Tax time is around the corner. There are many business and job expenses musicians must pay to keep current in the profession and continue their career. Deducting these expenses can lower your tax bill or increase a refund.

Usually there are two places in the Form 1040 tax return where expenses are deducted:

1. Job expenses for which you receive a Form W-2 (wages) are deducted on Schedule A (Itemized Deductions).

2. Business expenses for self-employed work such as those which you receive Form 1099-Misc are generally deducted on Schedule C (Profit or Loss From Business).

This article mainly concerns Form 1040, which is the individual income tax return. However, these expenses also pertain to other business entities such as an S Corporation, an LLC, or a partnership return.

Business expenses must be ordinary, necessary and related to your current career. In addition, there are many job expenses for which an employer, if needed for the IRS, should be able to provide a letter stating the necessary requirement of these expenses. This request for a letter from an employer has come up more frequently in the last couple years. Many employers are reluctant to provide a complete letter and may have to be prodded to do so.

(A side note to Local 802: I think the union needs to help educate employers regarding the necessity of writing a letter, when needed, which authenticates job expenses. This has become a thorny issue with the IRS and the union could help its members a great deal. Otherwise many legitimate job expenses could be disallowed.)

Below is a list of some business and professional expenses for musicians.

• Union dues and initiation fees, including work dues. This expense is usually only for W-2 jobs.

• Professional memberships directly related to your job. No social, entertainment or health clubs.

• Resume expenses such as printing, mailing, photography fees and resume-listing fees.

• Demo recordings to seek work or enhance your professional standing.

• Web hosting fees for a business or promotional site.

• Agent or manager fees and commissions.

• Trade publications and subscriptions, including web-based subscriptions. Only publications related to your profession (like, for example, Billboard magazine) may be deducted. Your subscription to the New York Times, for instance, may not be deducted.

• Promotional tickets for directors, producers, agents and others when they are bought so they can hear and see you perform as you are considered for a job.

• Professional education that maintains or improves your skills as a musician, including seminars and workshops.

• Subs who you have to pay for yourself. Also accompanists, side musicians and assistants.

• Rehearsal and studio rentals. Also instrument and equipment rentals.

• Professional research, such as recordings, sheet music, books and concert tickets. Be sure to have a substantial reason for each one of these and be able to list them if required.

• Tuxedo and concertwear, if required for work and not used for anything else except work.

• Local transportation to auditions, non-paid performances, professional education or to a second job on the same day. Commuting to your first or main job any day isn’t deductible. (Deducting transportation can be tricky, so do some research starting with the IRS publications I’ve listed at the end of this article or hire a tax preparer.)

• Instruments purchased. These are considered business equipment and have to be depreciated on Form 4562. See the instructions for this form.

For all business and job expenses, you are required to keep records and receipts that substantiate your expenses and the reasons for them. You should have a receipt or a cancelled check for each expense. For every expense you need to provide who, what, where, when and why in a business-like format.

One way to help do this is to have either a business diary or a ledger. With a diary you can have every job, audition and related expense listed under the date. If your diary or ledger is in electronic format, save it for each year and be able to print it on 8.5 x 11 paper when needed. If your diary is a physical one, the minimum size should be 5 inches by 8 inches.

If you use a car for business local transportation, you must have a car log with a daily record. Write down the odometer mileage on Jan. 1 of each year, then when the year ends on Dec. 31. Business mileage along with the destination must be written under the date. You will need the following:

• Business miles driven during the year.

• Commuting miles (which are nondeductible) and the average daily round trip of your commute.

• The total of all miles driven during the year, including business miles, personal miles, commuting and any other.

• Business parking and tolls. With just your mileage figures, most of the time you can use the standard mileage rate. You may also use actual car expenses. But see the IRS publications listed at the end or use a tax preparer.

Keeping track of business receipts can be a chore, but it’s worth money to you – so do it. The old fashion way is to use an accordion file: keep your receipts by category rather than by date. It’s easier to total each category at the end of the year this way and the dates are already in your diary or ledger. In your file, have separate pockets for most of your expenses and a miscellaneous pocket for your lesser-used categories.

If instead you use bookkeeping software, be sure to stay on top of it and be current. Keep the software simple and have a category for each type of expense that can be totaled at the end of the year.

If you keep your business receipts current and categorized during the year, it will be much easier at tax time to pull out the receipts by category and just add them up.

Keeping a current business diary also makes tax time easier. For example, a diary will have all your job locations, your local transportation expenses and will help substantiate your receipts.

Here are some IRS publications and forms that you might find helpful:

• Pub. 17 (“Your Federal Income Tax”). See part five.

• Pub. 535 (“Business Expenses”)

• Pub. 463 (” Travel, Entertainment, Gift and Car Expenses”)

• Pub. 946 (“How to Depreciate Property”)

• Form 2106 (“Employee Business Expenses”)

• Form 4562 (“Depreciation and Amortization”)

These are all available at www.irs.gov call (800) 829-3676. Some are available in person at the IRS building in New York City, which is located at 110 West 44th Street.

Michael Chapin has been preparing taxes and consulting for musicians and performing artists for over 20 years. He is active in the arts and also an amateur musician who sings in a choir. For more information, see www.TaxesForPerformers.com.