Image via WikipediaTaxes are due in 3 days!! It’s hard to believe that time passes so quickly (and that I procrastinated to this point). As I’ve been gathering my various business and personal data over the last few weeks, it occurred to me that not many get the benefit of a good business education and are often lost when it comes to taxes and finances. Quadruply so for musicians and creative types who prefer dwell in creativity… and not so much with the bean counting.

Well, that’s why you’re reading this. You get the benefit of my quasi-schizophrenic right-brain, left-brain 1-2 punch.

Your best resource for the tax season is going to be irs.gov and your local accountant. There are many professionals out there who specialize in accounting for musicians and music businesses (both profit and non-profit). I’ve found success using Tax software. I’ve used TAXCUT (from h&r block) for the past couple years, but this year will be giving TurboTax a shot… because it syncs up with Quicken (which I started using this year too).

The main distinction you need to consider with your music efforts is how you treat it. Is it a business or a hobby. The IRS has a check list that will help you distinguish your specific situation, but if you are spending and earning money (even/especially if you net a loss at the end of the year) I would seriously encourage you to look at claiming your music expenses.

Things you should claim:

• Money/tips/etc from playing gigs
• Income earned from selling merchandise and CDs
• The law also requires you to claim bartering income if you have traded services for other services

...but don’t worry because here are some things you might deduct:

• Advertising/Marketing Expenses
• Printing/reproduction
• Legal, Accounting, and Professional Expenses
• Depreciation of all your music and audio gear
• Cost of Goods Sold (cost of producing, recording, printing, and buying merchandise and recordings)
• Gas mileage
• Audio/computer equipment
• Studio space –there are special rules if you have a studio in your house or apartment that may allow you to deduct a portion of your utilities and rent/mortgage
• Stage clothing –whether it is black, formal clothing for orchestral musicians or your ass-less chaps, tutu, or fake grill that says “BLING” (see a professional for details)

The list goes on…

Although it’s really great to make lots of money with music, the statistical reality is that you’re probably running at a loss which can mean huge tax savings/rebates. Even if you do make good money, you can lessen your tax burden by accurately accounting for your revenues and expenses… and it’s kind of the law.

If you do a lot of dollar volume or just want to take your organization to the next level, talk to a lawyer or accountant about the benefits of forming an LLC or S-corporation.

Good Luck!