Is kit rental non-taxable income?

[Alan Rencher]

Kit rental is considered income in the eyes of the IRS, and they tax it as such.

[Scott Monk]

Ladies and Gentlemen,

Thread is old, but I have a fair bit of knowledge about payroll/taxes/accounting, so I'm going to share.

 

Any money that comes into your possession that you didn't have before is considered taxable income by the IRS - regardless of the source, EXCEPT for inheritance. If you are getting a W2 for the work, no sweat - you don't have to put aside any of the income for taxes - it's already withheld by your W2 employer. But, if you're NOT getting a W2, the payer has an obligation under the law to send you a 1099 at year-end for any money paid you that is $600, or more. So, you'd better withhold taxes out of any money you get that is 1099 income - even if it's LESS that $600.

 

Why? Even if the income from one payer is LESS than $600, they might send you a 1099 at year-end anyway - it's happened to me several times for gear-rental day jobs. Usually, this comes from companies that have been burned by the IRS for not following the rules - they overcompensate. Remember that a copy of every 1099 you get goes to the IRS, so they know about your income.

 

To be safe, I pay about 25% (income tax withholding), plus 15.3% (Medicare + SSA) of every dime I get that's not W2 income.. If I don't get 1099's for all of it at year-end, then Yay! - I get that tax money back from the IRS when I file. If you withhold (pay the IRS as you go - very important), you might not have to pay any additional at filing time. But, if you do - it should be minimal.

 

Another thing: if you have a kick-ass year, you better pay in even more - 30%, at least for income tax. The 15.3% (SSA/Medicare) is constant up to $118,500/year, then it's 0%) - every time you get paid. If not, you might under-withhold and have to pay more at the end of the year. It you under-withhold a lot, you can also get hit with a penalty when you file.

 

With the IRS, it's better safe than sorry; one great year, I under withheld - like, a lot. I had to pay eight grand, with the penalties. That hurt. I learned my lesson. I also recommend using Turbo Tax. I've been using it for 16 years, and it's great. Low fees, direct deposit of your refund, all of prior year tax returns are available on-line, and it's interactive user interface makes it easy to use, even if you're self-employed.

 

You can run from your mother, your ex-wife, and Don Corleone...but the IRS will get you every time. :)

 

Hope this helps.

 

Scott.

[Scott Monk]

I forgot one of the most important parts of Income Taxes - Deductions!

 

Where you're self-employed, almost everything you spend for your work is tax-deductible. Rigs, parts, cables, knobs, bongo straps, gear repairs...everything. Travel expense mileage (57.5 cents/mile as of 2015) if you drive to/from the gig and the set, hotels, travel to a repair center, freight to ship your gear, etc.

 

About the only thing you can't deduct is meals. And actually you can, but they have a formula that cuts the expense so much, that it's not even worth your time to do the calculation. Oh, if you're getting a per Diem, still take the expense deductions for lodging, but treat the per Diem as taxable income.

 

Keep ALL receipts! That's very important. As the IRS's budget has been drastically cut over the last several years, only a very big fish is likely to get audited. But, even so, that's hassle you just don't want to face - believe me. Tax returns can be audited for up to 10 years, so keep everything for at least that long.

 

I put all my deduction receipts in large manila envelopes marked by year. Better safe than sorry.

 

Regards,

Scott