The plan for this week was to provide some tax advice for working (or occasionally working) bluegrass musicians. As I mentioned last week, I’m not qualified in any way to dispense this kind of information, but since this has never stopped anyone from giving me questionable tax advice, I figured I’d go ahead and weigh in anyway.
Then, however, I got cold feet about the idea. I remembered that no matter how many disclaimers I offer at the start and/or the end of one of these columns, and no matter how ridiculous some of my fake advice might be, someone invariably leaves a comment like this: “Very informative article, Chris. Have you thought about writing about copyrighting songs? This is a subject of great interest to me, as I am a new songwriter.” This leads me to believe that although 90% of Bluegrass Today readers will realize my suggestion that you’re exempt from filing taxes if you play more than two stringed instruments is wishful thinking at best, or a poor attempt at tax time humor at worst, that other 10% might take it seriously, get themselves in trouble with the IRS, then blame me for it. I see a potential lawsuit.
For that reason, I plan to play it safe. I’m just going to answer a few reader questions that came in during the past week, mostly dealing with what I know for sure you shouldn’t do when filing your taxes.
Gary Sheldon in Peru, IN wrote:
I’m the leader of the band External Hard Dryve, and I’m wondering if I can claim all five of my band members as dependents. Not only do they depend on me for money, I feed them on a regular basis, and the mandolin player lived at my house for two years, even after he was fired from the band.
Gary, though I sympathize with your circumstances, the claiming of employees, contractors, or just really needy friends as dependents is frowned on by the IRS. So is the claiming of pets, other livestock, and house plants, even though they, like your band members, might die without your care. Is your former mandolin player still living at your house? Removing band members from your living quarters will be the subject of a future column.
Darlene McComb in North Platte, NE had this question:
Hi Chris, I was told by a friend that because the keeping of paper records is now obsolete, saving receipts for purchases of tax-deductible supplies like strings and picks is no longer required. She said that if you have a mental picture of the receipt, you can just describe it to the IRS in the case of an audit. Even if you just have a mental picture of the strings or picks themselves, and a rough idea of what you paid for them, they’ll accept that too.
Darlene, not only is this not true, but I would discourage you from following this friend’s advice on any other subjects, including music, marriage, and directions to the bank. No good can come of it.
This next one was from an anonymous reader:
My bluegrass band grossed $1.8 million dollars last year. Expenses related to our bus cost 1.6 million dollars, and after payroll and other expenses, I took home an estimated net income of $120. Then I spent $14,000 on a vintage guitar. Would you recommend that an accountant handle this?
I would recommend a new business plan.
Speaking of vintage instruments, Cliff Donegan from Greenup, KY asked the following:
Even though I’d always heard they appreciate in value over time, I’ve taken depreciation over several years on my taxes for my Lloyd Loar mandolin, and my pre-war Martin D-28 herringbone, so they now appear to be worthless, at least on paper. Can I still get any money out of them if I decide to sell them, or should I just plan to give them away.
I would plan to give them away, Cliff. If you wouldn’t mind privately passing on your contact information, I can personally help guide you through that process.
Finally, Gloria Lambert in Olympia, WA wrote:
I’m offended that the government only permits a 50% deduction for meals eaten on the road. To protest, I’m now only eating half of what’s on my plate when I travel.
Way to stand up to “The Man,” Gloria. Just don’t take the other 50% in a to-go box. The government is wise to those kinds of tricks.
Next week: if you’re a self-employed musician, does that mean you can fire yourself? At least on paper?