A music industry tax expert outlines ways to make the most of your money with financial moves to make all year long.
As you map out the music you want to make in the new year, it's also the right time to consider U.S. tax strategies to make the most of your money.
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, who heads up Nashville's King Business and Financial Management (KBFM) specializing in music industry clients, recently chimed in with year-end artist tax ideas. Now, he’s ready with more financial moves to start making now with another whole year ahead of you.
Understand your expenses
King says that when it comes to expenses, he looks “at it as something that’s specifically used for business purposes. Say [you’re] going to coffee with a publisher or another songwriter… Or, if [you] are going downtown and have to pay for parking, any of those things are legitimate expenses.” When in doubt, consult an accountant.
“Normally when we take on a client, there are usually so many missing expenses they should be able to take.” King explains. “Say, for instance, Spotify, which is considered research. For the normal person, it might be about just listening to the music, but for the artist it's not just listening... The biggest thing is keeping track of it all, whether they are utilizing online banking or other great finance software out there.”
Toss your receipts
“In today’s world, it’s hard for anybody to keep track of receipts because everything is so digital,” King continues. “I tell most of my clients to go through and take a picture of the receipt on your phone. If you’re going to buy gas on your way to a show, take that picture of the receipt right from the gas pump, and write the name of the show you're going to and the date before you snap it. Then throw the receipt away. Same thing if you are going out to dinner with somebody – take a picture of that receipt and write down who you were with and what you were there for.”
“Keep track of all that digitally, this way if you were audited by the IRS you have everything backed up on your phone instead of a random box of receipts. It’s a great way of tracking where you were at, why you were there and what was going on.”
Set money aside
“I tell my people, ‘Hey, if you can set aside 30 percent when you get that check in, even though you're going to have expenses going against it,’ It’s better when you go to file your tax return to have 10,000 bucks [ready] and you only owe 5,000, not the other way around.”
“If you are able, set aside money and forget it is there,” he says. “Or even open up a savings account in a different bank where you cannot easily transfer money between accounts. Just know that it is there for tax time and not to play with.”
“If you see the money in your account, you're gonna want to spend it. So if I could do whatever I gotta do to help you get that money out of there so you know it's not your money, we’ll go with that.”