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We're Here To Inform You

What's The Purpose?

Most lyrical artists place the business side of music, especially taxes, at the end of their priority list. Often it’s not your intention. When reviewing your list of responsibilities we frequently see taxes or get help with taxes near the top of the list. But then reality sits in. And the reality is that there are way more things to manage than you imagined, AND the creative nature of you seems to fight with the technical side.

 

Income: There are many income generating services/products that are available to artists. Of course there are the normal performing, CD and merchandise sales. But don’t forget your income from teaching, consulting/session work, (ghost) writing, promotional and more. If you’re being paid its taxable income. You won’t receive 1099s from all of these sources, but it’s still against the law not to report any taxable income.

 

Expenses: Lyrical artists will probably incur more travel, meal, entertainment and automobile expenses compared to other businesses. Make sure your entertainment expenses detail the purpose and participants of the meetings. Your mileage log should include starting/ending or total trip distance along with the purpose for the trip.

 

Many lyrical artists purchase a fair amount of equipment. Make sure you’re following the rules of how and when to deduct the cost for this equipment. This especially holds true for antique equipment. Whether your equipment was purchased new or used most equipment can’t be fully deducted in the year its purchased.

The home office is a deduction that most artists should look into. You probably use a room or area of your home for your craft. Although the IRS has recently made the home office deduction a less strenuous task you have to still be aware.

 

Concert tickets, other artists’ music, some clothes, makeup etc aren’t deductible to most businesses. They’re definitely a deduction for a lyrical artist. Consult a professional to make sure you’re not missing out on any industry specific deductions.

 

Remember that your deductible expenses must be ordinary and necessary and can not be extravagant. Extravagant is a gray area. Something that is extravagant for an artist generating $20K in annual revenue may not be extravagant for an artist generating $200K/yr. While something that’s extravagant for an $200K artist may not be for an artist generating $2M pr annul.

McMillan Consulting

Most of Tax Signal's content is created or found by the staff at McMillan Consulting. As tax consultants they've witnessed first hand the amount of damage that can be done to business and individual finance situations because of misinformation.