Chapter 13: The Taxman
It’s been said that the only two things in life you can count on are death and taxes. Hope-
fully, death is a long way off, but taxes are always staring us in the face. The most notori-
ous of these are annual income taxes. Each year in the United States, April 15 rears its
ugly head and demands we dig deep into our pockets. The days and weeks before are of-
ten wrought with angst and anxiety. But they need not be with proper planning and some
tax strategy.
In addressing taxes, it’s best to begin by defining what business income actually is
and isn’t. And here’s a hint. There’s more “is” than “isn’t.” We normally think of cash,
checks, and interest. That’s true, but Section 61 of the Internal Revenue Code (IRC) ad-
dresses “gross income,” which is defined as “except as otherwise provided in this subtitle
gross income means all income from whatever source derived.” That’s a very broad defi-
nition and includes goods, services, and property, among other things. For bands, solo
artists, songwriters, etc., income typically involves live performance fees, CD and down-
load sales, merchandise, royalties and commissions, along with fan supported funding if
you go that route for funding projects.
Gross income also covers the legal doctrine of “constructive receipt.” This means that
as soon as money, property, or other income is available to you, it’s taxable that year,
whether you tap into it or not. So the check you receive for a gig in December and hold
off depositing until January in an effort to reduce your annual income isn’t going to hold
water with the Internal Revenue Service (IRS).