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CD Sales Questions
Ah, perfect timing, this new sub-forum!
So, let's say, hypothetically , that a very part time musician has a box of about 100 CDs sitting here, and he's throwing a CD release party in about, say, 10 hours, and has been getting online requests from friends and friends of friends to sell them some, probably via Paypal, and said hypothetical part time musician figures he may gross, say, $1000-2000 dollars selling CDs over the next year or two. Should said musician: a) Set up a new Paypal acct to keep track of this income so that he can b) Report said income to his accountant so that he can c) Report said income to the IRS so that he can d) Make an accounting nightmare out of his hobby? Or should said musician: a) Wing it, via his normal PayPal acct and figure b) He usually plays for essentially free and c) He'll never come close to making back what he's spent on guitars and recording gear etc. Or some combination of the above? In other words, how do y'all (hypothetically speaking, of course), deal with the various legal, accounting and distribution nightmares involved in selling a portion of your hobby to the public? As of last year we do have an accountant already, fwiw, for taxes (kid in college and a Canadian wife with massive medical expenses, who's parents just died and left her an inheritance...in Canadian funds). td |
#2
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My father-in-law is a tax lawyer & was one of the top guys in the auditing department at the IRS for the past 25 years (just now retired). Here's what I learned from him:
If you don't declare the income, you can't take the deductions without raising all kinds of red flags. My bet is that you've spent way more on instruments, recording, duplication, artwork, et al than the $2k you may make off of this. Keep track of the income and declare it, and make sure your accountant then sets up all the proper depreciation scales for your musical equipment & office equipment (that computer is now a deduction), mileage deductions, use of home for business, business phone usage, etc. My guess and experience over the past 10 years is that those deductions are well worth the price of entry (reporting the income). From what you describe: the income minus the deductions is going to maximize your refund. It's extra time and a few extra forms to file (schedule C, form SE, possibly a schedule A or B), but if your accountant is already on it...it just means a few extra signatures to you (and probably a slightly higher accounting bill - but money spent on a tax preparer is deductible). You don't need to register as a business - you can simply declare yourself a sole-proprietor and file the appropriate tax forms.
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-Steve 1927 Martin 00-21 1986 Fender Strat 1987 Ibanez RG560 1988 Fender Fretless J Bass 1991 Washburn HB-35s 1995 Taylor 812ce 1996 Taylor 510c (custom) 1996 Taylor 422-R (Limited Edition) 1997 Taylor 810-WMB (Limited Edition) 1998 Taylor 912c (Custom) 2019 Fender Tele |
#3
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Quote:
td |
#4
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Glad I could help.
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-Steve 1927 Martin 00-21 1986 Fender Strat 1987 Ibanez RG560 1988 Fender Fretless J Bass 1991 Washburn HB-35s 1995 Taylor 812ce 1996 Taylor 510c (custom) 1996 Taylor 422-R (Limited Edition) 1997 Taylor 810-WMB (Limited Edition) 1998 Taylor 912c (Custom) 2019 Fender Tele |
#5
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You can't just declare some small gross income from a "business" plus a bunch of business deductions giving you a big business loss and tax write off. Read up on the IRS rules regarding business versus hobby. Talk about red flags! Also $1000 to $2000 on CD sales is pretty optimistic unless you have tons of not freebie family and friends or do a number of live gigs where you can try to sell them.
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#6
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I'm definitely giving lots of the discs away, but at $10 a pop, we sold $250 worth last night at the official "cd release party" and brought in another $150 via word of mouth online in the last two days. From here on out I guestimate $50-75 a month at our average of one gig a month -- maybe two or three gigs a month during the summer -- so it's not a real "income" but I also don't want to break the law. Of course, once people actually hear the disc they may want a refund... |
#7
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Good question, i was kind of thinking the same thing myself. I have a cd coming out in a few weeks, and am planning a cd release party as well.
Glad to hear your album sales seem to be going well. I plan to just put mine up on CD Baby. Anton
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