Last week the RDTC Tax Help Blog posted this entry with advice for professional musicians. You can find a section of the entry below, but be sure to checkout the full text at Harmonic Tax Advice for Musicians.
Classify Yourself
You need to decide exactly what type of musician you are before you can even begin thinking about taxes. What course is your career taking? Are you in a band? Are you interested in being a music teacher? Or, do you offer lessons from your home or at a nearby music shop. Once you have classified yourself, if will be easier to keep track of your finances and tax liability.
$600 Rule
No matter what type of musician you are, if you make more than $600 in a year doing something then you will need to report your income to the IRS. Whether you make that much in tips from performing at clubs, or from teaching the piano to a family friend, it will need to be reported to the IRS.
Teaching Advantages
If you are a music teacher at a school, you may be able to take advantage of several tax deductions available to teachers. One of the most useful tax advantages for teachers is the educator expense deduction that allows qualifying teachers to deduct $250 worth of out of pocket expenses for classroom supplies. For more information on tax tips for teachers, including the educator expense deduction check out this article on CEO Roni Deutch’s personal blog.
The Business of Music
If you teach music classes from home or a business, you may be able to classify yourself as a small business owner. Speaking of teaching from home, if you have a separate room used to run this business then that room may qualify for a home office deduction. If you have not already, you may need to get a small business license from your city or country, and if the business expands you may even need to get a federal ID.
Quarterly Payments