5 Tips for Musicians to Avoid IRS Trouble

Categories: Music Bidness

Chuck Berry mar 7 d.JPG
Photo by Marc Brubaker
Stiff the IRS, and you could still be touring at 84, too.
It's a fact of life that bears repeating: The IRS does not fuck around, no matter who you are.

Legendary musician Chuck Berry received a reminder of this universal truth the hard way 33 years ago this month. Only three days after playing a gig on the White House lawn for President Jimmy Carter, the rock and roll pioneer pleaded guilty to tax evasion in 1979 for willfully falsifying income information on a tax return.

Because Berry notoriously insisted on being paid in cash and didn't bother to keep strict records, he was pretty much screwed as soon as the IRS took an interest in him. By taking a plea deal, he only spent four months in jail, but even after he was released he still had to perform 1,000 hours of community service. That's a hell of a lot of benefit concerts.

Chuck is hardly the only rock-star to regret crossing the taxman. In 1990, Willie Nelson famously owed the IRS $16.7 million, and the agency eventually confiscated and auctioned off his assets. Marc Anthony owed millions in back taxes after he failed to file a single return between 2000-04, and news recently surfaced that R. Kelly owes the IRS nearly $5 million in unpaid taxes. Not exactly chump change.

These are just a few of the most famous examples in a pattern of problems that musicians experience in dealing with (or avoiding) tax collectors. What is it that makes them so vulnerable to IRS issues--and how can musicians who aren't nearly so famous avoid the same pitfalls?

Rocks Off aren't exactly tax experts. In fact, our own filing routine typically involves a great deal of weeping and prayer. But thanks to the power of journalistic research (Google), we've managed to put together a list of five common-sense tips for musicians on how to avoid the IRS' wrath.

Now, don't be an idiot: This ain't legal advice. If you're unsure about a tax issue, consult a tax professional, not a blogger. However, following these simple guidelines might just help keep you out of Chuck's old cell come tax time.

5. Always, ALWAYS file a tax return.

It seems so simple, doesn't it? And yet, failure to promptly file a tax return each and every year is at the root of countless musicians' tax troubles. Some wealthy performers (like Marc Anthony) wrongly assume that their accountants will simply "take care" of filing their tax returns. The truth is, only you are responsible for making sure your return is filed promptly and accurately.

We get it: Pro musicians don't exactly lead the most stable lives, and if you're living gig to gig, the temptation to skip filing returns at all can be high. That's a mistake that can cost you dearly, however. If you get busted, IRS penalties can equal nearly 50 percent of the original tax burden. Then they apply monthly interest on both the unpaid tax and the penalty.

That adds up quickly to a spiraling, Tony Soprano-style debt that you definitely do not want.

4. When the IRS sends you a bill, for God's sake pay it.

If there's one thing the IRS hates, it's a deadbeat. If you know you owe money to the feds, do everything in your power to pay up. The taxman doesn't forget, he doesn't forgive and he never gives up. If the IRS believes a musician is dodging his or her obligation, it can file a lien at the county courthouse -- usually after a few warning letters have failed to get the money.

What's a lien, you ask? Basically, it's the government's legal claim against your property when you neglect or fail to pay a tax debt. That means they can seize your house, your car, your gear, your bank accounts and pretty much anything else you've got the keys to in order to recoup what you owe.

Typically, the IRS prefers cash and will only seize your stuff as a last resort. That doesn't mean they're shy about it, though -- No less a beloved figure than Willie Nelson lost damn near everything he owned to the IRS in 1991.

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Landmark Tax Group
Landmark Tax Group

Kudos to Rocks Off and Nathan Smith for offering practical and effective tax advice for musicians. As a former IRS Revenue Officer that worked these types of cases, I can't emphasize tip #5 enough. Even if you cannot fully pay a tax liability, you should still ALWAYS file a tax return.  Michael Raanan, EA

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