As an independent music artist, the task of running a business is not easy. The challenges of staying ahead of the competition, keeping up with industry trends, and growing your fanbase can be daunting. But with the right resources and a little bit of dedication, it is possible to make your music business successful.
Whether you are a rising music artist or someone who has been in the game for a while, understanding taxes and business ownership is key to success. This article will help you make sense of the different tax strategies that apply to music artists, as well as strategies for structuring your business and minimizing your tax liabilities.
My name is Sacha Walton and I help independent music artists operate as business owners to better navigate the business of the music industry with ease. It is my belief that “An Educated Artist Creates Leverage.”, this is a quote from my book, Beyond The Music: A Music Artist Entrepreneurship Guide.
One of the most important aspects of being a music artist is filing your taxes. Think about it, how many of you have heard about the horror stories of artists owing millions in taxes? I don’t want this to be you. No matter how successful you become as a musician, understanding how to file and pay your taxes is a vital step in the journey.
“An Educated Artist Creates Leverage” – Sacha Walton
Filling your taxes as a music artist can be complex, and requires a thorough understanding of the relevant tax laws. As a starting point, it is essential to keep records of your music income – any gigs, recordings, royalty payments, and music merchandise – as well as any deductions such as equipment, travel costs, and other relevant expenses that could lower your taxable income. This is the basic information that you will need to start your tax filing.
It is also important to keep track of the taxes that you pay throughout the year – if you work as an independent contractor, or even as an employee, taxes should be deducted from your income as you go. Additionally, keep track of any music-related expenses – including instruments, recording, subscriptions, production, promotion, and travel. These can often be deducted from your taxes to reduce your taxable income.
As your career progresses and you begin to receive more music income, it’s important to consider hiring a qualified accountant who can ensure that you are taking advantage of any available deductions and filing your taxes properly. Additionally, the more complex your music income becomes – including streams, royalties, and contracts – the more essential a professional accountant becomes.
By keeping up with your taxes as a music artist, you will be able to stay on top of any tax payments that are due and make sure you get the most out of your music income.
The Business of Filing Taxes
It’s the 2023 tax season and there are some tax tips that every independent music artist, musician, or producer should know. In accordance with the IRS, you are self-employed. You are operating a business as a single entity as a sole proprietor within the music industry and should file your taxes accordingly.
Wisdom Tip: For music artists just starting out, the process of setting up a business entity can be intimidating. However, there are benefits to forming a corporation or limited liability company (LLC), for business owners. But this is a topic for another time.
Let’s explore the reasons for filing taxes as a self-employed music artist.
Accountability
First, you are making yourself accountable by correctly reporting your earnings and expenses. Reporting your eligible expenses is very beneficial for bringing down your tax liability especially if you are working a 9-5.
Benefits of Filing
One benefit of working and pursuing your dream as an entrepreneur in the music industry is the opportunity for your business expenses to reduce your tax liability. Reducing your tax liability can either increase your refund or decrease the tax you may owe.
The Filing Process
In preparation for filing the 2022 tax year, you want to review all your earnings from music royalties, merch sales, other income, and expenses received in 2022 including your employment income. You must report all earnings over $400, including royalties over $10. All expenses are claimed as a loss.
Wisdom Tips: examples of expenses are advertising costs, website, domain fees, music registration, digital registration fees, copyright, music association, supplies, and travel.
Bonus Tip: Copyrights are considered intangible property and can be depreciated for your business.
It’s important to familiarize yourself with the necessary steps to ensure that your taxes are accurate and up to date. This can be done through tax-preparing services or by doing your own research. Generally, independent music artists will be expected to fill out IRS forms such as a 1040, 1040 Schedule C, and/or Schedule SE. Ensure you get an EIN, establish the right business entity, and operate as a formal business. Your music is the product and service.
Overall, preparing your taxes as an independent music artist can seem like a hassle, but it doesn’t have to be. If you plan ahead, keep detailed records, and remain diligent throughout the process, you’ll have no problem filing your taxes on time.
Follow Sacha Walton on Instagram, Facebook, Twitter, and TikTok for more tips.
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