Greetings and welcome to a new Flute Friday/Saturday.
This week in the mail, my husband and I received most of our W2s, 1099s, 1098s, and many of the other tax forms needed to get started on our 2017 tax return. As a private flute studio practitioner, however, I will still need to prepare my Schedule C form (to accompany the standard 1040 form). Tax time can be stressful for independent musicians and private teachers. Receipts, invoices, mileage calculations, and conference travel records can often make your head spin during this time of year, leading many of us to spend big bucks on professional CPAs. Today’s blog is devoted to helpful tips for private flute teachers as we all prepare our Schedule C forms. I am obviously not a tax consultant – just a girl with experience filling out these tedious forms. If you have specific questions regarding this or any other form from the IRS, please consult a licensed CPA.
What is Schedule C?
Schedule C is a tax form from the IRS to report profit or loss from a business (this includes privately owned business such as studio practices). The type of businesses that fall under Schedule C are those that you are involved in on a continual and regular basis. If you only periodically teach masterclasses or host your own summer flute camp, those expenses would be considered a “hobby” and not subject to Schedule C, but you will still need to report those earnings on Form 1040, line 21.
In a nutshell, Schedule C is how to report your business earnings, minus expenses, and how much in taxes you must pay the government based on those earnings. The “minus expenses” is often the trickiest part, but some of the tips below will help you keep better records throughout the year to streamline the process during tax time. If your business expenses were less than $5000, you may be able to file the Schedule C-EX instead of Schedule C (which is exactly what it sounds like – an easier version of Schedule C).
In addition to Schedule C, you will also need to fill out the Schedule SE, or the Self-Employment Tax form. This form is used to pay taxes for social security and Medicare. If your net profit from your Schedule C is $400 or less, you may not need to pay this tax (but there are other considerations on this form – check it out to make sure you do not owe).
Where can I find Schedule C, Schedule C-EZ, and Schedule SE?
Irs.gov of course! Or on the following links:
Schedule C – https://www.irs.gov/pub/irs-pdf/f1040sc.pdf
Schedule C-EX – https://www.irs.gov/pub/irs-pdf/f1040sce.pdf
Schedule SE – https://www.irs.gov/pub/irs-pdf/f1040sse.pdf
Helpful Ways to Prepare for Schedule C
Save your receipts as they come in. There are several easy ways to do this in the digital age that do not require digging through a shoebox full of receipts. Take a picture of any receipt that would be considered a “business expense” and email it to yourself. From here, you may save the receipt in a convenient email folder (“Studio Expenses” or something along those lines) or save it to your desktop under a local file. You may also scan receipts to be placed in the same files throughout the year. If you order music through Flute World or Amazon, simply place your order confirmations in this box for tax time. When it is time to fill out your Schedule C, all of your records will be in one place, helping you to easily total your expenses in each category.
Save invoices from each student. I know a lot of teachers that do not use paper invoices. Come tax time, they find themselves staring at a yearly calendar trying to remember how many lessons each student had each month, who skipped lessons, who went on vacation when, and so on. This is the easiest way to earn yourself an audit. To save yourself the stress, and to help you keep accurate records of your studio income, email PDF copies of monthly bills directly to students and/or parents at the close of the month. Keep these invoices saved locally in your business expenses folder on your desktop or in your email business folder. At the end of the year, simply total the monthly invoices for each student to arrive at your total studio income for the year. Save these records somewhere convenient in case of an audit.
Set up a separate bank account for your studio income and expenses. This is by far the easiest way to keep track of how much you’ve made and how much you have spent. Sign up for online banking to receive your statements electronically each month and file them in your designated business folder. Online banking can also help you compile yearly reports and break up your expenses into categories that correspond to those in Part II of Schedule C.
Use a separate credit or debit card for business purposes. Any time you purchase music, accessories, music stands, office equipment, conference registrations, or any other items that relate to your studio business, use a designated card that is tied to your business account. This will prevent you from having to dig around in your personal account for transactions that could, maybe, possibly be related to your studio.
If you have a large studio business or are currently drowning in possible business expenses but are not sure which expenses qualify, consider hiring a CPA. They are the professionals, after all. They will most likely take you through the Expenses portion of Schedule C, so start taking some notes on the items you know you purchased during the calendar year that fit into these categories.
Understand what is considered a “business expenses” according to Schedule C. Did you have any expenses for your studio this year that fit under the following categories? List them on your Schedule C.
Car and Truck Expenses
Commissions and Fees
Employee Benefit Programs
Insurance (including instrumental insurance paid by yourself)
Interest (Mortgage or Other)
Legal and Professional Services
Pension and Profit-Sharing Plans
Rent or Leases on Vehicles, Machinery, or Equipment
Repairs and Maintenance
Taxes and Licenses
Travel, Meals, and Entertainment
Did you drive anywhere for studio recitals, masterclasses, or any other studio field trips? Make sure to report this under the “travel” category. It is very easy to forget about this one. The Federal Standard Mileage Rate for 2017 is 53.5 cents per mile.
Do you have to file a Schedule C this year? Have you filed out one in the past? What tips do you have to streamline your studio accounting? Please comment below!
Happy fluting (and happy tax prep)!