Frequently asked questions

Do I have to report cash... ?
What if there's no Form 1099... ?
Can I deduct my recording costs... ?
Can I deduct my pressing costs... ?
Can I use the per diem method... ?
Can I deduct my meal expenses... ?
Do I have to report per diems paid to sidemen... ?
Self-employment tax on mechanical and performance royalties... ?
Can I avoid state income tax withholding... ?
Do I need a CPA... ?
How do you bill for your services... ?
When do I need to start paying taxes... ?
Do I need to withhold taxes for my sidemen... ?
When should I form a corporation or partnership... ?
Payments from investors or patrons taxable... ?
Involved in every aspect of entertainment... ?
Recognized as expert in any of these areas... ?

Do I have to report cash received and paid
(as opposed to checks) on my tax return?

Yes. There are many ways the IRS can find this out, and we know what those ways are. We suggest using a Daily Road Sheet.

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If I don't receive a Form 1099, do I have to report that
income on my return?

Yes. Taxable income is taxable income whether you receive a 1099 form on it or not.

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Can I write off all of the recording costs of my CD
in one year?

Generally, no. The IRS wants you to "capitalize" those costs and to write them off over the useful life of the master, which means you can write off some of the costs in the first year and the rest of the costs in subsequent years. This is also the case with demos.

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Can I write off all of the costs of pressing my CD in
one year?

You can, but only if you have none of the CD's left over at
year end.

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Can I use the per diem method for travel meals or
should I deduct my actual meal expenses?

You should use whichever method yields the most deduction for the year for your out-of-town overnight meals. You should use actual meal expense for entertainment-type meals. You may not generally use the per diem method for hotels.

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For per diem rates within the US go to...
:: Click Here To View ::

For per diem rates outside the US use the local meals rate at...
:: Click Here To View ::

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Can I deduct all of my meal expenses?

No, you can only deduct 50% of your meal expenses whether you use the actual method or the per diem method for the year.

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Can I deduct all of per diems that I pay to my sidemen?

No, only 50%.

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Do I have to pay self-employment tax on my
mechanical royalties and performance royalties?

Generally, yes. They are reported in the same manner as
your performance income.

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How can I avoid having states withhold state income
tax from my out of state performances?

Usually, you can provide the state tax authorities with
your tour budget for the dates in that state and eliminate
or reduce any state tax that the promoter may try to withhold.

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How do I know when I really need a CPA?

In a spiritual way, you need one when you start losing
sleep over your tax and bookkeeping responsibilities. In a
more tangible way, you should at least consult a CPA when
you start performing as your full time job.

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How do you bill for your services?

One of three ways - hourly rate, fixed fee, or percentage
of gross income. Call us for a free initial consultation and we
will set up a billing method to fit your situation. Our basic billing
philosophy is to set up a system between us and our client
where the bill is an amount that the client can afford to pay
and that we can afford to bill.

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If I am self-employed, how much profit do I have to
make before I have to start paying taxes?

You start incurring self-employment (social security) tax
when your net income goes over $400. After your net income
exceeds the total of your standard deduction and personal
exemption amounts, you start incurring federal income tax.
Generally, if you are making a living at what you do, you
should be paying estimated taxes in quarterly at a rate of
at least 15% - 20% of your net income.

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Do I have to withhold payroll taxes from my sidemen?

Yes. If they walk and talk like employees, generally the
answer is yes. The IRS can go back three years and calculate
the taxes that you should have withheld and collect them
from you... along with interest and penalties.

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When do I need to consider incorporating or forming
a partnership?

Usually the first two factors that come into play are limited
liability issues and ownership rights - who actually owns
the band name, who are the main songwriters, who signs
the recording contracts, etc. There are of course many
other issues that need to be considered such as tax savings,
fringe benefits, etc.

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If I receive money from "investors" or patrons for the
purposes of recording, pressing or touring, do I have to
report that as income?

Generally, yes, unless you set it up as a loan or as equity investment (eg., partnership interest, stock ownership interest, etc.). Basically if you are not required to pay it back (like a recoupable advance from a record label), you are taxed on it when you receive it, so careful tax planning may be required if you are able to raise a sizeable amount of money for this purpose.

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Is your firm involved in every aspect of the Music Industry?

Yes. The generic term "Music Industry" encompasses many
different types of businesses and services. Although it is virtually impossible to be involved in every aspect of the music industry,
we routinely perform accounting, tax and consulting services for
the following types of music clients:

Bands
Professional Musicians
Songwriter
Music Store Retailers
Recording Studios
Music Teachers
Independent Record Labels
Personal Managers
Booking Agents
Entertainment Attorneys
Publicists

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Is your firm recognized as an "expert" in
any of the aforementioned areas of the music industry?

Yes. We have a significant amount of experience working with
musical performers and bands, as evidenced by the large number
of our musician clientele throughout Austin, in Texas and many
outside of Texas.

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