Music Biz Finance: Expensive mistakes that artists make with income taxesMonday, April 11th, 2016
The website Music Biz Finance has published the following article to inform artists about their taxes as the deadline approaches for the 2015 tax year. This article was also republished at FYI Music News.
By Sam Arraj
When it comes to personal finances, some artists are very creative. For instance, an artist once told me that to record a video for her song, she rented out her couch and worked 12-hour shifts for few months to save enough to make the video. While they are creative in some aspects, many still make expensive mistakes relating to income taxes. Since the personal tax season is here, let’s review some common mistakes that artists and musicians should avoid:
1) Not filing a return on time
Many artists and musicians don’t file their personal tax returns on time, which can be a very expensive decision.
It’s important to file your tax return by the annual deadline to avoid late-filing penalties and interest. The annual deadline is:
April 30th for individuals who are not self-employed
June 15th for self-employed individuals (most unincorporated artists are in this category)
Either way, if you have taxes payable, they’re due on April 30th.
The late-filing penalty is 5% of the balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months. This means that the penalty could be as high as 17% of the balance owing.
If you have a balance owing, the Canada Revenue Agency (“CRA”) charges compound daily interest starting on May 1, on any unpaid amounts owing. The rate of interest the CRA charges can change every three months. See the prescribed interest rates.
In some circumstances, some artists don’t file for years, then they discover that they owe a substantial amount, not just because of the taxes, but because the penalties and interest have accumulated over the years.
Another important reason why you should file your income taxes on time is that in most circumstances, you might have a refund due — one you might use to invest in your music business.
In some circumstances, not filing a tax return might be considered as tax evasion, which could lead to some criminal charges and serious fines.
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