Taxes and other legal stuff

[Zeromus-X]

Don't have a clue where to begin here and Google hasn't helped much, so I figured maybe one of you guys can chime in.

 

I've been playing drums for a band all of last year. Some places paid us with checks, some places paid us with cash. Up to this point we've just cashed the checks and split the money, or split the cash, haven't kept any accurate records, etc. Come tax time, our singer's name was on all the checks and he's gonna get slammed with 1099's or whatever the venues give him.

 

I know nothing about taxes at all so forgive me if some of this seems dumb.

 

1. If he's getting all the forms from the venues, is he the only one who can write off expenses? The band's name is his name, but we're not incorporated and don't have a business license/etc.

 

2. It appears in my city, to get a business license, you have to have an inspector come out and inspect the location. We don't have a location. Does this make sense to anyone?

 

3. The singer's plan was to 1099 the other musicians, but it looks like in order to give us a 1099 we have to be independent contractors, which means we would all need business licenses... which obviously we don't. Someone on another forum mentioned there was a better way and to not have him 1099 us. Is there?

 

4. We occasionally have other guys play with us (if we need more people in the band for a larger show, or if one of us is sick). Is there a threshhold that they have to be paid before they're officially responsible for part of the taxes? I'd hate to hit someone with a tax form for their $100 cut at a {censored}ty gig and have it push them into an audit/etc, but I also don't want them filing it as income and us not filing it as an expense.

 

5. Starting Jan 1st, I'm keeping a log of everything. Any money spent, any money made, mileage to and from each place we play, etc. Right now I assume I'll be able to write off for transportation expenses, gear expenses, stuff like that. Is there anything I might be forgetting? If we're there for six hours, for example, would dinner costs for the band be considered an "expense"? Little things like that...

 

6. Here's a random one. Our check from New Years Eve 2007 is written out as January 1st 2008. Does that mean it goes on this year's taxes, or last year's (since that's the date of the gig itself)?

 

Thanks for any help or links you guys could give me!

[Johnny-Boy]

If all the checks are made out to the leader of the band, then it's his obligation to give all band members W2's.

 

Best, John:cool:

[ihateyouguys]

You may want to double check your assumption that you need a business license. Usually those are reserved for people that set up a fixed placed of business, and sometimes extends to people operating certain types of businesses. To require anyone who works as an IC have a business would be next to impossible, and a sign you're living in a horrible city.

 

My advice: Every state is different WRT to tax law. Spend $150 or so and sit down with a good accountant that can explain everything to you as it pertains to your situation and your state. Anybody you talk to here will not be able to give you good information because they don't know your specifics like a good accountant will.

[Johnny-Boy]

Actually the Federal tax works the same for all the states (in the USA). Your employer is responsible for sending you a W2.

 

If your band leader is getting the checks in his name, then he's your employer, and he has to send you a W2. Actually, it’s in his interest to send you and the other band members W2’s.

 

Yes, for further details you need to find an accountant in your area.

 

Best, John:cool:

[MartinC]

Not sure about your state, but in California a musician doesn't need a business license to be an independant contractor. Only professions that require a license (an electrician, for example) need that license to be an independant. If your leader makes all the decisions about when , where, and how you play, you may be considered an employee, but that would be rare unless your a sideman for a name act, or an established show(Broadway, Vegas). Even then, the employer might try to consider you an independant. It would be to his advantage not to W2 you, because that would make him liable for various employment expenses.

 

Bottom line, the best way, IMO, to handle your situation is to have the leader 1099 the players. You can then take your deductions against the 1099. As far as New Year's you can take your pick which year, but it'd probably be more proper to take it in the year you did the gig. I don't think it really matters. As far as the cash, that's between you, your conscience, and the IRS. Better to be safe than sorry.

 

In CA, if you pay someone over 600.00 in a year , you have to 1099 them. But if you want to write off 200.00 you paid a guy for a gig, you should keep a cancelled check or have them sign that they received the cash. Deductions can include gear(which may have to be amortized), strings, miles driven or the actual auto expense, stage clothes, lessons, cd's(if they are needed to further your career, concert tickets(same test as the cd's), expenses looking for work, repairs to your gear, etc. Not sure about food. A CPA is the way to go, and a log is an absolute necessity, as are receipts for everything. I've been auditied by the IRS. I had my accountant handle everything. I never even spoke to them.

 

 

 

 

 

 

 

 

 

Don't have a clue where to begin here and Google hasn't helped much, so I figured maybe one of you guys can chime in. I've been playing drums for a band all of last year. Some places paid us with checks, some places paid us with cash. Up to this point we've just cashed the checks and split the money, or split the cash, haven't kept any accurate records, etc. Come tax time, our singer's name was on all the checks and he's gonna get slammed with 1099's or whatever the venues give him. I know nothing about taxes at all so forgive me if some of this seems dumb. 1. If he's getting all the forms from the venues, is he the only one who can write off expenses? The band's name is his name, but we're not incorporated and don't have a business license/etc. 2. It appears in my city, to get a business license, you have to have an inspector come out and inspect the location. We don't have a location. Does this make sense to anyone? 3. The singer's plan was to 1099 the other musicians, but it looks like in order to give us a 1099 we have to be independent contractors, which means we would all need business licenses... which obviously we don't. Someone on another forum mentioned there was a better way and to not have him 1099 us. Is there? 4. We occasionally have other guys play with us (if we need more people in the band for a larger show, or if one of us is sick). Is there a threshhold that they have to be paid before they're officially responsible for part of the taxes? I'd hate to hit someone with a tax form for their $100 cut at a {censored}ty gig and have it push them into an audit/etc, but I also don't want them filing it as income and us not filing it as an expense. 5. Starting Jan 1st, I'm keeping a log of everything. Any money spent, any money made, mileage to and from each place we play, etc. Right now I assume I'll be able to write off for transportation expenses, gear expenses, stuff like that. Is there anything I might be forgetting? If we're there for six hours, for example, would dinner costs for the band be considered an "expense"? Little things like that... 6. Here's a random one. Our check from New Years Eve 2007 is written out as January 1st 2008. Does that mean it goes on this year's taxes, or last year's (since that's the date of the gig itself)? Thanks for any help or links you guys could give me!

 

[ihateyouguys]

 

Actually the Federal tax works the same for all the states (in the USA). Your employer is responsible for sending you a W2. If your band leader is getting the checks in his name, then he's your employer, and he has to send you a W2. Actually, it’s in his interest to send you and the other band members W2’s.

 

 

However he may not be an employee depending on the state / federal definitions of such, and in that case it would be dealt with using 1099's, not w-2's. There are federal rules for such cases, and I know some states have their own definitions as well. It's a whole can of worms that really requires expert advice tailored to his specific situation.

[BlueStrat]

 

If all the checks are made out to the leader of the band, then it's his obligation to give all band members W2's. Best, John:cool:

 

 

True. However, he can write off up to 1000 dollars per man in the band without having to provide SS#s.

 

I find it easier to just keep track of what we made and issue everyone in the band 1099s. W2's are for employees where taxes are withheld, while 1099s are for contract labor.

 

I don't know why anyone wouldn't want to declare income, because it then entitles you to write off strings, drumsticks, etc; equipment repairs; gas to and from gigs and rehearsal, any recording, promo or business expenses you incur, and so on. You will invariably show a loss, which means your overall tax bill is lessened. This works as long as you can show that you are growing your business, i.e., putting money back into the band, or do what I do and lie every 4 or 5 years and claim that I made more than I actually did so that I don't show a loss year after year.

 

 

In CA, if you pay someone over 600.00 in a year , you have to 1099 them.

 

 

I believe that's a federal statute, and it was raised a few years back to 1,000 a man.

[gogo]

re: NY Eve, my accountant said I could claim it either year. Since I actually received & deposited the check in 2008, it makes sense to me to claim it for 08 not 07. If the payer puts it on your 07 1099 it doesn't look right, but worst case you'd explain it to the IRS. I've never been audited.

 

I don't know about business licenses. Never had or needed one, at least in my state. When I function as bandleader, I receive all the money, it shows on my 1099, and I claim it all as income. Then I pay the bandmembers, claim all that as expense on my taxes & send each a 1099 if it totals over $600 -- (or $1000?)

[Johnny-Boy]

 

True. However, he can write off up to 1000 dollars per man in the band without having to provide SS#s. I find it easier to just keep track of what we made and issue everyone in the band 1099s. W2's are for employees where taxes are withheld, while 1099s are for contract labor. I don't know why anyone wouldn't want to declare income, because it then entitles you to write off strings, drumsticks, etc; equipment repairs; gas to and from gigs and rehearsal, any recording, promo or business expenses you incur, and so on. You will invariably show a loss, which means your overall tax bill is lessened. This works as long as you can show that you are growing your business, i.e., putting money back into the band, or do what I do and lie every 4 or 5 years and claim that I made more than I actually did so that I don't show a loss year after year. I believe that's a federal statute, and it was raised a few years back to 1,000 a man.

 

 

You're right about 1099's. I believe that's what I received from the band leader when I gigged.

 

Best, John:cool:

[daddymack]

the other option is to file a fictitious business statement, and set up a bank account from which all members are paid. this way there is a record of income and pay out. As long as the 'cash' payments outweigh the checks, then you can usually skip all the tax BS...we've been doing it for years

[soundwave106]

 

I don't know why anyone wouldn't want to declare income, because it then entitles you to write off strings, drumsticks, etc; equipment repairs; gas to and from gigs and rehearsal, any recording, promo or business expenses you incur, and so on.

 

 

Because the IRS pays particular attention to "hobbyist" businesses, for a start -- especially for musicians, where hobbyists are more the norm than the exception. You have to show some intent of being a professional musician (which is simple -- print a few business cards, play income-generating gigs, etc.), and you may have to lie and show "profit" every 3-4 years to get a loss every other year. If I recall, hobbyists are limited to deducting only up to the amount they made -- and in doing this, you have to itemize your *personal* income statement -- which for many is not desireable.

 

I would say that if you play out regularly it's pretty easy to structure a music group as a legit business, and get all of the deductions as a result. If you are screwing around in a practice shed with little to no gigs, and the IRS comes knocking, it won't be as easy.

 

Regarding any income, I would have the band leader issue 1099s.

[BlueStrat]

 

Because the IRS pays particular attention to "hobbyist" businesses, for a start -- especially for musicians, where hobbyists are more the norm than the exception. You have to show some intent of being a professional musician (which is simple -- print a few business cards, play income-generating gigs, etc.), and you may have to lie and show "profit" every 3-4 years to get a loss every other year. If I recall, hobbyists are limited to deducting only up to the amount they made -- and in doing this, you have to itemize your *personal* income statement -- which for many is not desireable. I would say that if you play out regularly it's pretty easy to structure a music group as a legit business, and get all of the deductions as a result. If you are screwing around in a practice shed with little to no gigs, and the IRS comes knocking, it won't be as easy. Regarding any income, I would have the band leader issue 1099s.

 

 

My band was indeed set up as a business, which entitled the players I hired to deductions. It isn't necessarily considered a hobby if you derive steady income from it. It is often regarded more as a second job. I file a schedule C for it, and a P&L statement. And you can indeed deduct more than you made IF you can demosntrate that you are putting money back into the band, and your business is expanding. Back when I was increasing my range, I lost money every year for three years, but I was making more CDs, paying my band members more money with higher paying gigs, making better promo, I bought a band truck, took on an agent with the resultant commissions paid, and was traveling in a 400-500 mile radius. The IRS doesn't seem to mind deducting a loss if you are moving toward increasing your business.

 

If you are stagnant, though, and are making the same 3k a year playing at Bob's Country Bunker, you'd better not be deducting 5 k a year.

[Zeromus-X]

Well, we're playing 3-4 nights a week and booked for months, mostly bar gigs but a couple higher profile ones (amusement parks, ski resorts, stuff like that). We're definitely pulling in more income than I'm going to be able to deduct with expenses, unless I get REALLY creative with it -- we're talking probably $15,000 - $20,000 a year income if it continues the way it has been going.

 

I still believe in order to give someone a 1099 it's state law in VA that they have to be an independent contractor with a business license. I'm going to look into that today. Seems stupid and nobody here seems to have run into it.

[BlueStrat]

 

I still believe in order to give someone a 1099 it's state law in VA that they have to be an independent contractor with a business license.

 

 

1099 is a federal, not a state form, for the purpose of reporting income to the federal government. You may have a different requirement for state taxes, and require a different reporting form, but no state can regulate a 1099.

[Dave Martin]

Holy Cow!!

There's quite a bit of information on this thread that's misleading or downright inaccurate. To the original poster, Spend the money (or have the band do it together) to sit down with an accountant for a few simple lessons in record-keeping.

The short answer is that if the singer is the guy who's name is on the checks (and who'll be getting 1099's from the venues), he'll need to give y'all 1099's for your share of that money, so HE won't have to pay taxes on it. As of last year, 1099's were required for anyone that you paid $600 to (over the course of the whole year). And since all the band members will be getting 1099's, then you've have income against which you'll be writing of your expenses.

 

Spend the money - go see an accountant (Not H&R Block, but an accountant or CPA who works with small businesses on a regular basis; they'll know what you need to do, or you'll need to find another accountant. I don't know if VA has a state income tax; in any case, you'll need to find someone who knows that information, and who knows how to minimize the tax liabilities of the individual members of the band.

 

An online forum is a really terrible place to go for tax advice - and a music forum is worse than most....

Good luck!

[BlueStrat]

 

As of last year, 1099's were required for anyone that you paid $600 to (over the course of the whole year).

 

 

My accountant told me it was raised to $1000/man starting Jan. 1. 2004.

 

And yes, I highly recommend using a CPA. I have since 1998 for my music business. Not only can they steer you away from trouble, they can also point out deductions you may not be aware that you are entitled to.

[Dave Martin]

My accountant told me it was raised to $1000/man starting Jan. 1. 2004.

Sadly, it's still $600; here's the relevant 2008 form: www.irs.gov/pub/irs-pdf/i1099msc.pdf You might wanna have a word with your accountant...

[BlueStrat]

Sadly, it's still $600; here's the relevant 2008 form: www.irs.gov/pub/irs-pdf/i1099msc.pdf You might wanna have a word with your accountant...

 

You are right; I just looked at my tax returns for the past 4 years and I filed 1099s on all my guys with SSNs. In the cover letter of my 2005 worksheet from the acountant, he said there was discussion about raising the non-ID'sd limit to 1000 from 600, but it had so far not been. I misread it, I guess, which didn't hurt me since I provided tax ID info on all my guys anyway.

 

My bad. I prolly ought to learn to read more carefully.