Re: Band Finances

["Bob Maglinte" <bbqbob917@xxxxxxxxxxx>]

- ----- Original Message ----- 
From: "Michael Polesky" <m.polesky@xxxxxxxxxxx>
To: "M. Erickson" <erickm@xxxxxxxxx>; "Harp-L" <harp-l@xxxxxxxxxx>
Sent: Sunday, May 11, 2003 4:27 PM
Subject: Re: Band Finances


>
> Hi All,
>
> A couple of questions were asked about how to properly handle the tax
> liability of a working band.  The best way to do it is to ASK YOUR TAX
> PROFESSIONAL.  Only a tax professional who is intimately familiar with
> your specific situation can give you the proper advice YOU need.  Now,
> I actually am a tax professional, but I can't give anyone specific
> advice here, just some general rules to follow to help guide you
> along.
>
> First off, it's a much easier process if you can get a particular
> establishment or festival to provide separate checks for each
> musician.  They will likely require the social security number and
> address of each band member and, when you are managing in a working
> band, you should know this information too.  Because, if the employer
> will only write out one check, then you will have to report any
> payments you make to the IRS on forms 1096 and forms 1099-MISC.  In
> order to fill out these forms you will need correct social security
> numbers and addresses for each individual that requires reporting.
>
> Reporting Requirements
> Any individual whom you pay over $600 (for your business) in a given
> calendar year qualifies for a form 1099-MISC.  This is cumulative over
> the calendar year and not for one specific event.  So, if you have 6
> gigs and you pay one musician $100 for each gig (wouldn't that be
> nice) you need to report all $600 to the IRS at the end of the year.
>
> Form 1099-MISC and 1096
> Form 1099-MISC is the form you will use to report the information for
> each individual you pay more than $600 dollars.  You supply copies of
> this form to both the IRS and the individual whose income you
> reported.  Form 1096 is the form you use to report the total for your
> business to the IRS.  Forms 1099-MISC and 1096 can usually be bought
> together in the same package around February or March at any large
> office supply chain.  You can also order free forms from the IRS
> directly by calling 1-800-829-1040 and requesting them.
>
> The most current instructions for 1099-MISC can be found at:
> http://www.irs.gov/pub/irs-pdf/i1099_02.pdf on page 45 of 80.  The box
> you use on form 1099-MISC to report musicians' fees is Box 7 -
> Nonemployee Compensation.  Read the instructions carefully and ask a
> tax professional if you have questions.
>
> The most current instructions for form 1096 can be found at:
> http://www.irs.gov/pub/irs-pdf/f1096_03.pdf.  Remember that you have
> to mark on the form that the type of 1099 you are supplying is
> 1099-MISC.  Most of the other stuff on these forms is pretty easy to
> figure out from the instructions.
>
> Successive Years Of Losses and Hobbies
> ASK YOUR TAX PROFESSIONAL!  When you are a musician you are constant
> risk of your business being ruled a "hobby" by the IRS if you are not
> making enough profit.  The general rule is that your business must
> make a profit 3 out of the last 5 years in order not to be considered
> a hobby.  This is measured from the current tax year back.  This is a
> general guideline that the IRS uses, but not a written rule.  I
> suggest to my clients that they hold off on some of their gear
> purchases from time to time so they can at least show a profit every
> other year.  This is usually enough to prevent the IRS from declaring
> your musician's earnings as "hobby" earnings. Hobby losses are not
> deductible.  In order to determine if your business might be
> considered a hobby there is some sparse information on the IRS website
> at: http://www.irs.gov/businesses/small/article/0,,id=99239,00.html.
> It is vague enough to give you an idea why you might want to check
> your specific situation with a tax professional.
>
> If all of this doesn't confuse you enough to go ask your tax
> professional then I haven't done my job!  Good luck to your band.
>
> Michael

Hi,
I do agree with this post, but I should add is that you make sure that the
tax professional specializes with the entertainment industry, because even
though they may charge a bit more for their services, in the long run,
they're FAR more knowledgeable about what goes on in the industry and will
wind up saving you MUCH more than the fee they will charge for their
expertise. Going to places like an H&R Block for this stuff is something I
would NOT recommend, because many of these people have little or no training
and/or experience in such matters.

Sincerely,
Barbeque Bob Maglinte
Boston, MA