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Tuesday, April 25, 2017

Seven Tips for Singer Taxes: Tip #2 (035)

This is another article in the Seven Tips for Singer Taxes series. Previously, we talked about some of the major difference between being an employee and being Self-Employed. And then we covered the first tip:
Tip #1: Keep a log of all your income.
Mostly, that was about spreadsheets and the different kinds of income that are earned as a singer. Income brings us to:
Tip #2: Put all your self-employment income into a separate checking account.
What we're trying to do here is to separate out your personal transactions from your business transactions.

Here's how it works, it's not that complicated: Anything that you earn through self-employment goes into its own checking account, apart from your personal one. That includes stuff you'll be getting a 1099 for and the smaller stuff that doesn't generate a 1099. Basically, gigs and lessons that you teach, all the stuff that you put on your spreadsheet in Tip #1.

This checking account is only for Self-Employment income, so don't put in any income you earn as an employee. If you're going to get a W2 for it, put that income in your regular, personal checking account. Direct deposit, however you normally do it.

The checking account that you use for business doesn't have to be a called a "business checking account" by the bank. Those tend to have a lot of fees associated with it, and are oriented towards a different kind of operation than the one you're running. Those are designed for when a business is going to be writing checks to pay employees.

For a singer, a regular, free checking account from an online bank or your local credit union will work just fine. Two handy features are a debit card, and the ability to deposit checks with your smartphone. At least those are the two most handy for me.

I use the same bank as my regular stuff, and just gave that checking account the nickname Jonathan Music. That's enough that it keeps separate, but it makes transfers easy.

Money going into the account is only half of it though. Just as important is what comes out, and that's the subject of Tip #3!

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