Katlego Kwena Maboka Disk Jockey

DJ's and Taxes
by DJ Rob Wegner

March 2001

April is tax filing time in the United States. For working DJ's, it's time to pull out receipts, W-2's, tax forms, and more. The following information is my opinion of how DJ's should approach taxes (verify everything with your accountant and/or the IRS).

To begin, you should determine your status as a performer. If you purchase music to play in your home studio and it's not a source of income, you're not a DJ (as the government views "occupation"). On the other hand, if you purchase music to perform at clubs that pay you, then you may be eligible to deduct the music expenses. In other words, determine your primary occupation. If you do not qualify for DJ services such as Promo Only, Hot Tracks and/or a record pool, you're most likely not considered a professional "working" DJ (as an occupation). On the other hand, if you're a Grammy-nominee like DJ Richard 'Humpty' Vission, then you have little to worry about.

If you have a full-time non-DJ related job and spin occasionally, then you may have to fill out a Schedule C "Net profit from a Business" to assess your profit and loss from spinning. The information from this form is then added to your 1040.

Resident DJ's should distinguish between "independent contractor" or W-2 employee. In other words, when you get paid, are taxes, social security, etc. deducted from your check(s)? If you're considered an "independent contractor," then you must fill out your taxes as if you operate your own business and fill out forms such as Schedule-C and the Self-Employment tax form. If you determine that spinning is a self-employed business, then you should also make quarterly social security payments and self-employment taxes.

Independent contractors have the advantage of writing off legitimate business expenses related to spinning (i.e., records, headphones, needles, etc.). Most mobile DJ's would benefit from this classification (i.e., they could possibly deduct travel expenses to and from mobile gigs). The disadvantages of being an independent contractor (i.e., non-W-2) include: (1) if you apply for a loan, you're self-employed status may make it harder to qualify; (2) an "independent contractor" may not be eligible to receive workman's compensation or unemployment insurance; (3) as stated above, independent contractors must make quarterly social security and self-employment taxes; (4) independent contractors must maintain detailed records of all their income and expenses. In contrast, W-2 employees receive a statement at the end of the year (which simplifies the paperwork).

Since many resident (W-2) DJ's purchase the music played at nightclubs (out-of-pocket), club owners save money on their entertainment budget. However, if a DJ spends more on music than s/he earns, then the jock could, in theory, lose money working as a DJ. Since this is not shown on the year-end W-2, the DJ could potentially be taxed on income that never materialized. Fortunately for today's DJ's, performing artists in the past confronted similar problems when it came time to file taxes. Perhaps this is why the IRS recognizes the "qualified performing artist" classification (this is why your occupation, as discussed above, is so important).

The IRS on Form 2106 defines a "qualified performing artist" as a person that:

(1) Performed services in the performing arts as an employee for at least two employers during the tax year;

(2) Received from at least two of those employers wages of $200 or more per employer;

(3) Had allowable business expenses attributable to the performing arts of more than 10% of gross income from the performing arts;

(4) Had adjusted gross income of $16,000 or less before deducting expenses as a performing artist.

As a "qualified performing artist," a DJ can deduct legitimate expenses from a W-2 job so long as the expenses are related to sustaining that income. The "QPA" deduction eliminates two problems (1) being taxed on income you didn't receive, and (2) being taxed twice -- on your income taxes and when you're taxed purchasing the music used to get your income. To deduct the expenses, as the IRS puts it:

if you were a qualified performing artist, include the part of the line 10 amount attributable to performing-arts-related expenses in the total on Form 1040, line 32. Write QPA and the amount in the space to the left of line 32 on Form 1040. Your performing- arts-related business expenses are deductible whether or not you itemize deductions.

If you bought new music, unless it was used as a predominant means of generating your income, you're not allowed to use it as a "QPA" deduction. In addition, you should save every DJ related receipt.

If the club reimburses you for an expense, that amount is the club's deduction and not yours.

For more information, visit the IRS Website or call the IRS at 1-800-829-4477 (available 24 hours a day until April 17, 2001). If you call, be sure to speak to a representative that is familiar with performing arts related taxes.

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