General Music Chat

A friend who has his own music industry business keeps telling me I need to form some kind of LLC so I can write off any equipment purchased, expenses, etc.
The little I found when googling made it seem pretty complicated (have to worry about Social Security taxes, etc etc etc). As I have a regular full time job, it just complicates matters, in my mind.

Anyone here done this who is not working full time as a musician/music industry service?

It depends on how much income you are talking about to determine if you need an LLC. I receive most of the income from our performance fees and many of the clients we serve issue a 1099. I claim all the income and all related expenses on my taxes including travel, advertising, strings & cords, sub-contracted musicians (band mates) etc. Bottom line... I won't get rich in the music biz but it is all legal and above board.

A friend who has his own music industry business keeps telling me I need to form some kind of LLC so I can write off any equipment purchased, expenses, etc.
The little I found when googling made it seem pretty complicated (have to worry about Social Security taxes, etc etc etc). As I have a regular full time job, it just complicates matters, in my mind.

Anyone here done this who is not working full time as a musician/music industry service?

A home -spun basement of equipment means nothing, if you aren't earning significant revenue with it. (Significant means any reportable income from the biz, per year (Or as the Tax maniacs like to call it "A going concern"

Having said that... if you declare and report income from your music, you also can declare and report associated expenses.. No matter whether its proprietor or incorporated, you are responsible to pay (and match) your own social security. If you earn substantial revenue in a year, you might also be required to pay your taxes on a quarterly bases, rather than just at the end of the year.

Well, my buddy's idea is that despite having very little actual income from music, I can write off all my gear and related expenses. I think its a sure trap into getting audited. My income last year (no paying gigs, just CD sales) was about $100 (not all declared!) and expenses were much more (just for the CDs!)

My advise is don't over-complicate it! I did it for years! I did what J7 is saying. The way most folks do it (wink wink) is the venues that pay you cash and don't ask for your SS number don't report that income. It is the venues that ask for your SS and 1099 you at the end of the year. My tax prepare lady charged between $65.00 and $95.00 to do the band taxes and 1099's at years end. Here is the thing with all of this, in order to avoid being audited you SHOULD show more income than you have spent even if it is just a few $ You can show a depreciation in value of your gear and claim that to help reduce what you owe! Basically you are receiving compensation for playing. You take the money that you have paid your members off of what you make and transfer that tax burden to them as they are the ones that received those monies. If you continually show a loss it will raise suspicion with the IRS.

Thanks Jeff, that's what I thought - until I have some real income to write expenses off against, it's not worth it to do.