I am a freelance musician; therefore, I know lots of other freelance musicians. If I had a dollar for every time I hear someone say that they mean to keep better records this year (as tax season approaches), my husband and I would be retiring next year instead of next decade.
It’s still January. It’s not too late to start 2015 off right.
Should I have written this post earlier in the month? Yes, I should have, but I just didn’t think about it until I started hearing friends talk about the immense headache of gathering records for tax prep. I didn’t think about it because I maintain and update my records throughout the year, which means my tax prep consists of the time it takes to open my spreadsheet and to open the various tax forms downloaded or scanned into my computer.
I am not writing this to boast. I am writing this to encourage you to do the same. I promise, it’s not that hard!
After each gig I play, I open up my business spreadsheet and enter the paycheck amount, any union dues deducted (no longer a problem since I quit the union due to my local’s anti-military-band stance), the mileage incurred, hotel expenses (if any), the number of both partial and full M&IE days (I will explain all of that in more depth below, I promise), and any notes regarding the job. At the end of each teaching day, I enter my teaching income and the date, so that if I fall behind I can immediately see when I left off and get up to date quickly and easily.
I also keep a running total of expenses throughout the year. Whenever I buy strings, for example, I spend one minute of my time afterwards to open up that same spreadsheet and enter the expense.
As for records, I keep a PDF on my desktop at all times labeled “(Current Year) Expenses.” If I have an email receipt, I save it to PDF (Macs make this very easy to do; hopefully there’s a similarly easy function for PCs) and then import it into the larger PDF file. The receipts are just there for history and record-keeping; all of the information I actually need is in the spreadsheet. If I have a paper receipt, I usually save my scanning for once a week, as that seems to be more efficient.
I work on a MacBook and I don’t own Microsoft Office, so my spreadsheet is formatted for Numbers. Here is a clean copy of it: https://www.dropbox.com/s/ne3pjo3bdno2xaf/Business_Spreadsheet.numbers?dl=0. Unfortunately, the formatting was badly out of whack when I tried to export it as an Excel file, so here’s a PDF for those of you without Apple Numbers: Business_Spreadsheet. Page one is where you enter your teaching income, page two is for gig income, page three is for the M&IE table, page four is for expenses, and the last page is for mileage, which I print out each year and keep in my car. I’ve tried apps for tracking mileage, and old-fashioned pen and paper still serve me best.
About M&IE rates – Meals & Incidental Expenses. The IRS allows you to either (1) save your meal receipts while traveling and then deduct half of the total, or (2) use the standard M&IE rate (found here) and then deduct half of the total. The partial rate is for the first and last days of travel, and is 75% of the full rate. Personally, I hate saving all my food receipts and I get no financial advantage to doing so rather than using the standard rate, so I just plug in all of my partial and full days for each locale I travel to and use those numbers when doing my taxes.
Questions? Leave them below or email me at email@example.com. I promise that future you will thank current you if you take the time to set this up today. And I also promise that doing it this way won’t take any more of your time than brushing your teeth once the system is set up! If you can remember to brush your teeth at least twice a day, you can remember to do this after each gig or day of teaching. Just make it part of your routine.