Monthly Archives: April 2015

Estimating Income for Musicians

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Now that tax day has finally come and gone, many private lesson teachers are experiencing a sense of relief. Now that the next tax year has begun, it is important to consider your earnings for the coming year now, in order to avoid a big tax bill in the future.

Estimating income is difficult. This is especially true if your work is variable, and such os the case with private lesson teaching. Luckily, at this juncture in the year you most likely have enough information to get a realistic idea of your earnings for the coming year. Doing this now will save you the headache of substantial taxes owed next April.

If you are teaching summer lessons you most likely know your studio size for this season. Calculate your earnings for the summer based on weeks teaching and set it aside.

Next, determine your studio size for the school year. Will you be taking on more new students, than students graduating lessons or quitting band? Will you be adding any new schools or dropping schools from your schedule? Will there be any changes in the lesson rate? Now you can use this to determine income for your fall teaching. I assume a student will never miss a lesson for this excercise. I would rather overestimate now than underestimate and have to pay later. Combine this with your summer earnings, as well as money you have already made from January first to now,

Once you have arrived at this number it is important to also take into consideration any other income streams you may have, such as gigs or clinics, and include these if possible.

Lastly, take a look at your deductions from previous year. Are any of these no longer applicable for the coming year? This includes educational credits, or the witting off of one time purchases such as computers, tablets, or instruments. If you are losing a few of these big deductions you should be prepared to pay more taxes.

On the flip side if you see any expenses rising, this will increase your deductions. For example, your health insurance cost could be going up, or you may anticipate driving more work based miles.

You can now use your previous tax return as a model, by plugging in your new estimated income and making the same or revised deductions. You can also use this to determine self employment tax. Be sure to consult tax tables of thee has been a drastic change in income either way, as your tax bracket may now be altered. At the end of this exercise you will have an estimate on what you will owe next year, and can send in your quarterly vouchers accordingly.

This is an important procedure, and will keep you from a surprise bill next April.

The Private Lesson Teacher’s Guide to Surviving the Summer

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The summer can frequently be a season of less work for the private music teacher. Students are not attending school daily, and traveling to these buildings during their band classes to conduct lessons is no longer an option. This issue, combined with family vacations, sporting events, and other summer activities can make life difficult for the private lesson teacher in the summer months. With a few proactive measures, however, you can survive the summer without going broke.

1) Plan to save-You know that summer comes each year, and will present a predictable financial issue. So, during the school year do your best to put some money aside each month towards your summer living expenses.

2) Sell the importance of summer lessons-You cannot reasonably expect your entire studio to take summer lessons. Personally, I retain about 35% of my studio in the summer. Toward the end of the year I send out a mass message asking who would like summer lessons, and highlighting the importance of reinforcement of what we have learned this year, and the upcoming competition they will be practicing for in the form of all region  bands at the middle and high school level. This works better than just saying:  so, you want summer lessons?

3) Cater to your better students-Your best students are already planning on taking summer lessons. The ones that are serious about music would probably be interested in hour long lessons. This is a win-win for student and teacher. In the summer there is much more flexibility, so you can schedule an hour with less of an issue, you enjoy teaching this student, you can cover more material, the student improves more, and you are paid more. I send a targeted email to my better students proposing an hour.

4) Get in touch with beginners-Many times parents like for their student to get lessons before school starts so their child does not feel overwhelmed or fall behind during the beginning of band classes. This is another way to grow the summer studio. Hopefully, these beginners turn into your regular students, but even if some are just interested I a few start up lessons, this will help you survive the summer

5) School sponsored band camps- The schools you teach at may host summer band camps, and often look to hire private teachers as staff.

6) Marching camp staff-During marching band camps directors are often looking for extra part time staff to help with marching and learning music. Private lesson teachers are usually ideal candidates for this.

7) Start your own summer camp-Many musicians have had great success starting their own instrument specific camp or series of camps. The biggest hurdle is finding a location, but once this is established you can set the duration, length of sessions, cost, and material covered. This is a good time to introduce chamber music or instrument specific choirs to your students. It can be a lot of work to organize, but will help you survive the summer and possibly grow your studio going forward if you offer it school or district wide.

Retaining your students

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The school year is winding down, and students must make a crucial decision. They must decide if they will continue in band, or quit band – and as a result, private lessons. Often times the private lesson teacher is the last person to know if a student is quitting band. This is frequently because the student may be uneasy to bring this up in conversation to you, the private teacher, directly. Also, band directors frequently know who is quitting but assume the student has already communicated this to their private teavher. Taking steps now can ensure you have a more accurate picture of who you will be teaching going forward.

Communication is key when it comes to retaining your students. Common reasons to loose students are preference for sports over band, general disinterest in band, desire to take numerous advanced placement courses over band, moving, and obviously graduation.

I send an email to my entire studio at this point of the year, it reads:

Hello,
I have very much enjoyed teaching your student this year. Going forward if you would like to continue lessons no further action is needed. I will keep your student on my studio roster. If your student is no longer continuing band please let me know.

I know this may seem like you are inviting your students to quit. You are not. Most likely your students have decided this well before you send this email. It is far better to know who you will be losing now and plan accordingly, rather than schedule a time for next year only to find out they have quit band.

When doing this exercise there are always surprises. You are clearly aware your senior students won’t be returning, but some students respond they are quitting that you either feel are talented, or that you enjoy working with a lot.

Once you find this out, there is usually enough time left in the school year to switch their class schedules if you can persuade them to stay in band. Try talking to them in their lesson about the cause for their quitting. If it is a scheduling issue regarding sports or academia many times a solution can be reached. Often times students will just quit band and choose the other activity because they assume there is no solution. Frequently this can be resolved with good communication amongst the parties (students, parents, band directors, and other teacher/coach) and enough lead time to enact a resolution. When bringing this up with your students, do it in a causal way. If they interpret the conversation as aggressive, you may not achieve the desired result.

Once you have a final count of which students will be back, and who will be leaving I make a list of every student by school, and then band class if applicable. From here you can see where you have a lot of students, and where you can expand. You can also see what classes you have more time slots to teach and then can begin looking for new students to fill these slots. It is by far easier to communicate to new students about next year during the school year versus the summer because people check their email much more frequently during school.

I also try to use this time year to get information on who my new beginning students will be. Again, the band directors will be easier to get in touch with now rather than July. Usually, beginner parents are very enthusiastic about band in general, especially lessons. I like to send a mass email out to all incoming sixth grade saxophonists before school is over to see who wants lessons. This way you have a handle on both incoming and outgoing students.

Once you have acquired this information all that is left is to schedule your students. With the headache that is student scheduling you can rest easy knowing your previous work will ensure all your students scheduled are indeed still enrolled in band.

Maximizing Musician Tax Deductions

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Because of the self-employment tax faced by many musicians, it is critical to deduct as large of a portion of your income as possible. This way you are paying taxes only on the portion of your income that cannot be written off. If you are new to self-employed taxation, please see my earlier post on the basics.

My primary piece of advice on beginning this process is to get a good certified public accountant. Your degrees are in music, not tax law. Your CPA can help ensure all your forms are filled correctly and you are paying the correct amount in taxes. A tax return signed by a CPA looks better to tax officers than one filled out by an individual trying to take numerous deductions.

 

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Your role as a musician is to communicate all the items you would like to deduct to your CPA. Propose as many as you can, and your CPA will tell you what will fly and what will not. Keep in mind he or she is not a musician and is most likely unaware of the numerous expenses you have.

So, what can the musician deduct? Things you have purchased in the last year to do your job can be deducted. Some of the common ones are:

Standard deduction- Everyone gets this! It was $6,200 in 2014. This is a nice start to lowering your taxable income.

Self-employment tax- Using the  Schedule SE form you can determine your grand total of self-employment tax and then use the formula to determine the large portion of self-employment tax that can be deducted, about half.

Health insurance-If you are over 26 and self-employed, there is a good chance you are buying your own health insurance. The grand total of your monthly premium payments can be written off.

Retirement- Regardless of your age, it is important to set up a retirement account. If you open a traditional IRA, you can deduct these contributions, up to the maximum allowed, for the year.

Educational credits-If you are still in school, either enrolled undergraduate or a graduate degree program, you can write off the tuition paid. Your university can provide you with the needed form.

Student loan interest-Speaking of school, you may have completed your degree but are still paying loans. You may be eligible to deduct all the interest you have paid for the year on this loan, which can add up, especially in the beginning of your repayment period. Note, you cannot do this if you are married and file separate tax returns.

Insurance- this can be insurance on your instruments, your car you drive to work, liability insurance, or renters/home insurance if you have a home office.

Depreciation- You can depreciate the value of your instruments needed for your job over time. You can choose to either write off the entire value if you buy it in the current tax year, or depreciate it partially over a period of years. Either way, you must get an appraisal to verify the declared value.

Repairs-any repairs or maintenance on your instruments can be deducted.

Legal and professional services-you can use this column to deduct anything you paid for you tax return preparation for the previous year.

Car-If you use your car for your job, the government offers a standard rate for each mile driven for work. For 2015 it will be 57.5 cents per mile. If you drive a lot this really adds up. You must keep track of exact miles driven. Additionally, tolls and car maintenance can be written off too.

Supplies- You can use line 22 of your Schedule C to account for all necessary musician supplies. This includes sheet music, mouthpieces, ligatures, reeds, necks, strings, bows, instrument/music stands, and any other gadgets like iPads, computers, recorders etc. This category has a lot of potential so look back through your purchases to make sure you are not missing anything.

Travel-if you traveled for a conference, audition, or performance you were playing you can write this off, along with the cost of food for these trips.

“Other expenses” -Line 48 of your Schedule C allows for any other expenses that are not covered earlier in the tax return. This is a key area for musicians, because we frequently have unique expenses. Some to consider here are:
Facility use fees paid to lesson teaching locations
Fees to collaborative artists such as piano accompanists
Any lessons you take from others as professional development
Domain names for personal websites
Postage
PayPal fees if you use this for your students to pay you
Conference registration fees

Home office-People are sometimes scared to take this deduction, but if you have a room in your house or apartment dedicated to your profession you should go for it. This cannot be your living room with a computer in the corner, but rather a single room, with a door, used for work only. Not sleeping, eating, or partying. For this deduction you must know the square footage of the room and house and you can deduct a portion of your rent/mortgage. Also, add up all your utility bills and a portion of this can also be deducted with the home office.

All these things add up and help reduce your income to a more manageable, level for taxation. You must keep receipts for these items in case the value needs to be verified for up to 5 years after the return. I use a filing cabinet to keep receipts during the year. Then on Jan 1 I total everything up in a document and send it to my CPA. Good luck and happy deducting.

*Disclaimer-Please seek professional assistance in filing your taxes. Musicstudioteacher.com  takes no legal responsibility for results from this post.

Summoning the creative flow

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Everyone knows that feeling when the creative juices are flowing.  Whether its the extra motivation to complete invoicing, a sudden extra burst of enthusiasm teaching, or an interpretative discovery in performance, this often seems to come out of no where . Over at the renowned I Care If You Listen Blog Astrid Baumgardener has pinpointed the process of discovery what gets your creativity working at optimum efficiency.  I suggest everyone check out this post,  and the super hip I Care if You Listen blog as a whole

 

http://www.icareifyoulisten.com/2014/05/living-in-flow/

Tax tips for the private lesson teacher Part 1-the basics

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Tax time is here. This can be an inconvenience for everyone, especially self employed musicians. Wheather this is your first year filing taxes as a self employed musician, or you are a veteran of the process, below I will offer some explanation of the challenges self employed musicians face and how to get yourself in the best situation possible when it comes to limiting your payments. Below is part one of my posts on this topic. It outlines the basis concept of self employed taxation. Look for my upcoming part 2 post on maximizing your deductions next week.

If you are doing a lot of teaching or performing it is likely taxes are not being withheld from your pay checks. Besides the federal income tax all individuals pay, the self employed must also pay what is known as self employment tax. This goes toward things such as social security and Medicare. If you are employed on a payroll, your employer covers half this and the other half is deducted from your paycheck each month.

Self employed individuals must pay this tax along with federal tax, so it can often times be a much higher tax bill. There is a deduction on this that can be taken to help offset the cost, but it is good practice to know what you are paying as a musician and why.

To prevent you from oweing a huge tax bill on April 15, musicians should submit quarterly tax payments using from 1040ES. To make this a successful procedure estimate your total tax for the year and divide it in 4. On these days: 4/15, 6/15, 9/15, and 1/15 you must mail this form in with a check to the United States treasury and your SSN number on the memo line.

Tax years are not calendar years. They begin and end on April 15. So, if you are new to this procedure you can get a fresh start on the 15th for the 2015 tax year. Obviously, this circumstance requires planning a head and saving. If you are not sure how much to pay, just submit some type of payment and begin planning a savings strategy for June 15.

The ultimate kicker of this procedure is often times teaching or performing can be seasonal, with things winding down in May. The June payment is still looming and  a savings account is key to making these payments. It is very easy to be unaware that money you are receiving has yet to be taxed so save frequently, and over time you will develop an idea of how much you will need to save toward taxes.