Forward/Return ratios, expenses, etc.

[mojobone]

Taxi is way overpriced. Almost everyone that's dealt with Taxi knows this. It's also one of the reasons Taxi isn't taken more seriously.

Well-named, you are, sir, cuz I theenk your Taxi career just went up in flames. You'll now have to provide another email and moniker, if you want to continue trolling. Here's some music so you can do that dance.

https://youtu.be/nfWlot6h_JM

[Paulie]

Must. Resist. Bait.

[mojobone]

Must. Resist. Bait.

Find me at the Rally, Paulie, and I'll stand you to a round. (at least) Us sax players should stick together.

[mikemichnya]

This is a great thread! I'm enjoying every bit of it!

You can create simply for the fun of it, but when you start trying to make money at it, now you're in business. When you do that, you have a profit motive... And the purpose of any business is a fair profit (or to maximize your return on investment if you're a robber baron ). What that is depends, in part, on the business you're in, and the law of supply and demand really is a numbers game... but what are the numbers? Here are a few related questions:

How many hours and how much creative energy (brain power) does it take to produce one submission worthy piece of music?
How many submissions does it take to get a forward?
How many forwards does it take to get a deal?
How many deals does it take to generate any income?
How much income do you need from all those deals combined to earn enough money to make your living writing music?
How long will it take until the total income from music writing equals the amount you need to live?
How can you supplement your music business income - and do you have the perseverance to keep working at it, learning from your mistakes, and improving - until you do?

How many of you are set up as a business so you can write off your cable bill? The money saved right there could be enough to send you to the Rally, which can also be written off. I wouldn't recommend doing this unless you're close to breaking even, but it can be done...

Mojo, the only thing you need to write off your cable bill (and any other legitimate business expense) is a profit motive, not an actual profit - or even close to it. Your audit risk goes up, but that happens as soon as you start a small business anyway, and good record keeping solves that problem. (For the cable bill, a log of the shows you watched, the music you listened to, the music you wrote based on that, etc.)

...the IRS is incredibly anal about scrutinizing home office deductions. You can't use a laptop for both work and personal use (email, web browsing, games, etc), it has to be 100% dedicated to the company. Same for the desk and floor space. If your man cave doubles as both entertainment and workspace, you cannot deduct it...

Paulie, I think you need a better accountant. The part about the man cave is true, but IRS doesn't prohibit you from using your laptop for both personal and business use - just the office. And the "office" can be just a desk in a corner... (Admittedly, you won't get much of a deduction for that.) If your house is 2000 sq feet, and you're working in a 10x20 bedroom (I know, I'm being generous ), then you can deduct 10% of your mortgage, utilities, and more. You just can't use the office for anything else. If you have a desktop computer in your office, it stands to reason that you can only going to use it for the business, but a laptop is a different story, since it's not physically tied to the office. (Like your car, it's 'listed' property, and you specify the percentage of business vs. personal use.)

How you write off your cable depends on how your home office is set up. If it's a part of your home, and you're writing off your office as a percentage of total area, you'd write off the same percentage that you write off your other utility bills. If you only get the cable in your office - as opposed to the entire house - you can write the whole cable bill off.

But don't take my word for any of this. Read the IRS publications on the subject. Free. Online.

One way to look at the Taxi membership is that it's simply another business expense: you're paying for an annual conference in the music business, with the added bonus of having the opportunity to submit to listings on a regular basis. I don't know of too many conferences that you can go to - in any industry - where the cost of a four day conference is less than $400. (And, sadly, I've never been to a Road Rally, so I've been pissing away perhaps the biggest part of the value of my membership every year. )

Oh, and "Write - rewrite - submit - forget your ego- learn from your mistakes - rewrite again - repeat" doesn't fit neatly on a bumper sticker, but it's closer to the truth.

Steve, thanks for opening the thread! Keep the faith, and keep writing!

[andygabrys]

This is a great thread! I'm enjoying every bit of it!

You can create simply for the fun of it, but when you start trying to make money at it, now you're in business. When you do that, you have a profit motive... And the purpose of any business is a fair profit (or to maximize your return on investment if you're a robber baron ). What that is depends, in part, on the business you're in, and the law of supply and demand really is a numbers game... but what are the numbers? Here are a few related questions:

How many hours and how much creative energy (brain power) does it take to produce one submission worthy piece of music?
How many submissions does it take to get a forward?
How many forwards does it take to get a deal?
How many deals does it take to generate any income?
How much income do you need from all those deals combined to earn enough money to make your living writing music?
How long will it take until the total income from music writing equals the amount you need to live?
How can you supplement your music business income - and do you have the perseverance to keep working at it, learning from your mistakes, and improving - until you do?

How many of you are set up as a business so you can write off your cable bill? The money saved right there could be enough to send you to the Rally, which can also be written off. I wouldn't recommend doing this unless you're close to breaking even, but it can be done...

Mojo, the only thing you need to write off your cable bill (and any other legitimate business expense) is a profit motive, not an actual profit - or even close to it. Your audit risk goes up, but that happens as soon as you start a small business anyway, and good record keeping solves that problem. (For the cable bill, a log of the shows you watched, the music you listened to, the music you wrote based on that, etc.)

...the IRS is incredibly anal about scrutinizing home office deductions. You can't use a laptop for both work and personal use (email, web browsing, games, etc), it has to be 100% dedicated to the company. Same for the desk and floor space. If your man cave doubles as both entertainment and workspace, you cannot deduct it...

Paulie, I think you need a better accountant. The part about the man cave is true, but IRS doesn't prohibit you from using your laptop for both personal and business use - just the office. And the "office" can be just a desk in a corner... (Admittedly, you won't get much of a deduction for that.) If your house is 2000 sq feet, and you're working in a 10x20 bedroom (I know, I'm being generous ), then you can deduct 10% of your mortgage, utilities, and more. You just can't use the office for anything else. If you have a desktop computer in your office, it stands to reason that you can only going to use it for the business, but a laptop is a different story, since it's not physically tied to the office. (Like your car, it's 'listed' property, and you specify the percentage of business vs. personal use.)

How you write off your cable depends on how your home office is set up. If it's a part of your home, and you're writing off your office as a percentage of total area, you'd write off the same percentage that you write off your other utility bills. If you only get the cable in your office - as opposed to the entire house - you can write the whole cable bill off.

But don't take my word for any of this. Read the IRS publications on the subject. Free. Online.

One way to look at the Taxi membership is that it's simply another business expense: you're paying for an annual conference in the music business, with the added bonus of having the opportunity to submit to listings on a regular basis. I don't know of too many conferences that you can go to - in any industry - where the cost of a four day conference is less than $400. (And, sadly, I've never been to a Road Rally, so I've been pissing away perhaps the biggest part of the value of my membership every year. )

Oh, and "Write - rewrite - submit - forget your ego- learn from your mistakes - rewrite again - repeat" doesn't fit neatly on a bumper sticker, but it's closer to the truth.

Steve, thanks for opening the thread! Keep the faith, and keep writing!

Bravo!

This pretty well explains it. I do all of these things that Mike mentioned WRT taxes.

[VanderBoegh]

Taxi is way overpriced. Almost everyone that's dealt with Taxi knows this. It's also one of the reasons Taxi isn't taken more seriously.

Ummmmm..... and just who have you been talking to, Matches Malone? You know what I tell my students when they write papers with phrases like "almost everyone has..."? I say, "prove it."

Clearly you're talking to the wrong people.

~~Matt

[RockChild56]

This is a great thread! I'm enjoying every bit of it!

You can create simply for the fun of it, but when you start trying to make money at it, now you're in business. When you do that, you have a profit motive... And the purpose of any business is a fair profit (or to maximize your return on investment if you're a robber baron ).

...the IRS is incredibly anal about scrutinizing home office deductions. You can't use a laptop for both work and personal use (email, web browsing, games, etc), it has to be 100% dedicated to the company. Same for the desk and floor space. If your man cave doubles as both entertainment and workspace, you cannot deduct it...

Paulie, I think you need a better accountant. The part about the man cave is true, but IRS doesn't prohibit you from using your laptop for both personal and business use - just the office. And the "office" can be just a desk in a corner... (Admittedly, you won't get much of a deduction for that.) If your house is 2000 sq feet, and you're working in a 10x20 bedroom (I know, I'm being generous ), then you can deduct 10% of your mortgage, utilities, and more. You just can't use the office for anything else. If you have a desktop computer in your office, it stands to reason that you can only going to use it for the business, but a laptop is a different story, since it's not physically tied to the office. (Like your car, it's 'listed' property, and you specify the percentage of business vs. personal use.)

I would be very careful there, I would not try to deduct (music wise) unless you are making money with your music.
That said you can start a business (publishing, recording songwriting etc.) and set it up with the IRS and your respective state quite easily and actually very cheaply. If you are making money I would suggest that anyway. Still the IRS may not take it so well if you do that and deduct expenses with NO INCOME. Even with Income you Must become profitable within 5 years or the the IRS can and probably will shut you down.
If you do start a business I recommend an L L C with S Corp election as apposed to a Corporation.
Corporations are harder to dissolve and an L L C is better if you have Intellectual Property.
Corporations and L L C's have better tax advantages and ways of lowering FICA contrabutions.
The goal of starting any business is to become profitable.

As for the deductions mentioned all and more are doable. If you want to make the Home Office/Studio a bit more acceptable to the Gov. get a land line in that business name. You can even deduct a portion of your Landscaping... As far as Cable I can see that for many reasons especially if it bundles with your Internet. Oh and your Internet (or a portion) can also be a deduction. You cell Phone bill and much much more. As far as a computer goes I would use those like I would, say Instruments (Guitars, Keys, Hardware etc.) as assets which are depreciated over time. But that would be up to your accountant.
Any memberships, dues, fees etc. are deductions. Travel and related expenses same.

Remember one thing Business deductions come off the top and many/most are 100% so the IRS takes it very seriously.
As Steve said keep copious records and receipts.

One more thing if you are going to take money i.e. a salary or paycheck don't forget your State obligations of Workers Comp and State and Federal Unemployment Insurance Contributions. As well as the related Income Tax and FICA. Because you are an employee.

EJB

[VanderBoegh]

I would not try to deduct (music wise) unless you are making money with your music. The IRS may not take it so well if you do that and deduct expenses with NO INCOME. Even with Income you Must become profitable within 5 years or the the IRS can and probably will shut you down.

Check out this article that was published on CD Baby about a year ago in regards to making a profit as a musician:

http://diymusician.cdbaby.com/musician- ... MTI0MTc5S0

So it would seem we're not under the same restraints as other businesses. Luckily Uncle Sam seems to know the plight of musicians and our delayed revenue, yet immediate expenses.

As a sidenote, I've been writing off music-related expenses for the past 4 years now (this year will be Year Five). Everything from conferences, conference food, flights, computer (dedicated to music), equipment, payments to artists, submission fees, Taxi membership, sample libraries, even the construction of my studio. In my first two years, I had thousands of dollars of expenses, and ZERO dollars of revenue. My accountant's advice has always been that if I'm showing a good faith effort to make money at this, and not simply doing it as a hobby, then it's not a big deal to continually lose money right now. I've always been concerned, thinking "this is the year I have to start making good money", but I seem to be way more concerned than my accountant. True, it's ME that would get audited if it ever came to that, and not him, but he knows the tax codes and laws inside and out. So there's some comfort in that.

~~Matt

[mojobone]

I'm kind of with Mojo and Len. I don't think of Taxi as very expensive at all, especially if you consider how much you can learn. I think what has to be faced is not how much money it costs over several years - as Len said, if you added up your cable or internet bill over years, that would look like a chunk o dough. Getting good and then earning money can be expensive in *time*, though - and time is the most valuable thing we have, right?

That's a very important point that I nearly overlooked; I can't begin to describe how much more I'm getting done, since I took a break from Facebook.

[TimWalter]

Im late to this thread, but found it very very instructive. one reason I clicked on it was that it was alluded to in last nights Taxi TV episode. Michael brought it up, and both Rob and Ron talked about it. Basically, they sniffed at the idea that $6000 is a lot to spend at an attempt to make it in music, If I understood their positions. Some quotes from their discussions:

Rob: "there's no way to hurry this stuff"
" this is a humbling business"
" I have to take things in God's timing" This is from an 8 time Grammy award winner... wow. (approximately 8, + or - maybe a few... but definitely more than he could count on one hand)

Regarding being able to deduct business expenses without making a profit: I agree with the previous posts recommending to get a better accountant. There is no requirement that a business make profit to deduct valid expenses. My own experience: I spent about 10 years trying to make my snack food business go... all told my business lost about $3 million, over about 14 years.... never made a profit... all that loss has been accumulated and is being used as deduction against future earnings (corp was an S corp). Yes, there is a chance that I will be auditted (I was auditted once in the 90s on a different business, because it wasnt making money and my travel expenses at the time were high vs the income, but that was because I was travelling to Japan about 4 times per year trying to develop my export business which eventually became very profitable. The IRS had to back down on the expenses, but they did say I needed to pay myself more than I was, and got me for some payroll taxes they said I should be paying myself on.. but it wasnt a big deal and I ended up not paying really any more taxes.. complicated situation, glad I had a world class CPA in my corner.) My point, actual business expenses are deductable, whether you make a profit or not. if it is a real business venture.

As for me: Ive been a Taxi member for about 3.5 years. In that time, Ive gotten a few forwards (2) but no deal. Ive spent considerably more than $6000 on my efforts (probably $10,000+ on my studio alone), plus travel and attending seminars (I spent a week at Ronan Chris Murphy's Recording Boot Camp, which I would highly recommend, it really increased my skill set in that area, and I am signed up for another week long event with Ronan in West Virginia or somewhere close to there in the spring.. really looking forward to it.). I still suck, for the most part, based on my continued recpt of returns. But, I have decided that this is what I will do until I am too old, Im deaf, and my fingers dont work anymore. I'm very lucky that my financial situation is such that I get investment passive income which is enough to live on very comfortably (thank God for that), and I focus 100% on trying get better. No matter any success or lack thereof, this is the path I have set for myself, and I am enjoying it immensely.

Best regards to all.
Tim