Musicians have a unique opportunity to earn money doing what they love, but despite the
creative freedom to make a living sharing their art, there can be a level of stress that
arises when it comes to doing taxes and factoring in the financial side of performing.
Taxes can be simpler than they appear with a little bit of preparation, so if you are a
musician looking to get ahead, here are 6 incredible resources that teach you everything
you need to know about taxes:
How To Do Taxes as a Self-Employed Musician
Before doing taxes as a self-employed musician, you must decide if you will classify as a hobbyist, with no ability to claim losses, or a professional, who intends to become profitable. Additionally, musicians should understand the four types of taxes they will pay:
- Federal income tax
- Self-employment tax
- Capital gains tax
- State and local tax
From there, musicians should choose a bookkeeping method to track deductions and ultimately file their taxes.
Quick Guide to Taxes as an Independent Musician
There are a few simple strategies independent musicians can employ to make filing taxes is easier. Taking note of your monthly expenses and keeping track of everything throughout the year, such as keeping all bills, receipts, and forms in an organized location, will help ensure your taxes are accurate with a minimal headache when it comes time to file.
Musicians and Singers
Business taxes for musicians and singers can be confusing, but these are the factors performers should consider during tax season:
- Income for the musician.
- Travel and meals.
- Vehicle expenses.
- Home office or studio.
- Other unique deductions.
Each tax scenario is different, but through consistent bookkeeping, musicians can be prepared for a seamless experience when tax season rolls around.
The Musician’s Guide to Taxes: Top Tax Deductions
When running a business, you can claim certain business expenses as deductions to reduce your tax liability, so musicians must do diligent bookkeeping throughout the year. Some of the expenses that musicians can write off include booking fees for studios, utility costs for your workspace, registering for a business license and insurance, website fees, and more.
PayPal and Venmo Taxes: What You Need to Know About P2P Platforms
Peer-to-peer payment apps like Venmo and PayPal provide a unique level of convenience that connects musicians with potential tippers. These applications have personal and business payment platforms, but users must still consider them.
If you earn over $20,000 in gross payment and receive over 200 separate payments in a year using P2P platforms, you must complete a 1099-K form for your taxes. It may be beneficial to create a business bank account and track your expenses to make this process easier come tax time.
Musicians Tax Guide: 11 Common Mistakes Musicians Make on their Taxes
There are many mistakes that musicians can make on their taxes, but here are the 11 most common:
- Not filing taxes at all.
- Not claiming income and expenses.
- Bad business partnerships.
- Forgetting cash, Venmo, and PayPal
- Always taking a loss.
- Not considering the travel mileage.
- Not capitalizing assets.
- Underpaying estimates.
- Inconsistent bookkeeping.
- Not issuing 1099s to contractors.
- Being afraid of the IRS.
Most issues arise from lack of awareness, but through self-education, musicians can successfully navigate the business side of the art world.
The business element of the music industry can work to your advantage if you are organized throughout the year with your bookkeeping, allowing you to keep making money doing what you love. Check out these six articles for more in-depth information
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