When we think of musicians – well, rock stars – money is a big part of what we imagine. Sure there’s music, but there’s also that mansion. Oh, and the car. And maybe even that private jet.
But what we don’t imagine is a rock star getting behind on his taxes. That just isn’t very rock ’n’ roll.
Though we Canadians have a few more days to file our taxes, the deadline already passed in the United States, and news of some artists getting behind on their payments to the IRS, well, made the news.
Most notably there was Lionel Richie, although he says that was all a mix-up. Cheque’s in the mail. But there was also Rex “Rocker” Brown, the bass player for American hard rock band Pantera. His half-million-dollar tax debt made headlines, but it also brought up another issue: could the fickle music industry be responsible for musicians having trouble meeting their tax obligations?
In the case of Pantera, most of the band’s money was made over a decade ago when CDs were still selling. Back in 1992, country singer Willie Nelson, who owed over $32 million in unpaid taxes, recorded an album called The IRS Tapes: Who'll Buy My Memories? The album generated nearly $4 million toward his debt.
Not much chance of that happening for Pantera, it would seem. Taking all of this into account, it’s not the music industry’s fault that musicians can’t pay their taxes, according to Patricia Terrence, a chartered accountant and partner at the Toronto firm Sprackman Terrence. Her firm specializes in the entertainment industry and musicians who work both in Canada and the U.S.
According to Terrence’s way of thinking, tax troubles really just mean “bad fiscal management.”
She explains the first part of the problem: “I think the biggest problem in the music industry is that all these musicians are considered self-employed, and as a result their taxes are not being held at source by employers.”
And the second part: “It takes a long time for musicians before they can earn an income and once they do come into a large amount of income, they just want to spend it.”
Terrence meets a lot of musicians who let their tax filing get way behind. How often? “Daily,” she says. But once they do get things in order, they tell her how well they are now sleeping.
It doesn’t have to be that way, she explains.
“It’s hard for them to remind themselves to withhold some of that income they’re earning for the tax department, because it’s not truly theirs.”
Her advice is for all musicians to think of themselves as a business and set aside 30 per cent in a separate account and live off of the other 70. Then, change that ratio as you become more successful.
It’s probably a lot nicer flying around in that jet without thinking of your tax bill.
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Tax tips for Canadian Musicians
on Apr 24, 2012