4 Ways to Getch Yo’ Taxes Right

I remember it like it was yesterday.  There I was in H&R Block, I wasn’t yet a full-time musician.  I’m filing for my “real job” when the lady says “I remember you saying you played music – did you know you can claim expenses from that?”

Really?  I couldn’t believe it…no one had told me that before.

So, without a receipt of proof in hand – I forged ahead claiming mileage, equipment, and any expense I could think of.

Fast forward to about 2 years later and I’m better at keeping receipts, but not keeping them organized.  The band is also grossing close to six figures at that point (the net isn’t even close to that) so we are paying out to all kinds of things:  engineers, musicians for hire, things for our festival, insurance, recording, merchandise…

The only thing I kept were copies of cleared checks and bank statements.

Fast forward again to last September I was audited by the IRS.

The result was them claiming that I owed $28,000.

And guess what?  I hadn’t a clue where any of my records where.

Listen, I know you don’t want to read a post about taxes, but I’m serious when I say it can ruin you if you don’t learn the basics of what to do to keep your records straight.

Here’s what I’ve learned throughout this experience.  Keep in mind – I’m still no tax professional, so find someone who is.  I’m just giving you ways to be proactive.

1.  Keep EVERYTHING

A lawyer friend of mine once said “You know why a piece of paper is 8.5 x 11?  So it can cover your ass!” Keep all your records of money spent, money paid out to people, money you made, etc.

Some people will say “Just keep the receipts” or “you only need to print your bank statements.”

Again, I say KEEP EVERYTHING.

I had check copies, corresponding bank statements, and mileage records.  The IRS wouldn’t take it.  Why?  Because they do whatever in the holy hell they want to do.  So you have to be prepared to prove “beyond a reasonable doubt”.

For any lawyers reading – the IRS auditor actually used those words as if I was being tried for murder.

2.  Keep it ORGANIZED

I can’t tell you how nice it would have been to just go grab my ’07 and ’08 records out of the filing cabinet upon receiving that letter from the IRS.

Get organized.  It will save you a ton of backwork should they ever come knocking.

3.  You Cannot Write Off Everything

No you can’t write off that dinner with your friends and call it a “client meeting.”

No you can’t write off your new couch and call if “office furniture.”

Your safe as long as you stick to things that directly affect your business.  Things like new equipment, work for hire (make sure you 1099), mileage, promotional materials.  Your tax professional should have a list for you.

4.  Keep a Mileage Book

At first I used to keep gas receipts, then I was told you “get more back if you track your mileage.” And in the same sentence, I was told that a “mileage book is not needed…just keep track of your shows and the cities you played in with mileage.”

Welp, the IRS wouldn’t accept half of that.  Turns out they wanted a mileage book.  It’s tedious, but it’s worth it.

I’m going to stop there.  With this post, I really only intended on making you see that taxes are not to be underestimated.  You need to take them VERY seriously.

If you don’t think they will audit you, you are wrong.   I promise you, your chances of getting audited are much better than you think.  And nothing will kill your Indie career faster than a $30,000 IRS bill.

They made Uncle Sam point at you like that for a reason.  To let you know that they will find your ass.  And the backwards thing is:  they mostly go after the little guy.  The guy making $175 a pop in the corner of a smokey bar somewhere in Ohio.

Be ready for ’em.

——–

tweet wif’ me:  @davemhuffman

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