Taxes, man. You can’t escape ‘em. No, not even if you’re a rock star. Everyone pays taxes. E-v-e-r-y-o-n-e.
Now that we have that established, I want to tell you how taxes work for certain people. If you fit into any one of these categories, take notes. The bad news? You’re really going to have to pay attention. It is, after all, learning a new thing and that’s always a good thing.
I’m going to take examples of three groups of people:
- Group 1: Self-employed individuals.
- Group 2: Performing artists.
- Group 3: Foreign athletes and entertainers.
Group 1- Self-employed individuals
Who are they? Businessmen, independent contractors, sole proprietors, members of a partnership, part-time businessmen.
Okay, so first to give you a little perspective, a little bit about me. I’m a 28 year old entrepreneur; I run my own business so I fall under the ‘businessman’ category. Now let’s say your company generates gross revenue of 1 million dollars, you as an owner will be taxed on the profit your company makes after all the payments have been made. What are these payments?
- Employee expenses- salaries, medical coverage’s, taxes.
- Overhead expenses to keep operations running smoothly such as rent, utilities and supplies.
- Cost of Goods Sold (COGS) – the cost of raw materials used to produce or create a product/or service.
It’s a good idea to expect a 10- 20% profit margin of your gross revenue. So if your gross margin is one million dollars, you earn about $100,000- $200,000 profit. You will be taxed on this take home amount. If you have questions about your taxes, the IRS website should help in clearing your doubts.
Group 2- Performing artists
Who are they? Dancers, musicians, stand-up comedians, magicians, mimes, puppeteers, opera singers, theater actors etc.
Performing artists like you can avail qualified performing artist tax deductions that make life a whole lot easier. Now, you might not be entirely aware of how you qualify for them so that’s where I step in. Here are 4 ways in which you could qualify for this deduction:
- You need to either be single or married filing jointly.
- You need to have worked for at least 2 employers.
- The total deduction must exceed ten percent of the taxpayer’s gross income
- The adjusted gross income should not exceed $16,000. Should your income exceed $16,000 you are not eligible for this deduction.
Group 3- Foreign athletes and entertainers
Who are they? Athletes and sportsmen, entertainers performing in the United States.
Let’s say you’re in the country for a game. Do you pay taxes? Yes, you do. This, in fact includes compensation for performances, endorsements, sale of merchandise or any promotion leading up to the event. If you are non-resident entertainer, you might be subject to the following special tax and withholding rules. But you aren’t expected to know everything about it. So it’s safe to not take chances and always plan ahead the best place for you to check would be the IRS website.
One of the ways of making sure your taxes are always paid on time and you don’t miss a payment, is by enrolling the services of a professional CPA to do your tax preparation. You can get help from businesses like 1800Accountant.com, Horne CPA group, Suby, Von Haden & Associates and many others to do taxes online!
Taxes might not be fun, but hey everybody has to do them. Including rock stars and people from every walk of life.
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