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Friday, May 5, 2017

Seven Tips for Singer Taxes: Tip #3 (036)

Welcome back singer tax enthusiasts! This is another article in the Seven Tips for Singer Taxes series. Thus far we've covered some basics and the first two tips:
Tip #1: Keep a log of all your income.
Tip #2: Put all your self-employment income into a separate checking account.
So while we're on the topic of using that business checking account:
Tip #3: Only use your business checking account for business.

Now that you have a business checking account with money in it, let's talk about how to spend that money. From here on, only three things come out of this checking account:
  • Business expenses
  • Taxes
  • and take-home pay.
I'll talk about taxes and take-home pay coming out in the next video. Business Expenses is the main subject for today, but it's actually not that complicated. The simple rule is this: Only use your business debit card when you are buying stuff related to your business.

Here's just a few examples of business expenses:
  • Parking in downtown Seattle
  • That red-eye, coast-to-coast flight on Delta
  • Office supplies
  • Recital supplies
  • Studio rental
  • Lessons (that you take)
  • Coachings
  • Accompanist fees
  • Application fees
  • Union dues
  • Car rentals
  • Website upkeep
  • and on and on and on.
If you're not a singer and are following Singerreise just to get a sneak peak into our lives: well, we have very expensive lives!

In case there's some confusion on this, however, here's a few things that are not on the list:
  • Utility bills
  • Apartment rent
  • Mortgage
  • Groceries
  • Clothing
  • Garden gnomes
Those are personal expenses, unrelated to your business (except maybe the gnomes, those're totally legit!). Pay for these with your personal accounts, out of your personal, household budget.

One sticky subject is the topic of eating out. I do not pay for them using my business account, even if I'm on the road traveling. In fact, I do not track meals at all as a business expense. There are severe restrictions in terms of how much can be deducted (50% or 20%, if I remember correctly), and it only applies in very specific situations.

At your own risk, you might be able get a bit of a deduction by calling some meals with colleagues a "business lunch," but to me, it feels like it's opening you to an audit.

This is a case of keeping it simple, so that you can spend your time making money instead of minimizing taxes. So for that, and because it can only partially be called an business expense, anyway, don't pay for it with your business account.

Here's how it all comes together: When tax time comes, you'll have a list of exactly every expense you incurred while doing your business. Download your bank statements or use budgeting software, total it up, and you're good to go!

While we're at it, yes, you do need to keep your receipts. I have a dedicated box for these, but for me, the receipts are there as backup for reference or in case of an audit. My primary source of data comes from that checking account.

One final word about this checking account before we leave this subject. This one is very important: back in the last video, when I said open a checking account for your business, I really meant "checking account." I did not say credit card.

This VERY important point deserves one or several videos on its own, and I do hope to do some budgeting videos later. But here, I'll focus just on one reason. There are no guarantees in this business. If you build up debt, there is no guarantee that your singing will be able to pay off that debt.

If you only spend the money you earn, you avoid that problem entirely.

Clear? Okay, next time we'll cover the next tip, and talk about taxes and take home pay.

To end here, though, let me try to be encouraging for a second. To encourage, after all, is part of the Singerreise mission. If you are a singer (or even a non-singer) feeling overwhelmed by debt and other money issues, hear this: you can get out of it. You can do it. And I want to help you.

Send me an email at Singerreise @ silviasound.com, or get in touch through social media (facebook, Twitter, or YouTube), and I'll walk with you.

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