Advice on handling tax fun

[UNIII]

Hey all. I'm an idiot when it comes to the business side, so looking for advice on how to handle when it comes around to the good ol tax forms for the band.

We're a 4 piece cover that only really plays around 10-15 dates a year, most of them being bar gigs so we just get whatever payout at the end of the night. Maybe 2-4 of those being "bigger" events. But we've been getting invited to some festivals and such around the area, which means signing some papers. Luckily for myself, last year our singer kinda took the lead on the tax documents and such, so i didn't really see that side of things myself. So for those types of shows he'd take the check payout and venmo us our portions and did his thing when it came tax season. This year he wants to divvy out that responsibility among the boys.

What's the smartest way to do it to keep Uncle Sam happy? Is an LLC really necessary for us for not really being super active or raking in that much of an income? Should we cycle filing amongst ourselves? Should we close our eyes and pretend we don't see anything? (lol jk)

I've always had it easy filing taxes for myself, no kids or sig others or anything like that, it's about as easy as it gets, so my understanding of the different forms and things isn't the greatest. Opinions are appreciated! Thanks all!

 

[theduke1]

Save all your receipts for gear, travel, meals, mileage etc. If your share for the year is under 600 you don’t need to claim it. add a small business form to your W2 stating income and expenses Duke

 

[J Wilson]

The best thing to do is to hire an experienced, professional CPA.

This does two things:

First, you no longer have to worry about what you don't know, and it's done right.

Second, if Uncle Sam decides he has questions, they deal with the CPA first, there's now someone between you and them.

It's an extra expense, but what's it worth to have these things done right?

 

[mrcbass]

I've been in one one band that the BL actually sends out W9s to the members. We'd get paid the following week after a gig with a check so always a paper trail.

All other bands are typically cash at the gig (one sends me PayPal the next day or two) and it's on us to deal with our taxes. I could fudge a lot since so much of it is cash, but choose to report my income and pay my taxes. I honestly doubt that most of my mates do though.

As far as managing it, I keep it simple. I just file it as a "Musician" side business, claim my income, write off gear expenses and claim mileage. Since I am now actually making more than I'm outputting, I'm not worried about the "hobby vs. business" thing. If ever audited, I'm sure I'd get called out on something (I'm no tax expert and I'm infuriated by how complicated they make it), but it seriously is not enough money for anybody to be worrying about it.

 

[SoCal80s]

2 ways to go about it. 1: You fill out the W-2 to give to the venue, then you pay everyone and they give you a W-2. 2: You guys take turns being the one that give the venue a W-2, that way the tax burden is spread out.

As to your question about an LLC, it has nothing to do with taxes. LLC's are about liability. You can create a business and get a TIN without being an LLC (you can apply for a TIN as sole proprietorship or as a partnership). An LLC is worth it if you have enough assets that you want to protect in case the band gets sued.

 

[singlemalt]

The one time a band dropped a 1099 or whatever on me, I just figured out the extra paperwork and lost money for the year. It’s not hard if you track expenses, the losing money part, that is.

Since the bulk of any gig money is cash, and I spend that on gear, I don’t bother the IRS with frivolous musings.

On the other hand, when reporting to my long suffering wife, I tend to inflate earnings and minimize expenses. I get the same eye roll as I get when a bass size box appears at the front door.

 

[dbsfgyd1]

Hey all. I'm an idiot when it comes to the business side, so looking for advice on how to handle when it comes around to the good ol tax forms for the band.

We're a 4 piece cover that only really plays around 10-15 dates a year, most of them being bar gigs so we just get whatever payout at the end of the night. Maybe 2-4 of those being "bigger" events. But we've been getting invited to some festivals and such around the area, which means signing some papers. Luckily for myself, last year our singer kinda took the lead on the tax documents and such, so i didn't really see that side of things myself. So for those types of shows he'd take the check payout and venmo us our portions and did his thing when it came tax season. This year he wants to divvy out that responsibility among the boys.

What's the smartest way to do it to keep Uncle Sam happy? Is an LLC really necessary for us for not really being super active or raking in that much of an income? Should we cycle filing amongst ourselves? Should we close our eyes and pretend we don't see anything? (lol jk)

I've always had it easy filing taxes for myself, no kids or sig others or anything like that, it's about as easy as it gets, so my understanding of the different forms and things isn't the greatest. Opinions are appreciated! Thanks all!

Money received, be it in cash, or by check for playing music is taxable income. Whether you get a 1099 or not is irrelevant.

You are what as known as an independent contractor. You need to file a business tax form for a calculating your net business income which is income - expenses (like mileage, strings, certain travel expenses) and form SE for calculating your Social Security/Medicare tax.

Next, your band is a business which could be anything from a partnership, an LLC or you could a C Corp. An LLC while provides some legal protection advantages, from an income tax perspective offers little protection other than group expenses, like owning a PA or equipment truck held jointly for instance.

I’m not an accountant, but it is important that you understand if a venue pays you in cash, then doesn’t issue a 1099, you still need to add it into your income. If you don’t and the venue gets audited later on, it is possible you could be sited for unreported income.

Whether you register as a partnership or an LLC, you will need to set up a tax ID and some one, either a band mate (Setting up and running a QuickBook account is not overly difficult or time consuming ) or a or hiring a bookkeeper (might be worth the money all things considered), this needs to be done.

As I said, it’s a business and needs to be treated as such. You s sure as heck don’t want trouble with the IRS, or your band mates either for that matter.

 

[Kevan Campbell]

Hire an experienced CPA. I do this for both my business (music) income and expenses as well as my personal taxes. 1000% worth his fee to have him to ask questions about random expenses, to handle the paperwork and even a bit of help short-term financial planning.

Report every bit of income and try to ale as many expenses as are allowed by law. The only time I’ve ever skipped on reporting income was once when we got base pay and the tips were so low that my share was $7, which I went the next door over and bought a slice of pizza for $5. Even that I wouldn’t do again, just not worth the hassle of it hanging over one’s head.

 

[Topkat13]

I bet you’re not an idiot.

 

[Anne Millington]

We try to keep it simple, but definitely don't want to tangle with the IRS. We have our music business listed as a sole proprietorship, and report all income, cash, checks, online, whatever. Then we tally all what we have paid our musicians, and give a 1099 form to all who make more than $600 in the year. We keep track of all travel, instrument, equipment, PR and communication costs. I have a set of spreadsheets that I reuse every year to keep track of all this. Then our trusty H&R Block guy puts everything in the right place for our business and personal calculations. The cost is about $500 for his services, and he is worth every penny.
Find yourself someone you trust as an accountant or tax preparer, and follow their advice.

I would add that I think your life will be simpler if you do the whole thing, rather than try to cycle it among band members. Not everyone aspires to the same standard when it comes to handling minutia.

 

[40Hz]

We try to keep it simple, but definitely don't want to tangle with the IRS. We have our music business listed as a sole proprietorship, and report all income, cash, checks, online, whatever. Then we tally all what we have paid our musicians, and give a 1099 form to all who make more than $600 in the year.

Probably the easiest way to handle it as long as a professional looks it over and handles the tax forms. About the only potential risk is having your bandmates deemed to be “statutory employees” rather than independent subcontractors, which would make you an employer who’s now required to start withholding for SSI and Medicare as well as paying half the SSI contribution.

The rules can get a little complicated because you dealing with both Federal and State regulations. And state regulations will vary depending on the state you live in. So it’s a good idea to get professional advice rather than try to figure it out on your own. Money well spent.

 

[Anne Millington]

All of our players can be considered independent contractors, at least in California. This greatly simplifies everything. When we first started out, we were given the advice to treat them as employees, and that was a nightmare for all concerned. We have had no trouble with regard to the independent contractor status, for twenty some years of filing.

 

[john_g]

Bah...wait till the IRS contacts you and then wear this shirt in the audit:

 

[John Patten]

If a bar pays in cash, how will the IRS - or anyone - know to whom the cash was paid? Most of the bars don’t even even ask for a signature on a receipt, they just hand over the cash…

 

[Anne Millington]

If a bar pays in cash, how will the IRS - or anyone - know to whom the cash was paid? Most of the bars don’t even even ask for a signature on a receipt, they just hand over the cash…

Yeah, I guess it is just a matter of one word over another. All's I know is there is nothing to be gained by getting on the wrong side of the IRS or ASCAP/BMI. It can't be worth the pain.

 

[basspraiser]

Bah...wait till the IRS contacts you and then wear this shirt in the audit:

Nope

Especially now... The IRS is all over small businesses... Which a band is

Hire an accountant...

Track and record all income and expenses... Keep it organized ( spreadsheet or better yet quicken or QuickBooks)

I am a small businesses owner .... And do that for my business...

Any band member that makes over $600 per year " should" do this... Many don't

 

[bcbassman]

If you are a small band that plays for cash, there may be a small risk in anyone finding out about your situation, but is is really worth it? You can write off a lot of your band income if you file a schedule C with your income taxes. I mean if you played twice and earned 200 bucks for the year I wouldn't bother, but If you made an extra $5k to $10K, you should be claiming that income. It can hurt you if it comes out that you haven't done so.

 

[John Patten]

If you are a small band that plays for cash, there may be a small risk in anyone finding out about your situation, but is is really worth it? You can write off a lot of your band income if you file a schedule C with your income taxes. I mean if you played twice and earned 200 bucks for the year I wouldn't bother, but If you made an extra $5k to $10K, you should be claiming that income. It can hurt you if it comes out that you haven't done so.

I agree if you’re getting more than $1,000, it’s a good idea to report it, but I still doubt the possibility of the IRS - which is very understaffed and technologically impaired - is going to spend any time trying to find the people picking up a little cash in bars. Your social security number is not on record with the bar, so determining who was paid what and what you may have been paid would be nearly impossible.
Has anyone here had a different experience?

 

[BGroovy]

2 ways to go about it. 1: You fill out the W-2 to give to the venue, then you pay everyone and they give you a W-2. 2: You guys take turns being the one that give the venue a W-2, that way the tax burden is spread out.

As to your question about an LLC, it has nothing to do with taxes. LLC's are about liability. You can create a business and get a TIN without being an LLC (you can apply for a TIN as sole proprietorship or as a partnership). An LLC is worth it if you have enough assets that you want to protect in case the band gets sued.

W-2 is for employees. You’d fill out a W-9 and the they’d send you a 1099 end of year.

Most businesses won’t send a 1099 unless they’re paying you more than $600.

 

[KenSmithFan]

He wants to divy out the responsibility? Really? Having to pay out the money for 10-15 gigs a years is such an onerous ask that he can't handle it? How much time does it take? 10 minutes; MAYBE? I wouldn't split the responsibility. Actually if it was me, I'd use this as an opportunity to collect the money at all the clubs, which makes you the contact for the manager, so if things go south with the band, you'll be in a good position to book your new band in these clubs.

It ain't rocket science. Collect the money, keep a spreadsheet of how much you collected and how much you gave each member. At the end of the year, send everyone an email telling them how much you gave them. If you don't get a 1099 from the club, there's no way for the IRS to track the money back to you. If they somehow did, you would be able to show them where the money went. You're only responsible for taxes on YOUR portion.

If you're really concerned, see a tax professional.