Growth Group | Accounting for Musicians

Jazz Musician Loses Tax Deductions in Federal Court

musician lost in tax court

Jazz upright bass player and music professor was denied certain tax deductions in US federal tax court, on September 30, 2013. After being audited by the IRS and receiving notices for not filing tax returns for several years, the jazz musician prepared his taxes by himself and was disallowed tax write-offs he claimed on his income tax return. In this post, I will discuss 3 reasons the musician lost his tax deductions. I will follow-up next week with what the musician did correctly to save some of the claims on his tax return.

Jazz musician charged penalties for not filing taxes on time

Musician Files Taxes Late and Gets Penalized

Four past due tax returns, of which one was five years late, were all filed by the music industry professor at one time. The musician had to pay a 25% late tax filing penalty of $3,952.93 for this error! I have talked before about how filing taxes late can hurt musicians, this musician proves it. Be reminded, this is in addition to the taxes he owes, just for not filing the tax rules.

Business use of home for music professor disallowed

The jazz music educator claimed a home office deduction on his federal tax return, as a business expense. However, the U.S. Tax Court did not allow this income tax deduction because he was not able to prove he used a portion of his house regularly and exclusively for his music business. Whether you use a practice room in your home, or a storage closet for your instruments, you must keep good records to prove to the IRS how you used your home for music business.

Musicians’ vehicle expenses thrown out by IRS

vehicle expenses lost by musician

Musician Loses Vehicle Tax Deduction

Not keeping receipts to prove tax deductions? Bad idea. The IRS did not allow the jazz instructor’s tax deductions for parking fees or tolls, transportation costs, meals and entertainment, or other business expenses because he could not substantiate the write-offs with evidence. Don’t wind up in trouble with the tax court, use these apps to track music business expenses.

I understand your position, taxes are not interesting and you do not want to pay them, but taxes are a part of making money in the music industry. Your best safety guard for keeping your tax deductions, defending your write-offs, and winning a tax audit is working with a professional music accountant. Lauren Hill was just released from jail for tax evasion, don’t let that be you.

If you want to read it, here is the full text of the jazz music professor’s federal tax court case.

What tax deductions do you want to take as a musician that you aren’t sure would stand up to IRS agents?