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Seminar 10

Handling Taxes

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SEMINAR 10: HANDLING TAXES


Greetings!

Yes! You have finally made it to Part VII...The Income/Outcome! The two main earmarks of this Part of the 7 point journey through the music industry are "royalties" and "taxes." So, before we jump into the handling taxes segment, a word or two should be said about Royalties and Royalty Statements.


ROYALTIES

Royalties -- SMP Hot Link


We have seen throughout these seminar sessions, and especially in the last seminar, that there are a lot of middlemen in this business. And, since each middleman receives a royalty in payment for his contribution to the exploitation of the song, there are a lot of different types of royalties "floating" around. A book could be written on all the intricacies of these various royalties, but here, just an overview will be presented.

A royalty is the compensation paid by a party for the authorization to use a right legally owned by another, e.g., a right in a copyright or patent, or the right to merchandise one's personal image or name, etc.. Some of the royalties that exist in the music business include:

Songwriter Royalties
Song Royalties
Folio Royalty
Publisher Royalties
Artist Royalty
Producer Royalties
Statutory Royalty
Compulsory Royalty
Record Royalty
Mechanical Royalty
Multimedia Royalty
Cable Television (CATV) Royalty
Synchronization Royalty
Transcription Royalty
Print Royalty
Performance Royalty
Jukebox Royalty
Foreign Royalties


Here is where you will again need the SMP Membership Full Text Version of Seminar #10, along with the access it gives to the SMP Hot Links…you will find out how to "Take Care of Business" with detailed answers covering:

1) Royalty Statements…what is stated in them and who sends them out to who when.
2) Record Sales…why all Record Sales are not accounted for--Don't Get Burned!
3) Calculation Formulas…how does one figure them out?
Royalties -- SMP Hot Link

You get all this and much more with the SMP Membership Full Text Version…

Go To SMP Membership Full Text Version -- Index List of All Seminars
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INTRODUCTION TO HANDLING TAXES

Taxes -- SMP Hot Link


Yes, the good news is that your song has finally started making money and you are receiving royalty payments! The bad new is that the tax man commeth. So, you'll need to be ready to handle your tax situation, or it could cost you ALL you have earned.

This discussion on taxes will follow the flowchart listed below in the next heading section. The tax deductions listed in the flow chart (preceded by the word "Less") are the five general ways to lower the taxpayer's (your) TAXES DUE amount.

All tax deductions have certain qualifying restrictions and some have amount deductible restrictions depending on the taxpayer's particular tax situation. These restrictions are defined by tax law. Questions on specific matters may be ascertained by contacting an IRS Tax Information Center near you. Also, you may view/read and/or download much information from the WWW…such as Tax Calendars, Tax Publications and Tax Forms.

The main thing you, the taxpayer, must remember when dealing with the IRS is that IRS representatives and IRS publications INTERPRET the tax laws. These interpretations are sometimes biased and may not be in the taxpayer's interest in that they are sometimes contrary to the law as it is interpreted by the courts! Therefore, information received from the IRS should be in writing and confirmed by a competent tax attorney!



FLOW CHART
        FOR GROSS INCOME, DEDUCTIONS, AND TAXES DUE

Total income from all sources

Less Income exclusions

= GROSS INCOME


Gross Income

Less deductible adjustments to gross income

= ADJUSTED GROSS INCOME


Adjusted Gross Income

Less itemized deductions, or,

The standard deduction whichever is greater,

Less exemptions,

= TAXABLE INCOME


Tax on taxable income (from the tax table)

Plus any additional taxes owed,

Less total tax credit deductions,

= TOTAL TAXES DUE


All of the above entries proceeded by the word "Less" are items that can lower your total taxes due amount. A general outline listing and discussion of these items follow.



GROSS INCOME

Gross income is the total income received by a person or business, but not to include income exclusions. Personal gross income includes royalties, wages, salaries, tips, fees, commissions, bonuses, or any other compensation of value received. The gross income is figured on Form 1040.

It is possible, as a taxpayer, to realize income from many different sources. For example, the taxpayer could be a carpenter and have a savings account with $5,000 in it. The wages received as a carpenter and interest paid by the bank on his savings are both income and therefore must be reported. Another situation might be that the taxpayer is a carpenter, has a $5,000 savings account, and also has a side business of playing in a band on the weekends. Income from all of these sources must be reported.

There is obviously an almost infinite number of combinations from which a taxpayer could receive income. The sum of all these receipts is called gross income.



INCOME EXCLUSIONS

Income exclusions are receipts that may be legally excluded from gross income. The rules that must be met to allow an exclusion are numerous and often involve special interest groups. For more detailed information obtain Tax Publications #525, #54, #539, #593, and #505 from any IRS office or download them from the WWW.


Here is where you will also need the SMP Membership Full Text Version of Seminar #10, along with the access it gives to the SMP Hot Links…you will find out how to "Take Care of Business" with detailed answers covering:

1) Adjustments to Gross Income…what the 8 main deductions are--save Big Money!
2) Music Businesses' Expenses…lists scores of qualifying deductible expenses!
3) The Capital Loss…what it is and where to report it.
4) The Adjustments to Income Deduction…what it is and where to report it.
5) Itemized Deductions…what they are and when to deduct them.
6) The Standard Deduction…thankfully this is not the only deduction available!
7) Tax Exemptions…what they are and where to find the current rates.
8) Taxable Income…what it is and which tax publications you will need to figure it.
9) Tax Credits…what they are and which tax publications explain qualifying credits.
10) Taxes Due…what it is and which tax publications explain how to get it right.
Taxes -- SMP Hot Link

You get all this and much more with the SMP Membership Full Text Version…

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See you next seminar for the final session on taxes.


*R*


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