I was noticing in an earlier thread that some people incorporate themselves and have a business out of their music.

Playing out for me is definitely not my main source of income. I have a day job (career - whatever!) that pays the bills and my accordion playing is more of a hobby although I have been playing out a lot.

I purchased about 10K worth of equipment last year and was wondering what I need to do to write it off. I read online that I can open up a separate business-only checking account, keep track of every dollar I make and every dollar I spend and go from there. I always thought it had to be my main source of income for that, however.

Anybody doing something similar? I already itemize due to my mortgage so it would sure be nice to write off that 10K worth of equipment. It almost would make spending money on gear FUN!

Tommy

What you can do is start your business as a musician. You can open a seperate account or not, as long as you keep records. Then you can show a loss as a musician, especially after you write off the equipment. You can show a loss for a limited number of years (I don't remember the number) without a problem.
Of course this loss reduces your net income for the year and you pay less taxs. It's all legitimate and you are entitled to it, since you do receive money for playing and you are entitled to write off the expenses.
Turbotax software works very well.
DonM

Don hit the nail right on the head. Keep good records, and take all legal deductions--it's that simple. Turbotax is a great program and I also use Quicken for the checking account.

good Luck,

Gary

It is advisable to check IRS regs or with a pro to see what equipment can be written off in the year of purchase and others that must be depreciated over several years.

Any equipment claimed as an expense and later traded or sold requires you claim what you sold it for as income.

Eddie

Turbo Tax checks all the regulations and even has up-to-the-minute updates.
If there are options, it explains both and lets you choose to best suit your situation.
It keeps track from year to year of your equipment and asks if you disposed of it and it handles that too.
DonM

Taxe prep is what wives are for

Aw nuts !

I think its two years.

If you are claiming income from music and you don't depreciate equipment and deduct transportation charges, marketing expenses,
and office in the home (be careful to follow the law, you are paying TOO MUCH TAXES!

The idea is to pay taxes on only the PROFIT from the effort. It costs money to be a musician, and the deduction of legitimate business expenses is the fair thing from all points of view.

Good luck!


Russ

Tommy...sorry, I had another thought. You probably already have your 2003 tax forms.

Take a look at Schedule "C"..that will give you a good idea of allowable expense categories. There are various legal ways to handle depreciation...sum of the year's didgets, other accelerated methods...straight line and more. The point is, if you were a truck driver and owned your own truck, to figure how much you made in a year, you would have to decuct insurance, maintenance and truck payments, liscensing fees, etc. Same thing!


Russ
(I'm REALLY DONE,NOW!)

In reality, I believe you can lose money every year, but if you do then you should probably find another way of making a living. Many of the major airlines lose millions every month, and they have done so for decades, but for some strange reason they're still in business.

There is a book availbale called Tax Loopholes--all the law allows. I purchased it several years ago and it really opened my eyes to a lot of tax issues. The bottom line, however, is quite simple. Keep impecible records, document all expenses, regardless of how small, and don't forget to pay your self.

Here's a classic example. Lets assume that you go on a job to play a private party at a large hotel's banquet room. Here's some of the possible expenses you'll incur: Parking, tolls, gas, meals, tux cleaning, hair coloring (cover that gray) are just a few. Document everything with reciepts, place them in folders under the associated categories and if possible, use a check or credit card for everything.

If you're using a credit card, enter the information in a checking program such as Quicken, and itemize every item using the SPLITS feature.

If you pay cash for something, be sure to get reciepts. Then write the expense information on your calendar for that day(Tolls $5, etc). If you have to use a pay toilet and it cost just .25 cents, write it on the calendar.

Then, when compiling the information on your Schedule "C" using Turbo Tax, you can itemize each of these categories, plus set up additional categories. When it appears that you have finally made some money in the music business, go back to the schedule C and begin dumping money in your retirement fund until you bring your adjusted gross income down to a reasonable level. This will lower your taxes considerably, plus provide you with a place to squirrel away some pretax funds for when you get old like me.

As I said before, my ultimate goal is to pay $1-million in income tax one year--that's gonna' be one hell of a year!

Gary