TAXI.com

Unfortunately (or fortunately, depending on how you look at it...), my music income is a small percentage of my annual income.In years past, I haven't claimed it, as my music-related expenses have generally exceeded my music-related income. But I want to claim my very modest income this year, mainly so I can write off the expenses from CD mastering, CD manufacturing, mailing costs, etc.I was curious about what other folks are doing with taxes, and if anyone had recommendations for tax books for musicians/composers.thanks!

Declare your income so you can write off your expenses.Even if you don't have income you can write off expenses (within IRS guidelines of course).The tax filing software programs have good business deduction info and can help identify deductible expenses and help with depreciation, etc.Good Luck!

I'm not a tax expert, but I believe a business has to make money (over expenses) in something like 2 of 5 years (or something like that). Otherwise, they will try to call it a "hobby", for which you can't claim any expenses. And they may not catch it right away, but if you file, they have a time limit to audit you. And if you don't file, there is no time limit (even if you don't owe anything)-- so far as I understand. So better to file, even if you don't owe anything-- that way they can't come back to you and say you owed for something rediculous from years ago. But again, I'm not an expert here-- just my personal experience.A good attorney/accountant is helpful for these kinds of things. Good luck to you!Raags

Thanks lsp and Raags!I was aware of the 2 of 5 rule -- figured I should go ahead and declare a loss in a year when I had a lot of expenses. (We released a CD last year...)I'll probably order this book from Amazon. Only $10.17, which I'm assuming is tax deductible!The New Tax Guide for Artists of Every Persuasion: Actors, Directors, Musicians, Singers, and Other Show Biz Folks http://www.amazon.com/dp/0879109661/

well you almost have this right.You can treat your activity as a business if you show profit in 3 out of 5 consecutive years, unless you are racing horses, in which case it would be 2 out of 7.The more important question is, are you up for the task of producing income in excess of deductions in 3 out of the next 4 years, under the assumption that this year, you've lost money?

I hope so -- I'm assuming it's possible to show a taxable "profit" in any year by simply not deducting all of your expenses. (Though I'm also guess that the IRS would suspicious of any business that had huge losses when it lost money, but made minimal profits in the "positive years.)A few online articles I found today:Tax Tips for Musicianshttp://emusician.com/mag/emusic_tax_tips_musiciansTax Tips for Musicianshttp://www.musicbizacademy.com/knab/articles/taxtips.htmArts Tax Infohttp://www.artstaxinfo.com/musicians.shtml

David - um, no. You cannot pick and choose deductions to manipulate your books to create income in certain years. There are various tax code sections and regulations that prohibit such.While it might not be worthwhile for the IRS to audit a small operation and dissect your expenses versus what would be expected expenses, I'd rather just come up with some kind of idea as to whether you will be profitable or not. If you are trying to become profitable, great. If you think you can't, you might just want accept the idea that your income from music is income from a hobby.just an idea.

They can regulate and prohibit what they like, are they actually going to come to my studio in hopes of spotting an extra computer I didn't expense? I mean, I'm sure they could, but will they? Come to that, I've got other stuff lying around that I didn't pay for, a band had a session and left it behind, should I not use it? The used Mac my cousin gave me when he got out of the computer biz? The instruments on loan/gear in for evaluation/consulting? Just thinking out loud, here, but even the bean counters might not want to open that can of worms.

Mojo- probably won't happen. Just don't want to show losses of $20,000 in years 1 and 2 and then show income of $5 in year 3, $8 is year 4, and $895 is year 5. Unless that actually is the case....