New Tax Guide for Writers, Artists, Performers and other Creative People

by Riley, Peter Jason

• ISBN13: 9781585104697
• ISBN10: 1585104698
• Edition: 2nd
• Format: Paperback
• Copyright: 2012-01-01
• Publisher: Focus Publishing/R. Pullins Co.

Summary

Peter Jason Riley's book is the most authoritative and up-to-date guide to tax preparation for writers, actors, dancers, visual artists, musicians and other creative professionals. It includes information for 2011 tax forms along with a guide to completing them, useful for both individuals looking for information on preparing the forms, deductions and other tax issues. It also includes examples of 2011 final tax returns, as well as guides and links to where those tax forms can be found. Written with the non-accountant, creative individual in mind, this guide provides a clear outline of taxes, responsibilities, income, deductions, I.R.S. audit guidance, timelines and tax and accounting issues. It also serves as a primer to to Peter Jason Riley's outstanding website,http://www.artstaxinfo.com, where in-depth tax information that goes beyond the scope of the book as well as updates that occur after publication can be found. Furthermore, the book covers good financial practices that the individual can refer to throughout the year to minimize taxes and the pain of filing them.

Author Biography

Peter Jason Riley is a CPA in Newburyport, MA. He is also an amateur guitar player and CD collector, and he writes music reviews on a wide variety of music from folk and blues to jazz and rock.

Table of Contents

Contents Introduction vii Dedication xi Income 1 What Can I Deduct? 17 For Actors, Actresses, Directors, Dancers and Other Performers 41 For Musicians and Singers 69 For Visual Artists 91 For Writers 109 Setting Up a Business Entity 129 The Audit Process, Recordkeeping, and Your Taxpayer Rights 137 Choosing a Tax Advisor 153 Tax Planning 157 In Closing 163 Appendix A: Internet Resources 165 Appendix B: IRS Publications and other Resources 171

Excerpts

1. Income

I will address the types of income a person involved in the arts might earn and introduce the most important point in the book: the difference between employment income and self-employment/contract income. In these days of multidisciplinary artists, it is common for folks to have income and expenses from both employment and self-employment. According to this differentiation, income and expenses will appear in different places on the income tax return. But first things first:What is income?

In essence, income is practically everything of value you receive in exchange for your products or services as a performer, visual artist or writer (hereafter referred to as “artist”). You can be “paid” in cash, services, or property; you can even have barter income. Taxable income may or may not be reported on a tax form such as a 1099-MISC, W-2 or K-1 at year-end. Most of you will be familiar with the first two tax forms, but perhaps not with the K-1. The form K-1 is a means of transferring income from a partnership to a partner, an LLC to a member, or an S type corporation to the stockholder. In other words, if the artist is a member of an LLC, then he or she will get a K-1 that will show their share of income from the business and this amount will be reported as income on their personal income tax return.

As well as the obvious form of cash payments for services directly performed or artwork delivered, your income may come in the form of “free” merchandise that a company gives you in exchange for a product endorsement. Actors often receive free or discounted products in exchange for the use of their name in advertisements. Musicians receive free merchandise for endorsing a particular instrument, brand of strings or other supplies. The types of activities and/or products for which an artist may receive income include:

• Book publishing
• Recording
• Acting
• Product endorsements (including samples of the products endorsed)
• Personal appearances
• Sales of artwork
• Digital image licensing and sales
• Music downloads
• Ring tones
• Performance art
• Modeling
• Voice-overs
• Touring
• Dance performances
• Choreography
• Lecturing
• Teaching
• Master classes
• Instructional videos
• Commissions
• Studio and art work rentals
• Stipends
• Website design fees
• Website content
• “Fan-Based” funding such as Kickstarter
• Publication of articles
• Sales or rental of photographs
• Sales of CD or DVDs
• Sales and licensing of videos
• Fees collected for streaming web content such instructional videos
• Directing
• Production
• Consulting
• Television and radio appearances

While not exhaustive, the list gives a sense of the many activities that produce taxable income for the artist. These types of professional income will be added to your other income, whetherunearned income(such as interest, dividends, capital gains, rental income, alimony, prizes, unemployment income) or otherearned incomethat is unrelated to your professional life (for instance, the musician who moonlights as a music store clerk or the actor who works as a waiter). These types ofunearned incomeand unrelatedearned incomeare handled on your income tax return in exactly the same fashion as they would be on anybody else’s income tax return. It is with your professional income that things diverge.

What Type of Income Is It, and Why?: Employee Wages vs. Contract Income