Q&A: Music Finance
We turn to our financial guru Clemens Kownatzki, author of Money Music 101, for Get to the Music’s first post in the Q&A series. From an LA Music Academy student:
Q: I put my songs up on Tunecore and make about $20 a month. Do I need to report this on my tax return? If so, how?
A: Technically, you are required to report all of your taxable income no matter whether you are selling songs on Tunecore or CDs on the Internet. Anytime you are engaged in selling a product or a service at a profit you must report the income from that activity.
The frequency or the amount of your income from selling songs are not the point actually. Instead, the question focuses on whether you are selling something at a net profit. Net Profit means the revenue or proceeds from selling a product or service minus the expenses associated with the production and marketing of it. When it comes to selling a song for instance, the problem is to demonstrate what costs you incurred from producing the song. That can be quite complex in fact. It is not just the cost of hiring a studio, manufacturing the CD or producing the MP3 and marketing your music etc. but also the hours that went into writing the song.
This can get very complex and in terms of reporting you are best advised to consult a CPA familiar with these types of transactions.
Clemens Kownatzki, one of our guest bloggers, teaches a finance elective at LA Music Academy College of Music.
He is the author of the just released Music Money 101 (pictured at left; available on Amazon).