Here's Something Else for Musicians and Teachers to Worry About

There are a number of sound  reasons to dislike the new proposed tax bill passed by the House of Representatives recently.  As the commentators have noted, the bill eradicates many of the tax  deductions we have grown to know and love (except for charitable donations, property taxes and mortgage interest).

However, one of the lest comprehensible elements  of this new bill is that it eliminates employee deductions for unreimbursed expenses.  This means that for musicians, who are also considered W‑2 employees, they will no longer be able to deduct the cost of their instruments and gear as well as the cost of union dues, home office expenses, travel expenses and  mileage or uniform expenses.  The kicker here is that none of this applies to independent contractors – 1099 workers who itemize their expenses on Schedule C.  So if you're an independent contractor you're okay, if you're a W‑2 employee, you're screwed.  It is not hard to recognize the irony here.  As anyone who has wrestled with this knows, the IRS has a very specific test to determine whether a person is acting as an independent contractor or an employee and it doesn't take much to classify a musician as an employee for tax purposes.  Of course  many professional musicians and others involved in the entertainment industry find that they have both W‑2 income and independent contractor income.  Will there be a push to classify more of this income on the 1099 side of the ledger?  I think so.

As an aside, having been a part-time educator, being married to a full-time educator and having some experience with our public and private schools, it seems patently evil to deny teachers the right to deduct their job related  supplies and expenses. From  the books and movies my wife buys to enrich her college students' learning,  to one of my daughter's elementary school teachers who I fondly remember bought all of the musical instruments used by his students (because the school district either couldn't or wouldn't pay for them) teachers make a great sacrifice for their jobs.  Congress shouldn't penalize them.

Thanks to the website financeformsucians.com-a great resource.

In Praise of Cat Ladies and Charitable Tax Deductions

I have known many cat ladies in my life-my mother and my former assistant for starters, so I read the headline in last Saturday’s Wall Street Journal “A Cat Fancier Finds a New Way to Skin the Tax Man” with mild curiosity. What I discovered is good news for anyone who wants to know how to properly claim a charitable tax deduction for unreimbursed expenses incurred for volunteer work.

In the reported case before the U.S. Tax Court, Jan Van Dusen successfully challenged the IRS disallowance of $12,000 in expenses she incurred in caring for over 70 stray cats for a local IRS approved cat rescue organization,. The key, according to the article, is to keep detailed receipts and (this is important) to secure a letter from the charity acknowledging the gift. The donor has to secure the letter before the tax return is filed. Again, the charity has to be approved by the IRS.

This really seems to be an important victory for all types of volunteers and the charities that depend on them. As always, check with your tax professional.