Music CPA

Frequently Asked Questions

Frequently asked questions


Do I have to report cash?
What if there’s no Form 1099?
Can I deduct my recording costs?
Can I deduct my pressing costs?
Can I use the per diem method?
Can I deduct my meal expenses?
Do I have to report per diems paid to sidemen?
Self-employment tax on mechanical and performance royalties?
Do I need a CPA?
How do you bill for your services?
When do I need to start paying taxes?
Do I need to withhold taxes for my sidemen?
When should I form a limited liability company, corporation or partnership?
Are payments from investors, patrons, and crowd sourcing taxable?
Involved in every aspect of entertainment?
Recognized as expert in any of these areas?

Do I have to report cash received and paid (as opposed to checks) on my tax return?

Yes. There are many ways the IRS can find this out, and we know what those ways are. We suggest using a Daily Road Sheet.

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If I don’t receive a Form 1099, do I have to report that income on my return?

Yes. Taxable income is taxable income whether you receive a 1099 form on it or not.

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Can I write off all of the recording costs of my CD in one year?

Generally, no. The IRS wants you to “capitalize” those costs and to write them off over the useful life of the master, which means you can write off some of the costs in the first year and the rest of the costs in subsequent years. This is also the case with demos.

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Can I write off all of the costs of pressing my CD in one year?

You can, but only if you have none of the CD’s left over at
year end.

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Can I use the per diem method for travel meals or should I deduct my actual meal expenses?

You should use whichever method yields the most deduction for the year for your out-of-town overnight meals. You should use actual meal expense for entertainment-type meals. You may not generally use the per diem method for hotels.

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For per diem rates within the US: Click Here To View

For per diem rates outside the US use the local meals rate: Click Here To View

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Can I deduct all of my meal expenses?

No, you can only deduct 50% of your meal expenses whether you use the actual method or the per diem method for the year.

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Can I deduct all of per diems that I pay to my sidemen?

No, only 50%.

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Do I have to pay self-employment tax on my mechanical royalties and performance royalties?

Generally, yes. They are reported in the same manner as your performance income.

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How do I know when I really need a CPA?

In a spiritual way, you need one when you start losing sleep over your tax and bookkeeping responsibilities. In a more tangible way, you should at least consult a CPA when you start performing as your full time job.

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How do you bill for your services?

One of three ways – hourly rate, fixed fee, or percentage of gross income. We will set up a billing method to fit your situation. Our basic billing philosophy is to set up a system between us and our client where the bill is an amount that the client can afford to pay and that we can afford to bill.

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If I am self-employed, how much profit do I have to make before I have to start paying taxes?

You start incurring self-employment (social security) tax when your net income goes over $400. After your net income exceeds the total of your standard deduction and personal exemption amounts, you start incurring federal income tax. Generally, if you are making a living at what you do, you should be paying estimated taxes in quarterly at a rate of at least 15% – 20% of your net income.

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Do I have to withhold payroll taxes from my sidemen?

Yes. If they walk and talk like employees, generally the answer is yes. The IRS can go back three years and calculate the taxes that you should have withheld and collect them from you… along with interest and penalties. IRS now has an amnesty program that might be right for you.

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When do I need to consider forming a limited liability, corporation, or partnership?

Usually the first two factors that come into play are limited liability issues and ownership rights – who actually owns the band name, who are the main songwriters, who signs the recording contracts, etc. There are of course many other issues that need to be considered such as tax savings, fringe benefits, etc.

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If I receive money from “investors”, patrons or crowd sourcing for the purposes of recording, pressing or touring, do I have to report that as income?

Generally, yes, unless you set it up as a loan or as equity investment (eg., partnership interest, stock ownership interest, etc.). Basically if you are not required to pay it back (like a recoupable advance from a record label), you are taxed on it when you receive it, so careful tax planning may be required if you are able to raise a sizeable amount of money for this purpose.

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Is your firm involved in every aspect of the Music Industry?

Yes. The generic term “Music Industry” encompasses many different types of businesses and services. Although it is virtually impossible to be involved in every aspect of the music industry, we routinely perform accounting, tax and consulting services for the following types of music clients:

  • Bands
  • Professional Musicians
  • Songwriter
  • Music Store Retailers
  • Recording Studios
  • Music Teachers
  • Independent Record Labels
  • Personal Managers
  • Booking Agents
  • Entertainment Attorneys
  • Publicists

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Is your firm recognized as an “expert” in any of the aforementioned areas of the music industry?

Yes. We have a significant amount of experience working with musical performers and bands, as evidenced by the large number of our musician clientele throughout Austin, in Texas and many outside of Texas.

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