A singer’s life is fraught with all sorts of expenses. Thirty or 40 expense categories are typical, such as accompanist fees, management fees, coaching, local transportation, piano tuning, union dues, equipment, costumes, make-up, telephone, publicity, study material, supplies, photos, postage, etc. And that’s not to mention the many travel expenses such as lodging, meals, airfares, and auto rental. The goal is to make sure they all become tax deductions. Good record-keeping is necessary to make sure deductions are not forgotten at tax time. Let’s say you are in a combined federal and state bracket of 33%. Well, omitting a $100 expense is like throwing away 33 bucks! That’s Chinese dinner for two here in New York City, including kumquats.
Some people think they should keep track of their expenses by the month or by the job, but on the tax return the IRS only asks what you spent for each category by the calendar year. If you are one of those folks who put all of your receipts in one shopping bag and plan to deal with them on the morning of April 15, check out some of the self-help books out there. When you’ve finally ripped up your membership card to the “procrastinator’s club,” try following this approach.
If you track your expenses on a computer program, send it to the Recycle Bin. Ledger books are also a waste of time. Just get a batch of large envelopes and label each one with the likely category for which you will probably have receipts. Use last year’s tax return as a guide. As you accumulate the bills and other backup material, sort them into the envelopes on an ongoing basis. Each month, when you get your canceled checks back from the bank, sort the checks into the envelopes. Don’t forget to also file credit card charges into the envelopes as you acquire them. By the end of January of the following year, these envelopes should be filled with last year’s tax material by each category.
Add up the contents of each envelope and write the totals on the front of the envelopes. Then transfer the totals to a sheet of paper, listing each item to use for tax preparation. Store all the envelopes in a safe place for about four years, which covers the period of time during which the IRS can audit your expenses. Should you be one of the unfortunates who gets a notice that the IRS wants to audit your deductions (and of course, it always arrives when you are doing a three month tour in Europe), you can breathe a bit easier since you already have your backup in those envelopes in that box somewhere in the back of your closet or attic.
Remember that there are some deductions that don’t require receipts, such as local travel, out-of-town meals, entertainment, and quiet business meals that can be noted in your datebook if under seventy five dollars per entry. For entertainment and quiet business meals, be sure to have the six required elements: date, place, person entertained, position or title of the person, what was discussed, and amount spent. For example, in your date book on June 1, 2001, you may have jotted down “Lunch with James Levine, Artistic Director at the Met Opera, at Maxwell’s Plum restaurant. Discussed opening the 2003 season with me as Otello. $74.50 (including tip).”
