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Tax help

lpcarter

lpcarter

Supporting Member
Jan 20, 2012
1,580
704
39
Minneapolis, MN
#1
Right forum? Either this or Off Topic.

Anyway. Last year I bought about a million dollars in gear, and although I received no W-2 forms, I did make a decent amount of cash.

However. I don't know if you can only claim up to the amount you "made" in write offs...or what...

And I don't wanna ask a tax guy because he might make me claim the bit that I made and change my refund :)

Basically. I want to know if it would be beneficial to claim musician income to use a zillion writeoffs.

Anyone with experience on the topic?
 
#3
I believe if you gig it constitutes a job, so every expense for it you can claim like gear, lessons, rental space, even gas to and from shows and practice. Now this next part I'm not 100% sure on but I was told that you can claim that stuff like a job for 3 years before you show profit. After that if you don't actually claim how much you make I think they will audit. I would go ask a tax expert anonymously, just give out a hypothetical question and see what he says, that way he won't know who you are and can't make you claim anything you don't want.
 
#4
You can NOT claim expenses if you don't declare income. ALL income is taxable, even from a hobby. You can't deduct hobby expenses, but you can deduct legitimate business expense. The key is being able to show the IRS that you're pursuing it as a business with the INTENT of making a profit.

That means you have excellent records showing the time, miles, investments in equipment and promotion, etc. Keep a spreadsheet all year of all you buy (basses, music, strings, music magazine subscriptions, hours on gigs and rehearsal (not individual practice ), miles driven to gigs, repairs, promotional activities, etc.

Keep receipts for everything on the spreadsheet too.

John
 
#6
JTE said:
You can NOT claim expenses if you don't declare income...
Click to expand...

True. However, some expenses (like equipment) may count
as capital equipment. As such, you may be able to deduct
them over the course of several years. You may not need
(or even be able to use) the deductions this year but there
may be a potential tax savings in there for future years.

TB is full of people who are quick (a little too quick IMO) to say
that "you need to see a tax professional" even in trivial tax
situations. However, in this case, given the level of your
expenditures, I think you really should see a tax professional.
 
#7
Well, getting "I heard once..." advice is bound to be suspect. As for the "profit every three years thing". An occasional TB'er named Pedro used to be an IRS auditor, and according to him, the crux is that you have to show intent. Even if you do not make a profit for five or six years, if you can show CREDIBLE evidence that it really is a business and not a hobby, it's OK. The three year thing is a rough rule of thumb, but not law. But, again, you have to be serious about showing it's a business because they'll likely see through you if you try to scam them. Given the penalties and interest involved, it at least makes sense to me to find out from people who really know this stuff what you can and can't do.

John
 

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