4 Tax Tips for Musicians in 2021

It’s no secret that 2020 was a tough year for musicians who rely on live performances both to thrive spiritually and survive financially. Now that tax season has arrived, here are four tax tips for musicians to make the most of their financial situation.

1. Know Your Forms

As a musician, you should report your music earnings. Income is income regardless of why you’re earning it (hobby, business venture, etc). However, that why becomes important in determining where and how to report your income on your filings. If you are conducting your music actives under the umbrella of a business entity here are the forms you need:

If your music is solely hobby income, then you claim it as a line item on your federal tax return.

There’s another form you should be aware of, even if you never see it. If you were able to perform in any venues in 2020, the venue was required to turn in a 1099 MISC form to the IRS if you were compensated more than $600 combined throughout the course of the year. This means there’s no hiding it – the IRS knows what you got paid. It’s never a good idea to try and hide income from the IRS, but with 1099s, it’s definitely time to report it. An experienced accountant like the ones at Orsini & Associates will make sure that this income is properly reported based on each artist’s individual tax situation.

2. Should You Be a Business or a Hobbyist?

The IRS makes a big distinction between the tax implications of the earnings of a business and the earnings of a hobbyist. Therefore, you should know which category your music income should be (Tax Consulting can help if you’re not sure!)

As a business, musicians can deduct certain expenses, sometimes meaning that the expenses exceed your income. Hobbyists aren’t quite so fortunate. However, operating a business means more administrative requirements, like regular tax filings, separate bank accounts and credit cards, and bookkeeping.

Another factor to consider here is pre-paying taxes to avoid getting a big tax bill at the end of the year. If you owe more than $1000 after your tax filings, then it’s time to start paying Quarterly Estimated Taxes. It’s a good idea to consider even if you aren’t sure you’ll reach the full $1000 because by paying quarterly, your payments are spread out throughout the year instead of sticker-shock in April.

3. Deductions!!!

As mentioned above, if you’re operating your music as a business, you’ll get the benefit of deductions. Look at your expenses and see how you’re investing in your business. Expenses like buying new instruments, equipment rentals, rehearsal time, advertising costs, studio time, instrument repairs, printing fees, association fees, and even credit card processing fees might be deductible. If you’re self-employed in your business entity, you might be able to deduct things like health insurance premiums and home office deductions.

Another common deduction for musicians are costs associated with touring. Toll bridge fees, gas, lodging, mileage, and even some of your meals all fall under the “Business Travel” deduction category. Unfortunately, the IRS has strict requirements on what counts as a “tour” so be sure to discuss with a CPA experienced with tax rules for musicians beforehand.

One thing that is absolutely key when taking deductions is staying organized. You’ll need to keep track of all the expenses, what category they might fall into, and copies of all the bills, invoices, and receipts along the way. Your phone is a very helpful tool for this since you can just snag a quick (but CLEAR) photo of all these documents and then organize them into folders.

4. Don’t Go It Alone

As a musician, your focus should be on the music. Whether it’s strictly a hobby (and you’d like to keep it that way!) or you’re well on your way to a budding business, free up your headspace to focus on the song by having a music-loving accountant as a partner. At Orsini & Associates, we’ll make sure you’re set up to take advantage of all the tax credits available for you – and then we definitely will be coming to your next gig! Contact us today to discuss your musical future and how to best financially prepare for it.

What Gamers Should Know about Income Taxes

Game streaming? Super fun.

Taxes? BORING!

However, a large number of people now earn income, sometimes significant income, by streaming their gameplay. Professional gamers sometimes even share the same fame and fortune as professional athletes or actors. With millions of viewers watching from home, streaming revenue has become a significant factor for income taxes.

Gamers, especially professional gamers, are a relatively new phenomenon. However, the tax code has caught up to the times, and there are important tax implications that gamers at every level should know.

Gamer Taxes 101

If you’re a US resident and a gamer, then you will usually pay taxes on your gaming income. Even if some of your gamer income came from overseas tournaments, you’ll still be subject to federal and state taxes (depending on which state you live in.) Professional gamers face additional tax issues if they have tournament earnings, paid appearances, or revenue from multiple states. If you travel for any of your gamer income, you may end up having to pay taxes in multiple states.

Many gamers are shocked to learn their casual gaming income has landed them with tax bills in multiple states.

The international factor around eSports makes it great for building a global community. Twitch and YouTube Gaming make it easy for people all around the world to come together for competitions hosted in a variety of different countries. However, with international income come international tax issues. You may owe taxes in a foreign country if you earned income there. More than one country may try to claim your earnings from paying competitions, streaming gameplay, product endorsements, or selling merchandise. Come tax season, it’s important for you to know what countries your earnings came from.

Another important element to your gamer tax situation is your entity status. Are you filing as an individual? Is your gaming income earned through a business entity like an LLC or a Corporation? The answer to that question could have a huge impact on what the tax-man claimeth come April 15th. This is one of the many reasons why you should discuss year-round tax planning with a qualified CPA with expertise on gaming income. We can advise you on what entity or formation might be a better tax strategy for you.

Tax Planning as a Gamer

The best strategy for a gamer will depend on each gamer’s situation. A professional gamer may earn income as an independent contractor or employee of a team. A hobby gamer may earn income as a solo player or under their own business entity. For each of these cases, the tax strategy would be a little different. For example, the independent contractor professional gamer would be responsible for paying ALL applicable taxes – none has been taken out of their paycheck in advance. Therefore, that gamer would need to be setting money aside year-round to assure they can cover their tax bill.

If your gamer income has reached a certain level, you may also want to explore paying estimated taxes quarterly. This would help you avoid a larger tax bill at the end of the year by breaking it up into smaller pre-payments throughout the year. To do this, you might also have to set up a business entity for your gaming.

Tax law is also constantly changing. Certain deductions that were once allowed no longer are, while other deduction options might now be available. Can you write off that new microphone? Or streaming fees? Every situation is different, so you must discuss the ins-and-outs of your gamer income with a CPA experienced with gaming.

Gamer CPAs You Can Rely On

At Orsini & Associates, we don’t just talk about gaming – we ARE gamers. (Seriously – follow Partner Garrett on Twitch!) With year-round tax planning services, we can help you make sure your gaming tax strategy is top-notch. Don’t be one of those suckers shocked by a huge tax bill. Our goal is to help you find a way to legally minimize your tax liability using all the latest tools available to you. Contact us today for a free initial consultation!

2021 Tax Dates and Deadlines

2020 has been a year for the books, and the tax books were no exception. Deadlines were changed, stimulus checks were cut, and a record number of tax filings were submitted online. While we look to the coming year, we can all hope that some sense of normalcy begins to return. To help in this hope, we’ve compiled a list of the important 2021 tax dates and deadlines, because if one thing is certain in life: it’s taxes! Our dedicated tax professionals are ready to help make sure you never miss a deadline, no matter what life throws your way.

When Are 2021 Individual and calendar year C Corporation & Fiduciary Tax Returns Due?

If you are filing such a tax return in 2021 here are the tax dates you need to know:

  • April 15th, 2021: regular deadline for the 2020 tax year
  • September 15th, 2021: extension deadline for calendar year C Corporations returns
  • September 30th, 2021: extension deadline for calendar year fiduciary returns
  • October 15th, 2021: extension deadline for individual returns

If you need to file your taxes late in 2021, you can avoid major penalties by filing an extension. To make it easy and safe for our clients during the current climate, we support Zoom, Google Meet, and phone conferences for tax consults. Additionally, all materials can be uploaded from the safety of your home to our client portal.

The April 15th deadline for taxes means this is the date that your 2020 return must be e-filed by midnight. If you are mailing in a paper return, then the postmarked date on the return must be April 15th.

Estimated Tax Payments in 2021

If you’re a business owner or someone who earns income that requires you to pay estimated tax payments throughout the year, here are your deadlines for 2021:

  • January 15th, 2021: Q4 2020 Estimated Tax Payment Due
  • April 15th, 2021: Q1 2021 Estimated Tax Payment Due
  • June 15th, 2021: Q2 2021 Estimated Tax Payment Due
  • September 15th, 2021: Q3 2021 Estimated Tax Payment Due
  • January 15th, 2022: Q4 2021 Estimated Tax Payment Due

If you are self-employed, then you most likely need to be paying these quarterly estimated tax payments. They help prevent massive tax bills that you can’t afford come April 15th. Form 1040-ES and a dependable accountant can save you some heartache come tax time. Like income tax return dates, these deadlines are when your forms should be postmarked or e-filed (by midnight).

Other Important Deadlines

Of course, in order to file your taxes, you’ll need W2s from your employer. Federal law requires that your employer distribute your W2 to you by January 31st. In addition to W2s, you’ll also need tax forms for things like health insurance, stocks, student loans, charitable donations, and mortgage payments.

While not strictly related to taxes, if you run a small business, now is the time to start checking for dates for any license renewals you may need. Many city and county business licenses, state revenue agency registrations, insurance requirements, and professional licenses have to be renewed annually. Be sure to check for any upcoming due dates. (Hint: check your books for the previous three years to see any city or government payments. It’s probably a license!)

When Are 2021 S Corporation and Partnership Tax Returns Due?

If you are filing such a tax return in 2021, here are the tax dates you need to know:

  • March 15th, 2021: regular deadline for the 2020 tax year
  • September 15th, 2021: extension deadline for the 2020 tax year

If you need to file your taxes late in 2021, you can avoid major penalties by filing an extension.

The March 15th deadline for taxes means this is the date that your 2020 return must be e-filed by midnight. If you are mailing in a paper return, then the postmarked date on the return must be March 15th.

Tax Preparation Services

If you’re not sure about what all documentation you need or when you’ll need to have your return ready to file, our CPAs are here to help. At Orsini & Associates, we offer full tax preparation services for individuals and businesses. Located in beautiful Savannah, Georgia, we use technology that makes document sharing, meetings, and submitting filings convenient and cheaper for our clients nationwide. Contact us today to schedule an initial consultation.

And don’t forget that taxes aren’t something to think about just once a year! Tax planning can help you spot strategic advantages year-round, ensuring maximum credits and deductions come tax day. Our experienced, licensed CPAs provide tax planning and projecting services.