Klarinet Archive - Posting 000522.txt from 1998/02

From: Jack Kissinger <kissingerjn@-----.EDU>
Subj: Re: It's tax time
Date: Wed, 11 Feb 1998 15:08:18 -0500

Gary,

Perhaps your friend misunderstood you or you misunderstood him or
perhaps he did not have all your relevant information at hand. As you
have described it, your income from teaching and freelance playing (and
freelance composing, if you do any) is all business income, regardless
of your primary means of making a living and can be reported on Schedule
C. This is good news because, on Schedule C, you can deduct expenses
associated with producing this income (including, as has previously been
mentioned, specific insurance on your instruments, supplies (reeds, cork
grease, and (yes) that new mouthpiece and ligature you just bought),
music, and POSSIBLY (depending on specific circumstances) depreciation
on your instruments and some mileage. You may deduct these expenses (as
long as you can legitimately put them on schedule C) even if you take
the standard deduction on your return and without any limitation related
to percentage of income. (That's why it's better to deduct them on
Schedule C than to claim them as employee business expenses.)

"Hobby Laws" only kick in if you show losses in more than two years
within any five year period. But even in this case the IRS will allow
you deductions for each year up to the amount of that year's revenue.
If you have losses in only one or two years (during a five year period),
you can actually deduct the amount of loss against your other income for
that year.

Jack Kissinger
(who is, among other things, a CPA and Associate Professor of Accounting
at St. Louis University)

(Boy do I hate to admit this in this forum -- especially when I'm on the
verge of buying an alto clarinet. I mean, if a nerd is someone who can
play alto clarinet and owns one, what is an accountant who can play alto
clarinet and owns one? THIS IS A RHETORICAL QUESTION, SCOTT AND
CAROL!) ;^)

Gary L Smith wrote:
>
>
> But my major reason for responding is to mention one thing that kind of
> reeks: those of us who play and give lessons for $, but do not make our
> living at it, find this whole question moot - the IRS does not allow
> *any* deductions. At least, a friend who makes *his* living advising
> people on tax issues told me this - in such cases it's considered a
> hobby. If someone has heard different, please advise me, because I expect
> to make $3-5K next year in lessons and pay jobs, incurring $1-2K in
> direct expenses as a result.
>
> Gary