The Long and Winding Tax Road: What Every Musician Should Do to Prep for Tax Season
By Alexis Louis CPA, CEO of The Growth Group (an official IFWA Resource Partner) • January 23, 2020
Now that the new year has begun, it’s the perfect time to make sure you are hitting all the right notes for Uncle Sam and to get the finances for your music business in order. Here are four things every musician should do to prepare themselves for the upcoming tax filing season.
Part 1: Check Your IRS Account
Believe it or not, the Internal Revenue Service (IRS) isn’t above making errors. As you start this new decade and tax season, check your account with the IRS. This will ensure that all of the returns you have been filed and payments you’ve made are reflected in their system. To do this, you will need to create an account on IRS.gov, and request access to your tax account.
While you’re making sure everything is accurate in your account, you’ll also want to ensure you’ve done your part. This means making any estimated tax payments for tax you may owe for what you earned in 2019.
Part 2: Organize Your Tax Records
Before you can begin filing your tax return next year, you will need to have your financial records in order. Don’t wait to complete the bookkeeping for your music business. This is critical to knowing how much you earned and spent during 2019 and will make your tax filing process much smoother and less stressful.
While you’re at it, update your contact information with anyone who paid you during the year. Make certain that every record label, venue, publisher or other employer has your most up to date address, business name, and tax identification numbers. This will ensure all of the tax forms are accurate when you receive them in early 2020.
Part 3: Make Retirement Contributions
One of the easiest ways to secure your future and achieve financial peace, is by contributing to your retirement. Although retirement may be several decades away for you, putting a little aside each year can make a huge impact. Plus, if you add money to your retirement before the year is over, you may receive a tax deduction for your contribution!
Part 4: Find an Expert
Taxes can be complicated and confusing. When it comes to being a working professional musician, taxes may be the furthest thing from your mind. You’ve got gigs to play, flights to catch and music to create. But at the same time, you don’t want to put off taking care of your financial future.
As soon as you can, find a qualified tax professional that understands the music industry. Someone with knowledge of royalties, multi-state or multi-country touring, and recording costs will be critical in ensuring that you pay the least amount of tax legally possible. It is in your best interest to partner with a tax professional who can also teach you the best way to reduce your tax burden in the future so that you can keep more of your hard earned cash.
The Institute of Financial Wellness for the Arts (IFWA) provides valuable financial education and planning solutions for the arts and entertainment industry. Learn more and schedule a one-on-one coaching consultation.
Growth Group in an official IFWA Resource Partner and provides tax, bookkeeping and business management services to music industry professionals in the US. Learn more about Growth Group.