A music industry tax expert shares financial moves you can still make in December to impact this tax year.
The United States' annual tax deadline might still be months away, but that doesn't mean you shouldn't stay ahead of the curve so April 15th doesn't creep up and catch you unprepared.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction or filing any tax return.
Chris King heads up Nashville's King Business and Financial Management (KBFM), a money management firm that specializes in music industry clients. Here, the Tennessee native digs into the know-how he obtained while working on Music Row for superstars and emerging artists alike to offer a handful of financial moves you can make before you ring in the new year to get a jump on next spring's tax time.
Know Your PROs
It's important to remember the performance rights organizations (PROs) who have collected your royalties on your behalf, King advises.
"Especially if you're a new artist, you might not realize [where you] are registered," he says. "Every time you play, no matter how small a venue, they all have to report all those earnings to the different PROs. So make sure you are going through and entering those songs you played at those shows... Make sure everything is registered properly."
King is also quick to tell the story of "a certain artist who had some play" on the radio "but had no idea about it... They went five years not knowing they might be registered for something when the registration is free. We go in and sign them up and all of a sudden there's $30,000 sitting there that they would have never gotten if they didn't take the time and get advice about it."
"The more, the merrier in my opinion," says King when asked about the benefits of making charitable contributions at the close of the year. "Anything you could [donate] and have a tax write-off at the end of the year is great if you're able to do it."
"I've had a lot of clients over the years where all of a sudden it's the end of the year and they have [old] tour merch that didn't necessarily sell or they changed up the logo or designs. There are plenty of places to donate in that regard," he says. "As long as you are documenting that you paid for it and giving it away to charity, that's something you can write off on your taxes."
Save for Retirement
According to King, planning your retirement around your taxes is dependent upon how you file come April 15th, i.e. whether you get 1099s or a w2. Either way,"getting with a financial advisor," is worth your while. And those who do get W2's can look into, "setting up a Roth IRA or just a normal traditional IRA that you can give to."
"If you're a smaller artist who doesn't necessarily feel comfortable with putting money into a retirement plan, get some sort of investment account so at least you're saving money," he says. "The way I set it up with clients is through that normal investment account. We'd get it started for them, and every time they'd have money [to save] I'd put it into that." From there, you "can always then just move it from your general investment account over to that, so you don't have to save extra money."