.

Make sense?

Eddie

If those 2 jobs were not cancelled, you would have collected the fees and reported the income on your tax return.
Since the jobs were cancelled, you did not receive the income and your reported income will be lower. You do not get to write off the loss because you never reported the income from the cancelled jobs.

Mouse killer, er Gary...

Had very similar situation a few years ago. My accountant said I neither incurred the expense OR income of performing. So, the short answer is no.

If you had drove to the venue to find it was closed or canceled, you could've wrote off the mileage.

As far as having a cancellation clause, yes...that's routine but usually "Acts of God" are an exception that relieves the client from any burden of payment. In fact, I've never heard of a cancellation clause that didn't allow for relief that way.

In my opinion, it would be bad business to try and hold an account responsible for any part of the contract price if an AOG caused the gig to not occur.



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Bill in Dayton

You guys are right--not a write-off. I found the information last night in my Turbo Tax help disk, a program called "It's Deductible."

Oh well, I would not have ventured out for the next two days anyhow--we're in the middle of a blizzard. I hate winter!

Thanks,

Gary

Gary ... what's up ... I've often heard you refer to where you live as "the sunny south" ?!?!? ...
t.
PS ... we are getting prepared for that same storm ... problem is, EVERY snowfall up here is treated like the second coming of the blizzard of '78 ... no doubt the super markets are already out of bread and milk...
t.

Gary, the easy way to figure deductions is, you can't deduct anything that isn't an out-of-pocket expense or isn't set up on a depreciation schedule. Deductions are deductions from income based on costs/expenses-outlays figured as a cost of doing business. Lost income is not deductible at any time, but rather impacts your gross or top line.

The good thing about accounting training is, you are expected to understand the process, not just learn the rules by rote.

It's snowing in Lexington today, and people are canceling parties right and left.


Be well and stay warm, everybody!


Russ

It is supposed to drop into the low 50's by gig time tonight in S. Florida....but so far... no cancellations.

Eddie

Eddie,

It's still snowing, it's 9 p.m., but it should stop by midnight. The weather guy says we could get up to 30 inches in my area, 24 inches in Baltimore, and 20 in DC. Sure wish I was in Stuart, FL right now.

Tony,
Compared to your part of the world, this is the sunny south. In New England they only have two seasons, winter and July 4th.

Cheers,

Gary

Man....the gig was over at 10:30 and the temp had to be down to 57. I had to roll the windows up on the ride home.

Can't wait to get some hot chocolate.

Eddie

You guys are wimps. Try living on the eastern shore of Lake Michigan.

Tom

Tom has brain-freeze. Living in Michigan and drinking slurpees too fast will do that to you.

Eddie

... no one LIVES on the eastern shore of Lake Michigan ... they just EXIST ... and just barely at that ...

... one good thing about the 18 inches we are supposed to get from this storm ... Sunday will be all about finishing up the last of the Christmas cards, football, and playing with the H4n ... NICE !!! ...
t.

Ho Ho Ho! You guys don't know you're born. Temperature up here in Edmonton, Alberta earlier this week: Minus 58C inc. windchill. Minus 42C without windchill. Now back to your suntan lotions.

That's pretty bad, lol...

What happened to your Oilers last night against the Caps? I was listening to the game on the way home from my gig and the bottom fell out in the 3rd...



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Bill in Dayton

The coldest weather I ever saw was in Edmonton. Minus 29F. And that was in November. The cold seeped into the house, the wind blew hard. And my honey turned as cold as that wind. For no reason, far as I could tell. I tucked my tail and went home to the sunny south.

Yep, another night at the office for the oil. What happened was that Ove and crew were just too much for our disorganised defence. Probably just as well we play them only once in three years.



[This message has been edited by 124 (edited 12-20-2009).]

About the only thing we can console ourselves with up here is the the sun shines a lot. I'd like to tuck tail and head south, too, to where the sun actually has some warmth attached to it. Where's this bloody global warming we all hear about - we NEED it up here.

Coldest I've seen was -15F in Ft. Knox KY ... funny part is that when I finished basic training at Ft. Dix NJ and they told me I was going to Ft. Knox for armor training, I said "well, at least I'm going south for the Winter" ... South, yeah - to snowstorms that made drifts as high as the second floor of the barracks; to frozen mud that had to be knocked off the tank treads every morning; and to sub-zero temps ...
t.
PS BTW ... I think we've done a nice job of hi-jacking Gary's thread ....

t.

LOL! Just call it verbal evolution, Tony. The weather and the taxman affects us all. I'm not sure which one is harder to take.

Keep it going. I'm going to write off the time I spend reading all the replies as a necessary cost of the music business.



Jerryghr