Tax Time!

It is that time of year again, everyone is either finishing up or just starting their taxes. As a private music teacher there are generally a few more challenges this time of year than the average salaried worker. Even those who work a salaried job during the day and teach privately on the side face these same challenges.

So I have decided to compile a few tax time tips to help us all get through the stacks of paper and receipts.

1. Report All Your Income

It is so easy to skip this step, especially if private teaching is not your primary source of income, however you can thank me later when you are not penalized with back taxes. Back taxes can completely drain your bank account (and then some) not to mention it will leave you in quite a financial pickle as you try to figure out where you are going to get the money to pay for this penalty. It is not worth the risk, report everything and anything, be thorough!

2. Withhold Some of Your Income Throughout the Year

One of the wonderful things about salaried positions is that your employer withholds a portion of your paycheck for taxes, so come tax time you do not have to pay for taxes out of pocket. Since you essentially run your own business as a private teacher you need to prepare for what is going to be charged ahead of time. If you want to calculate it exactly, be my guest. I generally recommend programs such as quickbooks and payroll for those serious about their business. It is an investment but if you want teaching to be your primary source of income (or it already is) it is well worth the investment. If you don't really have the time or energy to keep track of taxes and income year round, then you should at least set aside a portion of each check. Generally you will be paying 10%-25% on taxes (depending on how much you make and your situation). Set up a seperate bank account for saving and put a portion of your income in there. This is different than your savings, or emergency fund, make sure you put money away regularly and do not touch it at all until tax time. I cannot stress this enough, that is why it is best to keep immaculate records and try to stay on top of withholding

your own taxes.

3. Keep Immaculate Records

This is another I cannot stress enough. When it comes time to report your income and your deductions the last thing you want to do is estimate. It is always a surprise when you go to the grocery store and your total comes up with a round number such as $20 rather than a number that has you scurrying for nickles and pennies. The IRS is shocked by numbers like that too and you are more likely to be audited if your taxes include lots of round numbers. If you are audited you need to provide documentation for your income. This is why your records are so important! Know when you have taught lessons, how much you have made for each lesson. Know exactly how much money you made each day, each week, and each month. Do not estimate!!

Likewise private teaching gives us access to a lot of business deductions. If you travel around teaching, write down the mileage of your car before and after each trip. You will need proof to get these deductions. Keep your receipts for every purchase you make, office supplies, music books, itunes music, anything you use for work. Keep your receipts and try to regularly document these deductions in a log throughout the year.

4. Filing

Unless you are an accountant part time you need to be very careful and thorough when it is time for filing. I prefer turbotax, you don't pay until you have filed and it will let you know which version is the best for you. The other good option is to get an accountant. When hiring an accountant be sure to ask questions, you want to hire someone who specializes in small and or home businesses. The deductions and breaks that you may qualify for are going to be different than the average person and you want to work with someone who knows what they are.

If you do not have an accountant and want to try filing without turbotax or a similar program at least have a very knowledgable friend you can consult and conduct a lot of research to find what additional programs you qualify for. This will be a lengthy process as you will want to be very careful when filing. Do not wait until the last minute.