We Remember The Magic Café We Remember
Username:
Password:
[ Lost Password ]
  [ Forgot Username ]
The Magic Cafe Forum Index » » New to magic? » » Taxes? W-2s? Business licence? (0 Likes) Printer Friendly Version

Eric the Excellent
View Profile
Loyal user
Montana
234 Posts

Profile of Eric the Excellent
So, I finally got my fees figured out and I have actually begun to turn a profit through performing for the past few months. Awesome! I thought I had everything figured out...

Well, a client (a radio station, actually) is now making me jump through a bunch of hoops if I am to receive payment for a show I am to provide them with. (I've been trying to get ahold of them all month; they finally got around to telling me this today, a full five days before the performance.)

I told them that my "business" was unlicensed. This seemed to cause a stir. Doubly so when they said that, sure, they could make a check out to an individual rather than a business but they would need to see a W-2 form. (I'm an unemployed college student; I have no W-2 form.)

It's all very confusing and has made me realize that I have a long way to go before I'm an "official" performer. Does anyone have any advice on how to deal with this current situation? (Or how to get things squared away, for future reference?)
Mitch150
View Profile
New user
Deep in the Lake County
17 Posts

Profile of Mitch150
Eric -

Technically, you are an independent contractor.

Taxes - YOU WILL NEED - from the IRS - a "EIN" -- an entity identification number -- this is like a social security number, but you apply for this as a business. Once you get that, the form you fill out for your client is a "W-9" which is a request for Taxpayer Identification Number and Certification. This is where you put your EIN and send that to them. Of course you could just use your social security number, but do you want that exposure?

I am not sure about your state laws, but you MAY need a business tax number. This you get thru your state tax people. It is another form in which you state your "business name" - ie - "Eric the Excellent" that is your business name. Then they will issue you a tax number to collect sales tax on your performances, if it applies to your situation.

NEXT - for your protection, GET A PO BOX. Having a secure mail drop both protects your home while you are away, and your mail from theft, and people just stopping by to have a "cover look" at what you are getting. Privacy more than anything.

AS far as what is next, you need to get a good computer accounting program to run your business on. This way when you file your taxes, you can pull off the exact numbers for things you spent money on, like the car / truck when used in the business, stuff you bought to "sell" - ie - refills for magic supplies which are used in each performance or things which you "give away" during the performance. Rent for office space, even if you use just your basement or a corner of the living room for an office - heat, light, water, tons of business related expenses can now be charged off on your taxes.

Of course you need to set up your own business, Either a Sole Proprietor (SP), Partner, or one of the Corporations. SP is the easiest, Corps, like a LLC are complex and you will need a lawyer to do that and be registered with your secretary of your state, and file corporate taxes.

Yes, a one man corporation under a LLC will also give you some protection from being sued. Ask your lawyer.

With a SP, all you file is "C" and "SE" -- the rest goes onto 1040 / your state forms as the instructions show.

DO that and you will be in "business" - you are trying to work to show a profit, and that is all which is required to be in business.

Good Luck!

Mitch

PS. You state you are a college student - did you take "Financial Management" in college? That is the higher level of accounting 101 which is basically bookkeeping in high school.

Trust me, after 40 + years running my own business, I can tell you more than this - way more than you want to hear or know.

Mitch
It is easier to try than to prove it can't be done.
Atom3339
View Profile
Inner circle
Spokane, WA
3242 Posts

Profile of Atom3339
^ Good advice, Mitch.

Also, my understanding is since you're an independent contractor, NOT an employee of the radio station, you use a 1099 form, NOT a W-2. It would be worth your while to read the IRS guide book, maybe also to talk to an accountant to get all your ducks in a row before launching out.
TH

Occupy Your Dream
jimhlou
View Profile
Inner circle
3645 Posts

Profile of jimhlou
Excellent advice. I've used my soc. security number for years and have never had a problem. I realize times are changing, but I "froze" all my credit and don't think I'll have a problem at my age.

One additional thing - keep good records. Write down everything you spend, all of your magic related income, and keep mileage records. This can be as simple as a notebook where you just jot down the info - but do it. I get a $2,000 plus deduction every year just from magic expenses.

Jim
Theodore Lawton
View Profile
Inner circle
1686 Posts

Profile of Theodore Lawton
Thank you for all this advice.
Jim Sparx
View Profile
Inner circle
Far Out, Texas
1144 Posts

Profile of Jim Sparx
And when things don't work out, fees to your psychiatrist are also deductible.
Eric the Excellent
View Profile
Loyal user
Montana
234 Posts

Profile of Eric the Excellent
... boy, that is a lot of advice. Thanks. I can't say "I'll get right on that" because it is probably too late for this gig, but I will definitely start pulling things together.

Nope, I have never taken any accounting classes; I'm a nursing student.

Quote:
On 2012-07-21 10:34, Atom3339 wrote:
Also, my understanding is since you're an independent contractor, NOT an employee of the radio station, you use a 1099 form, NOT a W-2...


Yeah, that's what I've heard. The problem is that is not what the client wants; they want a W-2 so that's what I'm going to have to give them.
davidpaul$
View Profile
Inner circle
Pittsburgh, Pa
2979 Posts

Profile of davidpaul$
All you need to do is fill out a W-9 Form http://www.bussvc.wisc.edu/ecbs/itx-req-......n-w9.pdf
You can use your social security number as your (TIN) Taxpayer ID Number
This form is used by the company that is paying you and they usually will supply it. That's it.
(I've worked for many restaurants and corporations and the W-9 form is all they needed from me)

Now you will have to report your income at the end of the year. I pay estimated taxes quarterly on the income I make from magic performances using a form 1040-ES. I perform several shows a month plus I have a full time job non magic related. So the magic income is additional money coming in and the taxes have to be paid. Smile

I've been performing regularly every week for the last ten years. I have performers insurance (a-must) My real name is my business name. My social security number is my tax ID number....Like Jim and Mitch said above, I keep records of mileage and expenses and magic related income.
At the end of the year my tax accountant does his magic. I never set up an official business (Corp. / LLC etc.) and my tax accountant hasn't advised me otherwise. It's worked for me for the last 10 years.

It sounds like Mitch knows his stuff, I just wanted to mention what I've done so you don't have to turn down work. Jsut fill out the W-9 and pay tour taxes...DONE
If you can't help worrying, remember worrying can't help you!
Atom3339
View Profile
Inner circle
Spokane, WA
3242 Posts

Profile of Atom3339
^ Mr. $, Sounds like you've got your act together!
TH

Occupy Your Dream
Mitch150
View Profile
New user
Deep in the Lake County
17 Posts

Profile of Mitch150
ALSO establish a "business" checking and savings account. If somebody makes out a check to a "biz name" you can't cash it without having first established someplace to stuff it. The savings account is for your "retained earnings". That is excess cash after all your expenses - it should be about 1/2 of your profits - this insures you will grow, and have the cash to do so. Also pay off taxes and other obligations like that.

The IRS will want to see, as well as the bank if you are going for a loan - the seperation of your personal and business banking records. DO NOT use a personal account, checking or savings for a business. You are asking for major trouble from not only the tax people, but almost everyone else involved with your business. GET a business credit card, and use it ONLY for the business. This also provides a seperation of accounts which nobody will dispute, if you do it right.

AND don't forget "depreciation" - you can write off the cost of your magical gear - especially the big stuff over a period of time, usually 7 years for this type of gear, and that also comes off your income before you pay taxes. There are seven ways of figuring this allowable deduction. (Form 4562)

Go to the IRS web site - "http://www.irs.gov" and poke around. There is a long "Small Business Guide to Taxes" which spells this all out, Pub 334.

Also don't forget the cost of running your home office, Form 8829.

Taxes can be a pain, but it is part of business. Figure 30% of your business income goes to the government in some way, Federal, State or Local - budget it in, and put the cash into a savings account as "retained earnings" - that way when it comes time to pay them off, you have the cash at hand.

One other thought as I read thru this - your local tax assessor will want to know about your business. You will have to pay personal property tax on your business assets - every year. So register at the local government center where the Tax Assessor is located. Don't make them find you - you will have to pay the back taxes when they do find you along with a fine for not filing with them.

Just a few more notes, and YES give them a W-9, you can get one at that IRS web site as well.

Good Luck --

Mitch.

PS - that Financial Management Class is an excellent way of learning all about business accounting, taxes, and everything else you would need to know about to run a business. Some local tech colleges, and some 2 year colleges offer this as a night course for adults. TAKE ONE.

Mitch.
It is easier to try than to prove it can't be done.
55Hudson
View Profile
Special user
Minneapolis
982 Posts

Profile of 55Hudson
Mitch - excellent advice for everyone turning a terrific hobby into a nice part-time (or full-time) job.

This should be a sticky.

Eric - a W-2 is what an employer gives to an employee at the end of the year summarizing the employee's pay for the year. The only reason to show someone your W-2 is to verify your income, like when you are taking out a loan.

Hudson
The Magic Cafe Forum Index » » New to magic? » » Taxes? W-2s? Business licence? (0 Likes)
[ Top of Page ]
All content & postings Copyright © 2001-2021 Steve Brooks. All Rights Reserved.
This page was created in 0.13 seconds requiring 5 database queries.
The views and comments expressed on The Magic Café
are not necessarily those of The Magic Café, Steve Brooks, or Steve Brooks Magic.
> Privacy Statement <

ROTFL Billions and billions served! ROTFL