Taxes questions re: license fees and paying co-writers....

[shellsings]

Hello!

I will probably have to seek out a cpa this year when I file, but my questions is this.

I got paid license fees, and from that I need to pay my co-writers. These fees will be reported to the IRS and I will be taxed. The amount I pay my co-writers is under $600 so I don't need to pay them on a 1099. But it appears that I should be able to deduct anything I pay them as commissions and fees? Is this true? I leave it up to my co-writers to claim their amounts if they wish, but don't want to be the only one paying the tax. But if I can claim the amounts as a commission/fee then It should off-set? But then again, would I even be taxed if my gross income is under a certain amount?

Has anyone dealt with this situation?


and second it looks like if you make over $400 as a self employed person, then you need to file for self employment tax for medicare and ss? 15.3%... not sure if that is a requirement or what...


Discuss...

[kclements]

Im not a CPA, so please check with someone who is, but I have done this many times in the past. I have had years where I have paid out more than $600 to an individual and have to give them a 1099MISC and years where I haven't. But as far as I know, yes, you are able to write off all the money you "spend" on paying other musicians and writers.

Also, even if you are not going to owe any tax because your income was too low, you still have to file a return and claim all your income and outflow. And I do believe you have to file Self-Employement tax as well - again based on how much you earned, you may or may not have to pay tax.

Again, this is just my experience and I am not a qualified accountant. I have used a CPA in the past to help me get things started. And now I mostly use TurboTax. They walk you through all this stuff if you get the right edition. I think it is called the Small Business edition. Runs about $80.

cheers
kc

[shellsings]

Thanks. KC. Can you do personal taxes on the small bizz edition? We do turbo tax joint for personal taxes and I entered my biz stuff last year. It had a section for that. It seamed ez to follow and brought down our taxes owed overall. Just wanna make sure I get it right . Thanks !

[kclements]

Hi. Yes, I do my personal and business taxes all through the small ( home?) business edition. I run my business under my own name and soc number. But I am pretty sure (almost 100 %) that you can do both personal and business taxes with the same edition even if you are a sole proprietor, LLC, or S-Corp. A C-Corp has to use another edition I believe.

Cheers
kc

[coachdebra]

[disclaimer] I am not an accountant, but my Mom is!

So - you will file a Schedule C as part of your Income Tax filing. You may also need to file state taxes as well.

Your Schedule C will include both your income and your expenses. Monies you pay to your co-writers would be considered an expense. Then after you figure your income and your expenses you'll get your net income. If that's a positive number, you'll pay the self-employed tax on that income. But that tax can be offset by w-2 withheld taxes if you have a W-2 employee day job. And income taxes you owe for the day job can also be offset if you lost money on your Schedule C business. Exactly how that all shakes out is way over my pay grade.

All of your expenses for running this business we call music can be used as a deduction from your schedule C - BUT only if you document those expenses. In other words - your contracts with your co-writers and receipts for those monies sent to them (which can be the cancelled check - so don't use cash!). Of course you'll only need those if you get audited

If a portion of your home is dedicated to your studio - you can also deduct that percentage from your home expenses including mortgage/rent, utilities, etc. But it can't be a room that's sometimes used as a studio and other times for Aunt Grace to sleep in when she visits...

Hope that helps.

Your coach,
Debra

[mobster85]

Absolutely Debra. Even though I have made no money from licensing I still make money from gigs and a sports show that airs weekly with my son. All expenses are deductible including cell phone and mileage. Set it up as a business and as KC said use ur social as ur business number. You have to make a profit in order to deduct the studio though. Good luck.

[shellsings]

Hi. Yes, I do my personal and business taxes all through the small ( home?) business edition. I run my business under my own name and soc number. But I am pretty sure (almost 100 %) that you can do both personal and business taxes with the same edition even if you are a sole proprietor, LLC, or S-Corp. A C-Corp has to use another edition I believe.

Cheers
kc

Ok great thanks!!

[shellsings]

[disclaimer] I am not an accountant, but my Mom is!

So - you will file a Schedule C as part of your Income Tax filing. You may also need to file state taxes as well.

Your Schedule C will include both your income and your expenses. Monies you pay to your co-writers would be considered an expense. Then after you figure your income and your expenses you'll get your net income. If that's a positive number, you'll pay the self-employed tax on that income. But that tax can be offset by w-2 withheld taxes if you have a W-2 employee day job. And income taxes you owe for the day job can also be offset if you lost money on your Schedule C business. Exactly how that all shakes out is way over my pay grade.

All of your expenses for running this business we call music can be used as a deduction from your schedule C - BUT only if you document those expenses. In other words - your contracts with your co-writers and receipts for those monies sent to them (which can be the cancelled check - so don't use cash!). Of course you'll only need those if you get audited

If a portion of your home is dedicated to your studio - you can also deduct that percentage from your home expenses including mortgage/rent, utilities, etc. But it can't be a room that's sometimes used as a studio and other times for Aunt Grace to sleep in when she visits...

Hope that helps.

Your coach,
Debra

thanks Debra!... not enough room in my Studio for Aunt Grace to sleep lol