The Tax Season Shuffle

Piggy Bank and Calculator

Photo by Images_of_Money on Flickr

Oh, month of March, how I dread you! This is the time of year when I assemble all of my tax information; I just finished, so all of this is fresh in my mind (and annoyingly in my dreams!). While I really ought to—and every year resolve to—tackle this project in February, I will seek out pretty much every possible diversion (down to pencil sharpening, which I don’t even do during composing procrastination!) to avoid the drudgery. Preparing tax returns is one of my least favorite activities on planet earth.

However, when the organizing and tallying of income and expenses is over, I have nice, neat lists of the previous year’s financial landscape. The good news: my income has gone up (almost) every year I have been claiming independent composer-hood. The less-good news: as one might expect, expenses as a whole also go up! The interesting part, from an “historical” perspective, is how the level and type of expenses have varied over the years; it’s not only a sort of personal financial journal, but also a reflection of changes in technology and in career development. It would be interesting to see a ten-year-or-so analysis of expenses incurred by a selection of self-employed artists at different ages and career stages. A few alterations in my own recent expenses popped out this year:

Postage expenses have plummeted, especially in the past two years.
Hurray for digital submissions! It makes me smile every time an application process can be completed totally within the digital realm, not to mention when a request for music can be fulfilled by attachments and/or links. Weirdly, I still feel like I visit the post office a lot, but I spend less than ¼ of what I used to over the course of 12 months.

The same goes for office supplies.
Again, yay digital submissions! Buying fewer padded envelopes and fewer spindles of blank CD-Rs is wonderful, as is having a little extra shelf and closet space as a result.

Travel expenses have gone down.
This is not so much because I travel any less, but more because travel expenses are more often reimbursed. Needless to say, this is awesome! (Note: Even if airfare and hotel are reimbursed, it’s still possible to deduct the GSA M&IE per diem rates for the days spent away from home.)

Meals and “Entertainment” are up.
Another function of age and career advancement, I suppose, is that now there are more actual work-related meetings over nice meals.

Contract labor and professional fees are up… a lot.
Sometimes a lawyer needs to be involved in a negotiation. Sometimes a composer needs a copyist. Or a PR consultation. I am accustomed to having a collection of 1099-MISC forms in my tax documents, but 2012 was the first year I have had to prepare them for others!

Anyway, what I’m really curious about is what your methods of keeping track of all this information are. How do you do it? Do you manage your records on a weekly, monthly, or yearly basis? Do you use one software program, several, or maybe just pencil and paper? I find these forms very helpful, but I have a hard time keeping expenses updated on a monthly basis, and end up spending a long time dealing with most of the previous year (which involves information scattered over several sources) in March! Help!

5 thoughts on “The Tax Season Shuffle

  1. Armando Bayolo

    I hate this process about as much as you do, Alex, so my record keeping is on a yearly basis. I save all of my receipts and then tally them up in February (Ha-HA!) when I sit down with Turbo Tax (such a blessing to my mathematically crippled brain) and figure out how much I made and spent in the last year. My results this year really reflect yours too, the only difference being that I’ve not had to fill out 1099-Misc. forms for others yet (though I think this was the last year for which that may be true).

    Reply
  2. John Mackey

    My taxes go fairly quickly now, since I’ve been working with the same accountant for over 10 years. Nearly all of my business expenses are paid with a dedicated American Express Business credit card, which provides a detailed end-of-year summary with all purchases itemized. (“Communications” — cell phone, internet, etc.; “Restaurant,” “Transportation” — with further break-downs of airline, fuel, parking, etc.) It shows dates of purchased plane tickets so I can line those up with my travel spreadsheet that shows dates traveled, where I went, what fee — if any — I received, and what expenses I incurred.

    Some things – like my bulk printing bills – are paid by check, but there aren’t many of those instances. Expenses are almost all on this single credit card. I don’t deal with receipts at all, since it’s all recorded by AmEx. It still takes a solid day to pull everything together for the accountant, but it’s not as bad as it used to be before I had these AmEx summaries.

    Also: a good accountant – preferably one who works regularly with artists – is the greatest investment I make every year. It more than pays for itself (I can deduct exactly how much for use of my own car while driving to a gig?), lowers the risk of an audit (since there are far fewer errors), and is just a much less stressful way to deal with an already scary time of year.

    Reply
    1. Alexandra Gardner Post author

      Thanks much for these tips, John! This sounds almost exactly like my own system (including the good accountant who is worth every penny!), but I definitely need to add a travel spreadsheet to the mix. Cobbling together my travel stuff from the year is what slows things down for me.

      Reply
  3. Scott Pender

    Whether it’s because my father was a CPA, or there’s just something wrong with me, I actually don’t mind the annual weekend spent doing my taxes, which I always prepare myself. I do wait til then to sort receipts, but I’ve got three other simple tips.

    I record all my expenses & income in a ledger as I incur/receive them, just in case I miss or lose a receipt. I can always use the ledger as some evidence of chronologically correct record keeping.

    I keep a notebook in the car to record mileage to/from any work-related events, parking, etc.

    Finally, I keep a written computer log for one or two typical months a year, recording approximate hours spent doing work-related work stuff vs non-work stuff. This means I can always check that box that asks if I “have written evidence” of >50% business use in order to take accelerated depreciation on the computer & related equipment.

    Reply
  4. Mark Winges

    Like John, business expenses go on one credit card and personal expenses go on another card. Separate bank account for the business. I still write some checks, but more important, I pay the business credit card from the business checking account. I also track that checking account using Quicken, which makes the categorization really straightforward. Business income goes into the business account.

    I’ve also had the same accountant for many years. The peace of mind from having a pro take care of it far outweighs his fee.

    – Mark Winges

    Reply

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