Tax stuff...am I screwed?

[pedro]

I'd still call and talk with an agent.

IF you specifically ask to have an off the record discussion they will not record the info.

I'd request a motion to be honest... tell them how many people get paid out of the check.. then limit your portion to the payment.

yes you will owe taxes - you drove on public roads to get there.. used public cops to break up a fight.

When talking to your tax dude.. discuss setting up a 401 plan.. you'd have to incorporate.. the first 10k profit or so (I forget the number) is tax free diverted to retirement.

I think it would be a serious mistake for the OP to incorporate let alone start up a 401k at this point.

 

[18eranaRic]

if they say you owe, you owe. it's that simple. sorry to hear it.

 

[pedro]

The challenge for being a pro musician is proving that the gear is required to play... their argument would be that you'd buy guitars and strings even if not being paid... this is where the "home office" becomes fishy... meaning would you liquidate all your stuff and close it if not in active use.

The home office and the hobby loss rules are two separate issues. If the OP takes the position that he’s a ‘professional musician’ than he has to be able to establish that he has the skill, education, etc. necessary to reasonably expect to make a profit. If music is a hobby the income is taxable but the expenses (guitars, strings, etc.) are deductible up to the income earned.

 

[MNAirHead]

I think it would be a serious mistake for the OP to incorporate let alone start up a 401k at this point.

Please note.. the first steps are uncooking the books.. starting over with good accounting.. and following the guidelines.

The note was "IF" you're trying to avoid taxes.. avoid them into retirement savings - this is 100% legal.

Not sure if anyone else has been through this as many times as we have - I'm trying to help...

So.. have you called the IRS for a ruling letter yet?.. this could save you tons of headaches.. draws some lines in the ground.. you can avoid paying a penalty if you get this included.

yes have done this proactively when I've found a mistake in our return...

 

[MNAirHead]

The home office and the hobby loss rules are two separate issues. If the OP takes the position that he’s a ‘professional musician’ than he has to be able to establish that he has the skill, education, etc. necessary to reasonably expect to make a profit. If music is a hobby the income is taxable but the expenses (guitars, strings, etc.) are deductible up to the income earned.

Only with the correct documentation.. uncooked of course.

 

[NJL]

Set up real books.. keep real records.. pay the taxes you owe.

um, i have this all, i have been paying taxes on my gigs for many years.

my accountant has all of my info.

 

[pedro]

Please note.. the first steps are uncooking the books.. starting over with good accounting.. and following the guidelines.

The note was "IF" you're trying to avoid taxes.. avoid them into retirement savings - this is 100% legal.

Not sure if anyone else has been through this as many times as we have - I'm trying to help...

So.. have you called the IRS for a ruling letter yet?.. this could save you tons of headaches.. draws some lines in the ground.. you can avoid paying a penalty if you get this included.

yes have done this proactively when I've found a mistake in our return...

I’ve been doing it for almost 30 yrs. There aren’t many things that the corporation can provide (tax wise) at this point that he can’t get with a schedule C. At this stage of the the OP musical career incorporating would be needlessly complicated and costly.

 

[fdeck]

I am a 'tax guy'. Driving to and from gigs would most likely be considered non deductibe commutting. Other things might be deductible and might offset the 1099 amounts. But he has to be very careful since he's left off income from other sources so its a tough call to risk an audit.

What if music is a second job? Also, I assume that in order to deduct mileage, one has to keep a mileage log.

 

[pedro]

What if music is a second job? Also, I assume that in order to deduct mileage, one has to keep a mileage log.

If music is a second job and you leave from your first job then its not a commute and would be deductible. But if you go home (to change, etc.) and then leave for the gig you are back to a commute.

As far as a log goes, you need to keep track of your milage contemporaneously. Diary, log, notebook, etc.

 

[KillerQuebec]

one question I have is "how did they get your SSN?"

Anyway, I would argue that the venue was responsible for payroll taxes. That's why you took such a low rate? Right?

If it is a taxed gig, my minimum is $300 a man or sometimes as low as $200 a man of it is a very steady gig. If they are taxing you, you really can't afford to work for less than that.

Anyway, I got a feeling you signed something and gave them your SSN. So it's really your fault. Find an accountant, and run a few numbers, and call the other guys and tell them they owe you (x) each or you are gonna have to drop a dime on them to the IRS. That's it. Game Over!

What have we learned from this? Never ever ever give out your SSN.

And if someone wants a tax deduction off your bottom, charge them for it or walk away!

I actually just had to quit a band over this very issue. The gig went from $116 plus food untaxed to $150 with NO food taxed. I kept trying to explain to them that we were taking a paycut and loosing a meal.

 

[pedro]

What have we learned from this? Never ever ever give out your SSN.

If you don't provide your SSN they are required by law to withhold 20% for income taxes.

 

[KillerQuebec]

If you don't provide your SSN they are required by law to withhold 20% for income taxes.

That's fine with me. That's what I assumed they were doing. Since I never signed a W2 or W9 or I9.

 

[Febs]

That's fine with me. That's what I assumed they were doing. Since I never signed a W2 or W9 or I9.

You are required to report the income either way.

 

[pedro]

That's fine with me. That's what I assumed they were doing. Since I never signed a W2 or W9 or I9.

W-2 don't require signatures. Anyhoo, that's how IRS protects its interest where an independent contractor exist.

In any case the money is income and taxable whether or not you get a 1099 or W-2 or not.

 

[pedro]

You are required to report the income either way.

Exactly.

 

[KillerQuebec]

W-2 don't require signatures. Anyhoo, that's how IRS protects its interest where an independent contractor exist.

In any case the money is income and taxable whether or not you get a 1099 or W-2 or not.

I agree completely. Nevertheless, the payor is responsible for the taxes. And I do believe that there is a minimum level of income that you can earn and are exempt from filing. Let's just say that a lot of factors come into play here. And it's important to know up front who is primarily responsible for paying the taxes on that income. And unless you are being paid enough to make all this tax filing nonsense worth it, make sure you are not the one ultimatley responsible for the taxes. This is so important that I make this clear to every venue that I book at. I make them understand that they are responsible for ALL taxes unless I/we have specifically intended to accept the tax burden.

If you don't believe me, look no further than the thousands of employers who try to hire their employees as IC's and then later the IRS comes back after the employers for the taxes. Well that's EXACTLY what these venues are doing when they try to 1099 you after the fact.

 

[pedro]

Nevertheless, the payor is responsible for the taxes. And I do believe that there is a minimum level of income that you can earn and are exempt from filing. Let's just say that a lot of factors come into play here. And it's important to know up front who is primarily responsible for paying the taxes on that income. And unless you are being paid enough to make all this tax filing nonsense worth it, make you are not the one ultimatley responsible for the taxes. This is so important that I make this clear to every venue that I book at. I make they understand that they are responsible for ALL taxes unless I/we have specifically intended to accept the tax burden.

No they are NOT responsible for the taxes you are. They are merely responsible for reporting the income to the IRS on a 1099 at year end. Whether they withhold it from you or you pay it with your tax return the money comes from you.

There is no minimum amount exempt from taxes. There is a minimum amount for the requirement by the payor to have to file a 1099.

If you don't believe me, look no further than the thousands of employers who try to hire their employees as IC's and then later the IRS comes back after the employers for the taxes. Well that's EXACTLY what these venues are doing when they try to 1099 you after the fact.

That is a different issue and based on my 30 yrs experience as a CPA and former IRS agent I would say that the bar owners are correct in treating hired musicians as IC. Accordingly, the musician is responsible for both income and self employment taxes on the net earnings.

 

[Staccato]

What if music is a second job? Also, I assume that in order to deduct mileage, one has to keep a mileage log.

Yes, a mileage log became very pertinent in the 1980's. The log or record became a basis for either a.) standard mileage rate or as a measure of b.) actual expenses. If you choose actual, you still need a basis (a log or record of business miles driven to be divided by total miles) for determining what percentage of your auto expense was business vs. driving to the beach for a swim, or out for groceries.

 

[genstormbringer]

So I just got a note in the mail from the IRS claiming that I owe on unclaimed income from 2007. It was from a place I played at with a cover band that is now defunct(the band is defunct not the venue). I used to collect and sign for the checks and pay the guys out of that(the place would always cash the check on the spot). I never received anything in the mail from the venue that year like I would a regular employer so I didn't think anything of it. I don't know, perhaps they don't have to send anything. Basically I was naive at the time and didn't consider this stuff. We had about 3 or 4 venues that we played at regularly and everyone had a venue where they signed for the money and all that. If I tried to contact these guys now I'm sure I'd get the cold shoulder as far as chipping in towards this bill. I don't have their SSN's so I can't do anything with that. Basically I'm currently saddled with a $1300 tax bill from gigs I did two years ago. Am I completely screwed on this one or is there anything I can do to at least reduce this amount? Yes I know I was stupid and my lesson has been learned.

Well you were not thinking at the very least. You are responsible for reporting that money made. Btw you are solely responsible for it since you signed the checks your band mates walked away scott free.
Lesson learned I'll say at the point you started signing checks that made you responsible for reporting that income to the IRS and you lost out on both ends cause not only are you paying for your income but the entire band's income. The venue is not responsible for sending you a tax form, at the point they paid you w check you became a self employed professional.
You r responsible for 100% of the money the IRS is asking for unless you can find a tax attorney like Ronnie Deutch. She always advertises on TV so...

 

[pedro]

Btw you are solely responsible for it since you signed the checks your band mates walked away scott free.

As a practical matter probably yes. But in theory, the bandmates are just as responsible for reporting what they made, regardless of who signed the checks, etc.

Lesson learned I'll say at the point you started signing
You r responsible for 100% of the money the IRS is asking for unless you can find a tax attorney like Ronnie Deutch. She always advertises on TV so...

Where is the icon for 'eye-roll'?