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(tax) Deducting Your Equipment Purchases?

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  • (tax) Deducting Your Equipment Purchases?

    Do you do it? How? Is your band set up as a corporation or do you just do it yourself as an independent contractor? If you do it as a contractor, how does that work? When a club gives the "Drooling Dogs" a check, how do I (as the Drooling Dog's drummer) claim my share, and my share only? Is it reasonable to ask club owners to write band members individual checks, or is that putting them out? I spend WAY to much money on equipment not to deduct it. Any advice?

    ------------------
    Drooling Dog
    - Scott

  • #2
    Thanks Arriguy. I definitely plan on speaking with an accountant. I'm also hoping to get feedback from as many musicans as possible via these forums.

    Unfortunately, I can not let my earnings go unreported. As a business owner, I'm already begging to be audited. So since I have to claim the income, and I'm spending money on equipment, I might as well figure out the best way to deduct it.

    I do not make my living playing music. It's more of a "side thing". However, my family needs deductions badly. We're a couple who makes a buttload of money, but have very few deductions. No kids, 1 house, minimal business expenses. So we get hammered every year at tax time.

    I have no problem spending enough on equipment to equal or exceed whatever I happen to make from playing. Obviously one must be careful when doing this though. If you show a loss for more than 2 years, you're gonna get audited.

    ------------------
    Drooling Dog

    [This message has been edited by Drooling Dog (edited October 08, 2001).]
    - Scott

    Comment


    • #3
      Originally posted by Drooling Dog:
      Thanks Arriguy. I definitely plan on speaking with an accountant. I'm also hoping to get feedback from as many musicans as possible via these forums.
      In some cases, you can deduct "Hobby Expenses". My accountant has done so for me for the past few years - there are specific rules, but they are pretty lax. Also, I deduct any drum purchases since I count my income from playing.

      - Hans
      - Hans

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      • #4
        If you get a 1099 or a W2 from an engagement it is tracable income and the IRS will ask you why you didn't claim it as income. I am not sure how much you have too make before you claim but I have been questioned many time by the IRS about my income. I make my living playing so my income is higher than a weekend player but if you start deducting gear you should use an accountant to do your taxes so he can deal with the IRS not you. Also always have proof of the gear you right off never fudge on your purchases .

        Comment


        • #5
          Originally posted by hmasing:
          Also, I deduct any drum purchases since I count my income from playing.
          How do you claim your income from playing? Do you get W2's or 1099's from somebody, or do you just keep tract of the amount?
          Originally posted by zekedrum:
          If you get a 1099 or a W2 from an engagement it is tracable income and the IRS will ask you why you didn't claim it as income. I am not sure how much you have too make before you claim but I have been questioned many time by the IRS about my income.
          Thanks zekedrum. I'm not too terribly worried about that. I plan on claiming every penny of income. That's kind of the whole point of this thread. Not just how to deduce expenses, but also how to claim income.

          Since you're a full-time musician, how does this work for you? If you're paid to play a club, does the club give every band member an individual 1099? Is your band set up as a corporation that supplies you with a W2?

          I'm guessing studio work is a lot more structured. I'm more interested in how people report income and expenses in a band situation.

          Thanks again.

          ------------------
          Drooling Dog
          - Scott

          Comment


          • #6
            There are more expenses than just equipment: miles to and from gigs, miles to and from practice, miles to and from the store you bought the equipment from, meals while on the road, lodging on the road, etc. An accountant probably should advise you. As an example, mileage is figured at $0.31(I think) a mile. Take all the deductions you're entitled to. I should probably say I live in MN. Can't say much about other states. It certainly pays to check it all out. Also, keep a logbook.

            Jay
            jg52

            Comment


            • #7
              In the last band I was in, one of the guitar players was a CFO (of rock & roll), and was then the Tax Commissioner for the state of Vermont!

              Needless to say, even though 90% of payments to the band were in cash, we reported every nickel.

              On the other hand, we were incorporated, which supposedly is cheap to do, and has a few tax advantages according to He-Who-Should-Know.

              We deducted everything - equipment, maintenance costs like repairs, tune ups, drumsticks, heads, guitar strings, etc. Travel, the band's bottle of scotch for each night at a gig!, food, gasoline, mileage, advertising, postage, studio time and materials, paying the sound guy, a big banner with the band's name....you name it.

              Insurance is another thing everyone needs to get straight, and is also deductable.

              BTW, once you start earning money, you can't use your homeowners insurance, or a rider on your homeowners - you need to get a professional insurance policy.

              The bad news it costs a bit more. The good news it covers your stuff at replacement value, including what your agent calls "mysterious disappearances". This is when someone steals your stuff, but there is no obvious sign of a break in.

              Another cool thing about incorporation is that you can depreciate your equipment costs over a period of time which you choose.

              All I really know is that we reported every penny, earned quite a bit of money, and paid diddley squat for taxes. Yes siree bob, the tax structure in this country definitely favors business over the public.

              Anyway, food for thought.

              [This message has been edited by gingerbaker (edited October 08, 2001).]
              Immensely powerful yet with a liquid cat-quick elegance

              Comment


              • #8
                The fact is - Uncle Sam wants you to create income, full-time, part-time or hobby. And as an incentive, he provides ~ 26 legal tax deductions to help the struggling musician keep his money, and not have to lie about it. I have been the book keeper for my last three bands (as well as my current). Been audited once, and the IRS looked over the books and I was out of the office in less than 15 minutes with a clean audit!! All I can say is keep good, clear and accurate records. Keep your receipts in logical order. The burden of proof shifts to the IRS when you are prepared. I've never used an accountant, but when the day comes we make lots of money, I guess I'll need one.

                Oh and one more thing - RTFM!! Tax manual that is!
                Driving a great song is better than driving a great car!!

                http://mysite.verizon.net/landin82/

                Comment


                • #9
                  I'm a Financial Planner who runs hiis own firm. This is what i do. While I have a corporation for my main business, I do not have one for my drumming. You really don't need one unless you are making real good money from drumming. All you do is become a sole propieter, that is simple. You do nothing but claim your income in your name and pay for your bills regarding the drumming (instruments, gas, etc.) in your name but make sure you keep the reciepts. When you do your taxes, you fill out form Schedule C and deduct your expenses and declare your income there.
                  As far as paying other band members, it depends on certain things, if it's cash then claim only your portion of it. If it is a check and you have to cash it before paying other members, then whoever cashes the check, claim the full amount as income, then deduct what you pay the other members as an expense. That eliminates any taxes you would pay on the amount given to the others. If you want additional info, let me know, I don't like doing long posts.

                  Dave

                  Comment


                  • #10
                    Get an accounting package like QuickBooks to help keep it formal... Just my $.02 (tax deductable too)...

                    Since I am the sole proprietor of SEPdrums, I write off all band gear because I can consider it promotional expenses....and I also spend waaaaaaaaaaaaaay too much on band gear!

                    Sometimes I have a problem with inventory shrinkage....mainly because I end up stealing gear from myself....but thats a different story.

                    It seems that you could set up the Drooling Dogs as an extablished business as mentioned in other posts... then you can claim and deduct accordingly. Getting a Sole Proprietor tax id is easy and I think they are all just your social security#.... There are probably some local guidelines on establishing a business for your area...easy to find online.

                    With a minimal, yet tax deductable expense you can be up and running pretty quickly.

                    Erik
                    SEPdrums

                    [This message has been edited by sepdrums (edited October 09, 2001).]

                    Comment


                    • #11
                      Originally posted by FloridaDrummer:
                      ...if it's cash then claim only your portion of it.
                      Dave,

                      Thanks for the great reply. That's about what I was expecting. Just one question: How do you deal with the lack of documentation that typically comes with cash? I assume clubs that give out cash probably don't supply you with a 1099 Do you just keep track of the amount yourself?

                      Thanks.


                      Originally posted by sepdrums:
                      Get an accounting package like QuickBooks to help keep it formal... Just my $.02 (tax deductable too)...
                      Thanks Erik. I wish it was that simple We've been paying a pro to do our taxes for years already though. We'll check with him on this issue. I was just hoping to hear what other musicians were doing first.

                      ------------------
                      Drooling Dog
                      - Scott

                      Comment


                      • #12
                        For cash, you just keep good records. It's kinda like the old days when waiters recorded their tips. You just keep a log of the amount you recieve. Also, you may lose money 3 out of 5 years before the IRS would consider it a hobby and not allow you to deduct any more expenses (there are exceptions). So deduct all your equipment in the first three years and then only deduct what you make for the next 2 and then repeat the process. If you use your name and not any other name, there is no expense. You use your social security number as you business number and there is no filing or any costs. Just file a Schedule C along with your 1040 and your all set

                        Dave

                        Comment


                        • #13
                          I don't know anything DD, but I've got some ideas. As far as the divying-up the "gig money," maybe you could set up a checking Acct. for the band. Have the check payable to whatever name you choose for the acount. Then, just make "paychecks" for each band member. That way you have official records of each person's pay for tax purposes, and you don't have to have the club owner pay you individually.

                          As for tax deduction, I don't really know. Everyone seems to have good ideas here. It always seems to me that there are plenty of deductions and loopoles for everything. You just have to find them.

                          Just my 2 cents!

                          Comment


                          • #14
                            Thanks snared.

                            The problem with the checking account, is then your band must become a business. I plan on playing in a few bands, teaching lessons and maybe (fingers crossed) even doing some session work. I'd hate to have to set up a separate company for each band and my lessons.

                            I think FloridaDrummer has the right idea. Afterall, he only has 4 posts. He hasn't been here enough to become as corrupt as the rest of us.

                            ------------------
                            Drooling Dog
                            - Scott

                            Comment


                            • #15
                              The problem with the checking account, is then your band must become a business.

                              Not really, you can set up a personal checking account or even a DBA which is easier than incorporating. That would give you a record of the income but it really doesn't need to be done. Every member is just responsible for keeping their own records, makes the bookkeeping a whole lot easier.


                              I think FloridaDrummer has the right idea. Afterall, he only has 4 posts. He hasn't been here enough to become as corrupt as the rest of us.

                              Don't judge a book by it's post numbers, :-)

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