Klarinet Archive - Posting 000488.txt from 1998/04

From: Jacqueline Eastwood <eastwooj@-----.EDU>
Subj: Tax info for musicians (Long)
Date: Fri, 10 Apr 1998 10:06:58 -0400

After *finally* completing my 1997 taxes (yay -- before the deadline!), I
have some info to share with others. This may be a little late to help
NOW but could help to prepare for next year! If not interested, please
delete.

For performing musicians who are paid as employees (you would receive a W2
from your employer), there is a Form 2106 called Employee Business
Expenses. This is where you claim both partially reimbursed and
unreimbursed expenses related to this employment, directly and/or
indirectly. For example, I receive a mileage allowance from the Opera but
it's lower than the federal standard rate of 31.5 cents per mile. I can
claim the difference between them on this form. Instrument insurance,
professional journal subscriptions, repairs, supplies, music, clothing, dry
cleaning, etc. can all be claimed. Meals for out-of-town gigs can be
claimed either by actual receipts or as 50% of a standard federal rate for
each city.

The IRS web page (do a search for "tax info" or "Internal Revenue
Service") has tables with standard allowances for meals & mileage, plus
much more info on the rules regarding this form. It was tricky to find;
you have to dig around but it's definitely in there! I would imagine that
the IRS phone help lines can also provide this information.

The *really nifty* part about this form, which I did not figure out at
first, was that these expenses do NOT get entered onto a Schedule A form
as the instructions initially imply (i.e., your expenses do NOT need to
be greater than the standard deduction for your filing category). For
"Qualified Performing Artists" (which I boldly assumed I was!), you enter
the deductions directly onto the Form 1040 -- read the directions to find
out which line (I believe it was Line 31 on the 1997 form). So you get
this amount *in addition to* the standard deduction, not *instead of* the
standard deduction.

For independent contractors (non-employees) who get a 1099: you file a
Schedule C. Similar rules apply with this form; however, keep in mind
that as "self-employed", you may also have to pay self-employment tax
(Schedule SE) if you make a lot this way. Also, keep in mind that you're
not supposed to claim a loss more than three out of five years. For my
deductions, I used 1) the expenses I had incurred directly as a result of
the work/income reported on the 1099, and then 2) just enough "indirect"
expenses to leave a net profit of $3.20 (which wouldn't be enough to
affect your taxable income).

Similarly, on the Form 2106 I included 1) expenses incurred directly as a
result of AZ Opera employment, and then 2) the rest of the "indirect"
expenses, such things as repairs, clothing, etc. which are not
"gig-specific". Depending on the circumstances of your income, you may
wish to juggle your expenses between the two types of forms to improve
your situation! For me, it worked quite nicely -- I managed to write off
about $1200 in taxable income, going from a $60 repayment to a $45 refund.

You do have to be quite organized with your receipts & records, and
patient with the instructions and yourself! I went through in pencil
TWICE before I was satisfied I had everything correct! But, depending on
the percentage of your income derived from playing, it could make a big
difference. I was intimdated at first, but I'm confident that I
eventually got it right. If they *dare* to audit me, I have receipts and
notes from my preparation filed away with the forms. Don't feel the need
to hire H & R Block to do this -- or else, maybe you can all hire me!
(I'm an accountant but I'm NOT a CPA!).

I hope this could be of use to some of you -- I was interested in the
thread that came up a couple of months ago, but never heard any more.
Maybe you're all finished already?!

If anyone has questions or needs clarification, please feel free to e-mail
me (directly, not on the Klarinet list). I'll do my best to help you
based on my limited experience!

Jacqueline Eastwood
University of Arizona/Arizona Opera Orchestra
eastwooj@-----.edu