In my 30 years of getting paid to gig I've never one bothered with the IRS. From 2008-2012 I probably cleared 8k+ a year from gigs. All cash, never reported.
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Advice on handling tax fun
- Thread starter UNIII
- Start date
By law, you're required to claim all income, regardless of the "$600 rule".
The $600 rule only applies if you PAY a contractor; ie another musician, less than $600 a year, and only relieves you of having to send out a 1099.
But you still want to keep track of that payment just like any other expense - I received a 2023 1099 from one venue for $6,000 since I was the one taking and distributing payments over a 10 month period. Not keen to pay taxes on others' income, I sent a 1099 to those whose annual payments totalled $600 or more. Everyone else is still shown as an expense on my income statement, which is auditable by the IRS, along with electronic banking records of Zele and Venmo transactions.
Back to the IRS requirement to claim all income, the IRS has full access to these same digital banking records; If a band leader Venmos you $599, you'd best claim it as income.
Wow, thanks everyone for your comments and helping understanding. Much appreciated.
So after gig pay is split, we each probably go home with around 200 per show. So figure, with the modest amount we play, each guy is sitting at between 1.5k and 2.5k at the end of a year. That's why i was like, I don't know if we needed to go all the way to something like an LLC or what have you. Or if we could do something like some of you were saying that as long as we keep record of earnings, spends and form 1099, we should mostly be alright. I get that ol Uncle Sam doesn't care the level of activity of a person, and see's it as a "What's yours is mine".
So after gig pay is split, we each probably go home with around 200 per show. So figure, with the modest amount we play, each guy is sitting at between 1.5k and 2.5k at the end of a year. That's why i was like, I don't know if we needed to go all the way to something like an LLC or what have you. Or if we could do something like some of you were saying that as long as we keep record of earnings, spends and form 1099, we should mostly be alright. I get that ol Uncle Sam doesn't care the level of activity of a person, and see's it as a "What's yours is mine".
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Depends on where you live and where you play. I’m seeing more and more paying by Venmo. Not all. but the number is growing.
As a practicing CPA, my recommendation is to get a CPA.
The IRS "boogieman" is far worse in myth than in reality. Many returns never get audited and very few are touched by human hands. The industry creates some of the myth in order to drive up business.
As usual when the subject of taxes comes up on Talkbass, there’s some correct information here, some wrong information, and at least one person openly admitting tax fraud!
Everyone’s situation is different. The advice is good to work with a CPA or other tax professional. If your situation is simple and you otherwise understand how to do your own tax return, maybe you only need to work with the tax professional for one tax return and then you can do it correctly yourself. On the other hand, there may be ways to save taxes that you haven’t thought of, and you may come out ahead by paying a professional.
Everyone’s situation is different. The advice is good to work with a CPA or other tax professional. If your situation is simple and you otherwise understand how to do your own tax return, maybe you only need to work with the tax professional for one tax return and then you can do it correctly yourself. On the other hand, there may be ways to save taxes that you haven’t thought of, and you may come out ahead by paying a professional.
I'm not going to give any advice that could lead to your band improperly handling taxes, but I WILL give you THIS piece of advice:
The idea of rotating the person who manages the tax forms, gig by gig, is an EXCEPTIONALLY BAD AND BONEHEADED idea. It's tough enough for ONE person to get this stuff right for 10-12 gigs a year. Having four people each do it two to three times a year is a recipe for foul-ups, plus of course some of them are likely to be the kind of non-detail-oriented people who show up to HR Block on April 14th at 4:30 pm with a shoebox full of paper.
Heck, I've had mistakes on tax forms and the handling of taxes come to me from BANKS with billions of dollars on deposit!
So who's going to be the person that has to chase each person in succession to do the tax stuff and do it right? Who's going to be quality control, overseeing each assigned rotation person's work, since it's all of you that'll be liable for wrong tax entries?
You'd be far better off compensating ONE band member for the trouble of managing tax forms. If that means he/she gets an extra share, I'd do that.
Unless, of course, everyone in the band is a tax accountant, in which case never mind and carry on.
The idea of rotating the person who manages the tax forms, gig by gig, is an EXCEPTIONALLY BAD AND BONEHEADED idea. It's tough enough for ONE person to get this stuff right for 10-12 gigs a year. Having four people each do it two to three times a year is a recipe for foul-ups, plus of course some of them are likely to be the kind of non-detail-oriented people who show up to HR Block on April 14th at 4:30 pm with a shoebox full of paper.
Heck, I've had mistakes on tax forms and the handling of taxes come to me from BANKS with billions of dollars on deposit!
So who's going to be the person that has to chase each person in succession to do the tax stuff and do it right? Who's going to be quality control, overseeing each assigned rotation person's work, since it's all of you that'll be liable for wrong tax entries?
You'd be far better off compensating ONE band member for the trouble of managing tax forms. If that means he/she gets an extra share, I'd do that.
Unless, of course, everyone in the band is a tax accountant, in which case never mind and carry on.
I haven't had to 1099 any fellow musicians yet. There's a bunch of other reasons why I avoid wearing the BL hat like the Ebola virus, but 1099s would be doable. (Just one extra chore for a guy already doing his own self-employed taxes.) One BL thought: "no way" at first - but then she figured it out and it's really not that huge of a deal. No need to form an LLC or anything like that.
Other people I work with should be 1099ing me, but don't. It could be a real dog's breakfast for them if the IRS were to take a closer look. But not for me - I claim all their gigs and am pretty confident about my audit-readiness.
IME non-reporting seems all fine & easy to get away with... until it isn't. I have a close family member who is in a huge, tangled legal & financial mess with multiple federal and state agencies, mostly from not telling them about stuff she should have.
Seriously screw that! I like not having to look over my shoulder, and I like contributing to my Social Security.
Not least of all, depreciating & writing off gear gives me an incentive to buy more!
Other people I work with should be 1099ing me, but don't. It could be a real dog's breakfast for them if the IRS were to take a closer look. But not for me - I claim all their gigs and am pretty confident about my audit-readiness.
IME non-reporting seems all fine & easy to get away with... until it isn't. I have a close family member who is in a huge, tangled legal & financial mess with multiple federal and state agencies, mostly from not telling them about stuff she should have.
Seriously screw that! I like not having to look over my shoulder, and I like contributing to my Social Security.
Not least of all, depreciating & writing off gear gives me an incentive to buy more!
You are correct sir. Keeping all income and expenditure records is the best course of action.
Having been audited once and I was lucky that all the musicians I worked with and paid gave me their shares of the bill. I now do a much better job of record keeping.
straight up booking is the way to go.
Thanks for the correction.
Duke
Then their are those of us who are targeted for "special attention". Trust me, it's a nightmare.
The IRS may not be the boogieman, but their level of untrustworthy business dealings, combined with harassment and ineptitude is still pretty epic.
We got targeted by the IRS one year because we self-filed traditionally. The IRS found a mistake that turned out to be theirs', not ours, and they ultimately owed us money, but not after threatening to put a lien on our home and freeze our assets.
Then somehow we were targeted the next 4 years in a row, each time with them "finding" a mistake that turned out to be theirs, not ours. During the 1 1/2 year long resolution period one year, the IRS put a hold on our covid relief checks, about $2,500 worth, of which they still owe us $400.
We now pay a CPA to handle all our taxes, which eliminates at least one red flag for IRS special attention. Nevertheless, we received another letter from the IRS last year, to which our CPA responded and they backed off. If it happens again, he recommends we hire a tax attorney to write a cease-and-desist.
I totally agree with this. It is hard enough for one well-meaning person to keep this all in order. To farm it out to others who may have no aptitude and less interest seems a disaster in the making.
But I have to say we incur huge benefit from being tax rule followers. And this is not just because we can deduct music-related expenses and payment to our other players. We are also able to play for non-profits of our choice for less than our published rates, deduct as contribution-in-kind and thus give to causes we support. But probably the best thing we gain is the certain calm we gain from operating within the rules. This is probably a character flaw of mine, stemming from being an oldest child.
But I reiterate, it is neither difficult nor expensive to keep records and then hire a tax person to file. It is money extremely well-spent.
Exactly. The only advantage to forming an LLC is personal protection against a business's debt. If you're not borrowing money from banks or investors as a business, which is highly unlikely for a local or even regional band, forming one isn't worth the additional tax filing requirements. My CPA charges me a flat annual rate to handle taxes for our single joint filing. Adding an LLC would double or triple that rate.
Yep. Friend of mine got in a jackpot with the IRS 5 years ago for not claiming income. He's still making IRS installment payments, and has a lien on his house until he's done.
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I agree with this if the band is setup as a business entity, which I will never do again for a local or regional band. This may be subject for a different discussion, but IME it's been superfluous, adding cost and exposure.
OTOH, if I'm filing everything on my personal income statement, which I am, and treating everyone else whom I've paid as a contractor expense, which I do, there's no downside to different band members accepting pay for different gigs in their names and doing the same for anything they pay me.
This is actually the way it works for the local pickup and sideman scene here. I may be the BL on one gig, where one of the sidemen may a BL on another.
Doesn't this approach increase your net income, and in turn, your tax bracket? That total earned is regardless of 1099s you send out... At least I think so? Probably a good question for a CPA
Doesn't this approach increase your net income, and in turn, your tax bracket? That total earned is regardless of 1099s you send out... At least I think so? Probably a good question for a CPA
No. It does not. It only affects gross. Net is after business expenses.
Net income is AFTER expenses. So no, your taxes wont be affected negatively by bringing in a lot of money as long as you have the expenses to offset it.Doesn't this approach increase your net income, and in turn, your tax bracket? That total earned is regardless of 1099s you send out... At least I think so? Probably a good question for a CPA
