4 Ways to Stay Out of Tax Trouble as an Indie Artist
While music celebrity tax issues are all over the media, what does that mean for indie artists? Here’s our answer for how indie artists can stay out of tax trouble:
Hundreds of artists, producers, and DJs filled the Sheraton Hotel in downtown Atlanta, GA to get tips and advice from music industry experts at the 2014 International Music Conference. Growth Group was a proud sponsor of the event and our Alexis M. Kimbrough was a panelist for the “Handle Your Business” discussion.
One of the questions asked by the panel moderator, Curtis J. Martin II was, “Celebs are constantly getting caught not paying their taxes. Lauryn Hill for example just got out of prison for tax issues. What steps can celebrities do to avoid further tax issues?”
1. Operate in a very businesslike manner
Do you want to be treated like a professional indie artist? Operate like one! To show the IRS that your music business isn’t just a hobby you enjoy from your garage or basement, ensure you have the following in place:
- Keep good financial records. If you don’t know your expenses, you simply can’t deduct them for taxes, guessing won’t cut it with the IRS.
- Document your business dealings. Met with a club owner, venue, producer, or artist. Send an e-mail calendar confirmation and a follow-up “thank you.” Also, ensure you have contracts with venues, artists, producers, labels, studios, and other music businesses you work with.
- Advertise. Pushing your latest album to potential fans isn’t your only business goal. You should have business cards to promote yourself to venues and other music pros. You should also have a website that not only showcases your latest project or EP, but should certainly include your a way to contact you for business inquires and booking.
2. Protect your signature
As an employee, you signed your own checks and tax returns, every year. Continue that practice in the future. April 15 rolls around at the same time each year whether you’re an indie artist or music celebrity, don’t forget that you need to file taxes.
If your tax professional can’t explain why you owe, and how your taxes were completed in a way you understand, hire someone who has the heart of a teacher to ensure you understand where you money is going. Never sign your name to a document you do not understand, learn first then sign. And always remember if it smells fishy, it likely is. Don’t expect to make millions and never write a check to the IRS.
3. File taxes quarterly
It can be difficult if not downright impossible to come up with a huge tax payment at the end of the year. If you’re not ready that tax bill will blindside you. To avoid this, calculate how much you made each quarter and send estimated tax payments to the IRS and state and protect yourself from interest and penalties, along with giving yourself peace of mind knowing it is handled.
4. Don’t ignore letters
Well before a music celebrity is sent to prison for tax issues and before a lien is placed on their mansions, they receive letters saying they owe, they must pay, and giving them options. If you ignore letters, the IRS will eventually send you to collections, which can get ugly. Treat the IRS like a distant friend, keep in contact with them annually by filing your return and answer any messages they send you throughout the year.
Hope you like the tips on how to avoid tax issues as an indie artist. What tax issues do you have as an indie artist? Tell us in a comment below.