Jamie Selects: What up fam, welcome back. This is Jamie selects and I'm super stoked to be coming back at you with the business of DJing podcasts after quite a long break, but we're back and I'm super excited for this episode today. I have on my personal CPA Christian Putnam and we actually, found me after my original taxes for DJ's article. So I'm super stoked to have him on to go over some of the major conversation topics and questions related to DJ taxes. And before we get into it, Okay, cool, we're live. Welcome back to the business of DJing today. I'm very excited to have a guest, Christian Putnam. Welcome to the show.

Christian P: Hey, Jimmy, thanks for having me.

Jamie Selects: Cool, well I'll have done a little bit of intro beforehand, but just thought it would be cool for you to give a little intro on yourself and a little bit on how we met as well before we jump into the questions.

Christian P: Yeah, ⁓ so I'm a CPA. I work with both individuals and businesses and their finances. So part of that is helping them with their taxes and both like the filing of their tax returns as well as their ongoing and forward-looking strategy. ⁓ So I work with a handful of clients in the music industry. ⁓

Jamie Selects: Also super excited to announce a new product which I'm launching which is called DJExpenseTracker.com. Just in time for tax season this year. It's a super easy way to automatically categorize all your DJ business expenses. All you do is link your card. It pulls in your transactions from the previous year. Automatically categorizes them with the IRS tax categories based on a bank of common DJ merchant mappings that I've created. And then also if there's any merchants that I'm missing.

Christian P: came across Jamie, he had a great article posted on the internet about taxes for DJs. Actually, I think it's a little more broad than that, covering taxes in that article, so I reached out ⁓ since we had some common interests and we've been kind of working together for a few years now. So, finally getting on the podcast to talk about taxes.

Jamie Selects: You can go ahead and create your own custom mappings and then automatically categorizes the rest of the transactions that you might have for that year from that merchant. And then also saves them to your account. So for future years, if you have transactions at the same merchant, those get automatically categorized. So it's a product that will keep getting better year after year. It's only 20 bucks a year and I'm super excited about it. It's going to save you hours on tax time. I use it myself and this is like the final culmination of the product that I've been trying to build for a super long time. Awesome. We really appreciate you coming on and yeah, you have been my CPA for the past couple of years now. So it's been awesome to work with you. ⁓ well yeah, let's go ahead and jump in. So before we get into like any tax specific, ⁓ questions, I wanted to jump off with, or start off with talking about the business structure for most DJs. It was all kinds of things out there. So proprietorships and C corporations, S corps, LLCs. And so one to understand the high level details of each. And now with AI tools, I was finally able to build it. again, DJExpenseTracker.com, check it out. Hope it helps. And now the episode. And in particular, the ones that DJs are most commonly going to be using. So in particular, soul prop, single member, LLC and S-Corp.

Christian P: So this is good one. Yeah, so those are the three big ones, as you said. The sole proprietor, single member LLC, and then the S corporation. So we'll start with the simplest one, which is the sole proprietorship. So that one is basically the default status for anyone who's starting a music business or DJ business. So you go out on your own, you get a client, or what? or something, whatever you're doing, your sole proprietorship, you're collecting payment for that. might even have like a doing business as name or a trade name. So this is like if you're going to have like a stage name that you're performing under or anything that's not your name. So for tax purposes, that's all reported on your personal tax return. So there's no separation between you and your business at that point. It's all flowing through to what's called Schedule C on your tax return, which is just where you report your business income. Now on the legal side, you don't need to do anything special. just, you know, you can operate as an individual. But if you do have... like I said, a trade name or stage name, you might need to register with like your locality. Sometimes that's the county or city where you live. So pretty straightforward sole proprietorship. ⁓ Now, if you feel like, ⁓ you know, you're booking a lot of events, you're taking a lot ⁓ of these amount of clients, you feel like maybe you want to mitigate some risk there, you might want to consider forming an LLC. I'll say right away that an LLC is not going to provide any kind of tax benefits. So if you form an LLC, it's all still good. All of your business income and expenses will still be reported on your personal tax return. There's no separation. It's as if you hadn't filed the LLC at all. Really all the LLC is doing is limiting your personal liability in the event that you're sued. by anyone.

Jamie Selects: you

Christian P: business. for example, ⁓ suppose you have like an event, ⁓ something happens and someone sues you, that LLC is going to protect your personal assets as long as, you know, there's a lot of legal considerations there. I'm not an attorney, but that would be the primary benefit of the LLC. You don't necessarily need one if you don't feel like there's a lot of legal risk there. Now, the third one we mentioned is the S Corporation. ⁓ So that is, I would say, something you want to consider kind of down the line. You wouldn't want to consider it right away because it complicates your taxes significantly. But there are significant tax savings to that. ⁓ So that's... kind of go through the high level details there. So basically what you'd want to do is form an LLC and then you file a form with the IRS called Form 2553. It's going to elect S corporation status for your LLC. So your LLC becomes an entirely separate tax entity at that point. It files its own tax return and then you become an employee of the LLC.

Jamie Selects: you

Christian P: and the LLC pays you a salary, there's employment taxes on the salary, and you have to get a W-2 as if you were an employee at any other company, report the W-2 on your personal tax return as well as the net profit from the S corporation that goes on your personal tax return too. Now, yeah.

Jamie Selects: Hey, got it. So from like a tax perspective, ⁓ sole property and single member LLC are essentially the same thing. Everything's going on your personal income taxes. The main benefit of the single member LLC is to protect your personal assets. So let's say you own a house and you put on an event, something happens, someone sues you, they can't take your house or something like that.

Christian P: Yeah, pretty much. ⁓ Yeah, that's the main benefit of the single member LLC. You might also, instead of an LLC, you might also consider like an insurance policy that could be simpler in some cases. So like some states like California, for example, there's an annual LLC tax. That's a minimum of $300. So you could get like a pretty cheap insurance policy for less than that or similar amount, easier to manage, provides the same amount of like risk protection. than an LLC. So, kind of want to understand the number of factors, but that's the gist of it. Yeah, the LLC provides not tax benefits, but legal benefits.

Jamie Selects: Okay, got it. And sorry, I think you're going to say something else about the S-Corp.

Christian P: Yeah, I was just going to say the benefit of the S corporation. there's no, on the flip side, there's no legal benefit to forming an S corporation or electing S Corp status for your LLC. Instead, there's the tax benefit. So the tax benefit. is it's saving you on a thing called self-employment tax. and that's a whole different conversation. So, self-employment tax is gonna be 15.3 % of your net business income, which can be pretty steep if you're making a lot from your music business. So just to kind of run through a high-level example, let's just say you're projecting to make around 100,000 on music business in 2026. Self-employment tax would be around 15,000 on that profit, which can be pretty substantial. And that's in addition to the regular income taxes that you might already be paying, which could be anywhere from like 10, 15, 20, or 30%. So those taxes really add up. But what you could do If you're earning around $100,000 this year, you could elect S corporation status for your LLC, pay yourself a salary, and at that point you're only paying self-employment tax on what you pay yourself as a salary. So for example, you pay yourself a $50,000 salary, your self-employment tax is effectively cut in half at that point. because you're taxed that 15.3 % is taxed on, is applied to the 50,000 other than the full 100,000. The 50,000 is your salary.

Jamie Selects: Okay, and then with the remaining 50, like go back into the business or could you set it up such that you're paying yourself a very small salary and taking out money elsewhere or how would that make sense?

Christian P: Yeah. Yeah, yeah, yeah, so you could do it. Yeah, so you're right. The money would stay, the 50,000 that you're not paying yourself as a salary, that would stay in the business ⁓ until you decide to take it out. And at that point, the distribution would not be taxable to you. So you're only gonna pay taxes on what you pay yourself as a salary. Self-employment tax, I should say.

Jamie Selects: Are there certain rules around like, you know, a minimum that you have to pay yourself or so people can't get around like, oh, I think myself a $1 salary and then take an owner distribution on the remaining, you know, 99.99. Are there any rules around that?

Christian P: Yeah, no, it's a good observation. So yeah, so the IRS has these requirements called like reasonable comp. So there's like a list of rules that you need to follow. But the general idea is that it kind of needs to be what you would be earning at a regular, ⁓ if you're employed elsewhere, like a third party organization. So.

Jamie Selects: Okay, got it.

Christian P: But then you can also, there's a number of different approaches, so that's one way to do it. You could also look at like, break down your job responsibilities and say I spend 10 % of my time on data entry and find what you might pay someone else to do that. So you could really engineer it in a way, but in general, yeah, you're gonna benefit from paying yourself as little salary as possible, but still adhering to those IRS rules.

Jamie Selects: Okay, makes sense. at about what amount of revenue would you say it makes sense to consider an S-Corp?

Christian P: Yeah, so that's a good question. So there's like a number of factors that go into the decision to form an S-corp election. revenue or profit, I should say, is like a big consideration. But I think around, I'd say, to 100k net. There's a time when you might want to start thinking about it, but there are a other considerations like if you're working a job as well, ⁓ you may not benefit from the self-employment tax savings because you're already paying Social Security, Medicare to your job and that caps out at a certain amount. So if you do the S-Corp election, you may not be paying those taxes anyway, in which case you're not getting the benefit from. the S-Corp election. ⁓ If you have other businesses as well, other than your DJ business, your music business, that could be reason not to do the S-Corp election ⁓ because those could be generating a loss which offset your DJ business income in which case you wouldn't have any self-employment tax because they're all going to flow through to your personal tax return. But I think, you know, just if you're thinking through the trajectory of your music business, ⁓ you know, if you're starting to hit around 80 to 100k and you think you could do this full time, you might want to talk to someone about someone credentialed like a tax pro who can kind of help you think about all the different decision, ⁓ the criteria, whether it makes sense to you to do that election.

Jamie Selects: Okay, cool. That makes sense. So basically the flow of business structure is like everyone's a sole prop. If you make any kind of money doing a business of any kind, whether it's, uh, you know, Oh, your first wedding or 10 weddings, you're a sole prop for sure. Then the second stage would be like, uh, setting up an LLC again for a personal asset protection. And then if you're considering going full time anywhere from 80, a hundred K plus per year. That's when you would want to consider the S corp and based on how complicated your tax situation is, if you have other businesses, other types of ⁓ partnerships, K ones, things like that, it makes sense to probably talk to somebody at that point and see if it actually makes sense based on your specific situation.

Christian P: Yep, that's a good summary.

Jamie Selects: Okay, cool. Well, I'm glad we covered that. Why don't we go into the high level financial order of operations next. So what I have here in terms of ⁓ what I've written down in my article in the past and just at a super high level, what comes in off the top pop line is how they say it in business terms, gross income minus operating expenses equals taxable income minus taxes equals net income. So one, can you confirm if that's the best high-level way to think about it? And two, any clarifications or better ways to think about that?

Christian P: Yeah, that's a good way to think about it. yeah, gross income is what you're making before any kind of expenses. ⁓ Expenses would be subtracted from your gross income. That's going to give you your taxable income. And then your... after-tax profit would be next. So once you figure out your income tax as well as your self-employment tax, that's gonna leave you with your net profit, after-tax profit.

Jamie Selects: Okay, cool. also, sorry, really quick on the LLC and S-Corp topic. I just did this myself and so I wanted to understand. Do you have to wait for a particular time of year or if there's like a tax change, is it always better to like start these types of things in January or can you do it a mid-year change, anything that you've seen work best?

Christian P: Yeah, yeah, so if you do, you can form an LLC at any point in the year, there's no tax restrictions on that. But if you want to do an S-corp election for the LLC, that needs to be done by March 15th of the year in which it goes effective. So if you want to be taxed as an S-corp in 2026, you need to file the paperwork by March 15th, 2026. Yeah. And then, ⁓

Jamie Selects: Okay, makes sense. And before we jump into, sorry, go ahead.

Christian P: Yeah, one other thing to add, you can still file after March 15th, but you have to do what's called a late election, and that is a few different, a few more steps. ⁓ So I highly recommend getting it done before March 15th, because it's just way easier.

Jamie Selects: Okay, good to know. And before we jump into banking, you already mentioned the self-employment tax. So just want to close out that topic and see if there's anything else. So you said it was 15 point something percent on, was it the revenue of the business or the profit of the business?

Christian P: Yeah. So it would be the net profit of your business. yeah, it would be gross income minus expenses.

Jamie Selects: Okay. Got it. And it's just a rate. Anything else to know about that?

Christian P: Yeah, so it's flat rate, but you can also deduct half of the self-employment taxes that you pay, which is the employer portion of self-employment tax.

Jamie Selects: You can deduct that on your personal taxes.

Christian P: Yeah, exactly. So back to that example of 100k net profit, if you're paying 15.3 % self-employment tax, you can deduct around 7,000 change in self-employment tax as well to give you your taxable income.

Jamie Selects: Got it, and when you say deduct, do we just mean like subtracting that from your ordinary income essentially, so it lowers what your total income is?

Christian P: Yeah, exactly.

Jamie Selects: Okay. Okay, cool. So I wanted to touch, before we get into like the specifics of, know, what can DJs write off, what constitute income, I just wanted to talk briefly about banking for DJs and how people can best set themselves up for success here. So the advice I've always given to people is the first thing that you should do is, especially when you're a sole prop, is just to use a separate card for all of your business related expenses. And especially as you're just starting out, That's like your biggest bang for the buck because everything's going to be siloed. It's separated. from like a tracking perspective, it's easier also from like an audit story perspective is easier because you at least have some separation. So I wanted to understand at the sole prop level, is there anything else people should be doing? Should they have a separate bank account? When does that make sense? Uh, and then separately, what are the steps then for the LLC? But let's start with the sole prop. What are like the main. takeaways people should have with regards to how they should set up their banking and spending.

Christian P: Yeah, so I agree that setting up a separate bank account and having like a debit card on that bank account, you could get a credit card too if you felt like that was the right call for you personally. ⁓ For exactly the reasons you mentioned that it creates a level of segregation, allows you to better understand your profitability on this business. It also helps during tax time when you and just review all the activity within your account, kind of quickly put together your profit and loss for reporting on your job's return. So definitely recommend segregation. As far as anything else, I think everyone has their own tolerance for, I guess, level of comfort with building systems around their business. Some people are more process-driven or systems-driven than others, so it's kind whatever you're comfortable with. But I think at a minimum, having some kind of, ⁓ whether it's a spreadsheet or some kind of software or tool that's going to allow you to track your expenses and categorize them and look what you're earning throughout the year. Because that's going to just, like I said, help you understand your profitability and then report that on your taxes. It saves time. That way you're not scrambling, you know, April, like what did I spend last year? What can I deduct? How can I save taxes? It's all right there already.

Jamie Selects: Right. Cool. Yeah, we'll, ⁓ we'll touch on like the recording piece more in depth a little bit later, but that makes total sense. ⁓ I've never set up a separate business account or bank account, always had a separate card. But now that I have the LLC, I've done that. I want everything to be separated fully. But good to know in the case where people do have a separate bank account. And this is like their, let's say they're a full-time DJ, they're a sole prop. You know, they have, they need to have personal expenses. Is there anything special that needs to happen around the transfer of money from like the business bank account to the personal bank account? Is it like an owner distribution or is it just like a transfer essentially?

Christian P: There's nothing special that needs to be done. You just need to make sure you're not reporting that as a deduction. So anything you transfer from the business bank account, whether it's the LLC's bank account or just a separate bank account you open personally. That is not deductible. It's just you dispersing money to yourself as the business owner, which isn't a deduction. whether or not you take, yeah, exactly, whether or not you take money out or leave it in, it doesn't have any impact on taxes.

Jamie Selects: Right, it's not an expense. Okay. Okay, cool. So the separation of this thing is mainly for like a structural perspective of understanding your profit and loss for easy categorization, for easy record keeping. So again, I think this is the biggest bang for the buck, especially for people who are just starting out. makes everything else so much easier. So if everyone takes away one thing from this conversation, especially for those just getting started when you're doing everything yourself, most likely just create a separation, create a separate card, second step.

Christian P: Yeah.

Jamie Selects: set the bank account, have all the money that you earn flow through there. It'll make your life so much easier. All right, cool. Well, let's jump into some of the more fun topics. Um, income before we get into expenses, we want to talk about income. So what constitutes income for a sole prop and, or any kind of DJ business? Uh, some of the examples that are obvious or gigs, that's probably the main one, but other things that could come up are like events, ticket sales, merch. ⁓ What else would be defined as income from the IRS's perspective?

Christian P: Those are all income, like you said, any kind of performance fees or getting merge sales, if you're selling food and beverages, ⁓ that would all be considered income. If you're even selling your equipment, that could be income in some cases, especially if you sold it for more than you bought it for, or if you depreciated it in prior years, you're selling it now. could be a taxable gain there for you. ⁓ So I think those are the main categories. But the general rule is that anything that you're receiving in exchange for goods or services is going to be taxable.

Jamie Selects: Got it. Makes sense. I mean, it's obvious, but that's how the RS is set, but it's good to just call it out. ⁓ What about sales tax? I know there's, in my own research, I've done research on like setting up some kind of thing for sales tax. I haven't really sold much things that would require sales tax, but how does that work with?

Christian P: Yeah. Yeah, definitely.

Jamie Selects: Especially like things like merch or if you have tax on ticket sales or something, do you have to have some other kind of thing with your city in order to collect sales tax?

Christian P: Yeah, so if you're selling, so services generally are excluded from sales tax. There probably are some jurisdictions somewhere in the United States that are charging, they require you to collect sales tax on services, but mostly you only need to worry about sales tax if you're selling goods or physical items. So that would be things like merch, food and beverage. year, etc. So if you are doing that, you would need to look at where you're actually selling those things. So if you're selling them in the city or town where you live, you probably need to register with your state, because the state is the jurisdiction that's going to collect those sales taxes. There might also be a county tax as well. ⁓ Sometimes there's like a food and beverage tax that you need to collect if you're selling food in addition to the sales tax. So ⁓ you'd go about registering by going to your state website. You'd register for a sales tax account. ⁓ Once you register, they're going to tell you like the frequency at which you need to be filing these sales tax returns. So a lot of times if you're like a small vendor, it's going to be either like annually or quarterly. Could be monthly in some situations, but I more often than not it's going to be quarterly or annually. ⁓ So you do that also with your locality as well if they have a sales tax that you need to be collecting.

Jamie Selects: Got it. Okay, so states the main one and then depending on where you live, like I know in like San Francisco, for example, there's all kinds of like health taxes and all these various things. So those would be filed with the city.

Christian P: Yeah. Yeah, exactly. And I will say also if you're selling things online, like if you're selling things through a platform such as like Etsy for example, ⁓ Etsy will file the sale, Etsy will collect sales tax for you and also pay it to the locality or the jurisdiction. But sometimes you still need to file a sales tax return to report. zero sales or that you collected the sales tax with the marketplace facilitator forwarded those taxes for you. It's just kind of like checking the box essentially.

Jamie Selects: So what if like, let's say I live in California, but I'm selling merch like throughout the country. Like how does that, do you have the file? it, you, do you pay the sales tax based on where you sell or where the person bought it?

Christian P: Yeah. Yeah, so that's a very complicated question. Sales taxes can get very complex if you're a big seller. So I think it really just depends on what your volume is in terms of number of orders and also the dollar amount total for each state. So each state has their own rules. for example, well, I'm about any specific examples because it gets very complicated but I think you know if you're selling like over 10,000 in one state you might need to file in that state but another state may not have the same rule. is that other states, you might need to file in one state but not the other. So I think once you start to sell online, you're getting over maybe like 100 orders to a specific state, you might wanna check and see what your sales tax filing requirements are in that state. Yeah.

Jamie Selects: Got it. Okay. That makes sense. Once you reach, it's good to know at least like the threshold where like someone should go and start looking into those things. So I'm sure they're not coming after you for one order, but once you get to a certain threshold, then that's when it makes sense.

Christian P: Yeah. No. I think online is, yeah, exactly. once you start selling, I might look in just like your home state where you live just to see what those requirements are. Because generally, if you're selling anything at all, you need to collect sales tax in your home state. ⁓ But ⁓ if you're out of state, the rules are different.

Jamie Selects: Okay. And I think in the case of DJs, something that people are probably selling is music. Does that, is that considered a physical good or digital good? Are they treated the same?

Christian P: Yeah, there's a... There are a number of laws popping up around sales taxes on digital goods. So kind of an evolving area. ⁓ But generally speaking, sales of music aren't going to be taxable. Like if you're selling on Bandcamp, for example, you wouldn't need to worry about filing a sales tax return.

Jamie Selects: Okay.

Christian P: And then Bandcamp, believe, would handle that since they're the marketplace facilitator.

Jamie Selects: Right. Okay, cool. Good to know for DJs. Okay, cool. Well, let's move on to expenses. This thing, this is like the meatiest topic of ⁓ taxes for DJs is it's trying to make sure that DJs understand what types of things constitute expenses for their business, how they're recording it and what can be right off properly. And also like how to avoid some common mistakes. So I think at a high level, I wanted to cover a couple of things, types of expenses. Section 172 for the capital expenses and then Some like common big things that DJs might miss so from my understanding there's two types of expenses current expense and capital expense current expense expense being You know everyday cost of business whether it's ⁓ Gas things of that nature. I guess gas is specific depending on how you write off your car, but ⁓ you know DJ cables ⁓ vinyl, things like that. And then a capital expense is like an investment in your business that's gonna last for a couple of years. Is that the best way to break those two things down?

Christian P: Yeah, so that's right. So anything that has a useful life greater than one year is going to be what's called a capital expense or a fixed asset. Then there are special tax rules for those types of expenses. So something that would be useful for greater than one year would be the kind of equipment you're using. DJ business, whether it's like turntables, speakers, like travel gear, anything that has a greater than one use lifespan. ⁓ There's one other rule there as well, so anything less than, that costs less than $2,500 would also be deductible in the year that you pay for it. But if something has a useful life greater than one year, costing more than $2,500, you might need to depreciate that asset. So depreciation is just taking the full cost of that asset and then deducting part of it in each year across its useful life. So useful life would generally be... ⁓ three, five to seven years for things you will be using in your DJ business. But, and you kind of touched on this, there are things you can do to deduct those items in full in the year you purchase them or place them into service for your music business. So, let's just say you bought some equipment for 5,000, you're not allowed to immediately expense that, so you have to consider the depreciation rule. Let's just say also, you your income is really high this year. You want to deduct the full cost of this equipment, full. So you can look at section 179 and you make an election to deduct the full cost this year. And it's going to allow you to offset your income this year. There's also a thing called bonus depreciation. This was kind of temporary until last year when the new tax laws got passed. But that bonus depreciation also allows you to deduct the full cost of equipment in full. And there are a lot of rules around this, so you need to look at what kind of asset it is and whether it's eligible. But those are the two general ways to deduct your

Jamie Selects: Yeah, it makes sense. Section 179, my bad. I 172. I think the biggest expenses DJs are gonna have are likely the DJ gear. So it's either a controller, turntables, mixer. Those are the expensive ones, like 1600-ish, 2000. Most equipment, I wouldn't say is above 2500. Maybe if you're getting to the top of the line mixer or stage equipment, if you're getting into the realm of those...

Christian P: Yeah,

Jamie Selects: types of products. So think most things should fall within the less than $2,500 calorie. But that's good to understand that distinction. I think if you're buying like stage equipment or stuff like that, then you're getting into the depreciation realm for sure.

Christian P: Thanks.

Jamie Selects: Okay, so in terms of what can DJs write off, what is the good rule of thumb for deciding if something is write-offable or deductible?

Christian P: Yeah, I'd say honestly just use common sense as the main rule. know, something's obviously personal, it's not deductible, but the IRS's official language is that anything deductible needs to be both ordinary and necessary. ordinary just means it's like a typical expense for your industry. Necessary means that it's not frivolous, so that... It doesn't have to be absolutely required, but it can't be something that's just, you want to deduct it because you want to deduct it. has to be business related and something that would be reasonable. So I think within that route, those... High level guidelines, there are many different things that a DJ can deduct. So, cost of music, for example, definitely deductible. Any kind of software you're using is deductible. Any kind of supplies you're using, ⁓ any kind of equipment under $2,500. dollars is deductible. If you're traveling to gigs, that would be deductible. There's a few different ways to deduct that. If you have a home studio, for example, that's deductible. ⁓ If you're self-employed and you have health insurance that you're paying for, that would also be deductible as well as a business expense. ⁓ But yeah, number of things. So if you have specific examples, I can kind of walk you through those.

Jamie Selects: Yeah, you touched on a number that I want to break down into here. So travel, one category. Meals and entertainment I want to cover because I can be a DJ, you're kind of in that space. ⁓ So let's yeah, let's start there. So for travel expenses at a high level, how did those work? And what can be considered ⁓ deductible for travel?

Christian P: Yeah, so travel expenses. So travel is anything from your house to a work site. So like work site being where you're doing a gig or performance. So that could be like across town. It could be to a whole different town or city. ⁓ So that's kind of the definition of travel. So how you get there. terms of transportation is going to have different rules. if you're flying to ⁓ the performance or gig, that's definitely deductible. But if you're driving, that is deductible, but the expenses or how you deduct it is a bit different. So in that case, you're going to want to start tracking your mileage to and from. that... is the requirement for deducting your personal vehicle expenses. So you might purchase gas along the way for your vehicle, but that gas is not deductible. So what you need to do is actually track the mileage. Then the IRS has a standard rate that they publish annually. So if you drove 100 miles to the gig and the mileage rate is $0.70 per mile, you're going to be able to deduct. 70 70 dollars from your business expense and you can also track the actual expenses too and this gets into some complicated like optimization calculations, but you can either deduct your mileage of the IRS standard rate or your actual vehicle expenses and then you apply like your total mileage on the vehicle ⁓ divided by your business mileage ⁓ multiply that by your total actual expenses and then that gives you your vehicle deduction. So it gets very complicated but I would just say if you're driving your car around track your mileage and that's going to be the simplest way to take that deduction. Yeah. ⁓

Jamie Selects: Thank you. Right. think my recommendation for DJs is to add all of your gigs into a calendar and then just that way when you're going through you can understand like, do I drive to this? How many miles is this from my house? And it's just like, it's easier to calculate that way. But if you don't have a list of all of the gigs that you did, then you're just not going to be able to remember them. Also things like, you know, driving to a studio or driving to get gear, those also count. Those are harder to remember after the fact. So definitely having a system in place to track whenever you drove for your business is super helpful. What about so obviously things like, you know, plane tickets, those are easy. What about meals while you're traveling? How are those different from say like other types of meals? And can you deduct the full amount of meals while you're traveling?

Christian P: No, you cannot deduct the full amount. So can deduct up to 50 % of your meal cost. if you're traveling to a gig or if you're at a gig, you buy a meal there, only 50 % of that cost is going to be deductible for you. So just keep that in mind if you're thinking you can write off the full cost. It's only 50%.

Jamie Selects: Okay, so even if I were, what about meals in your hometown? Like if you got a meal as part of your gig or right before, it's kind of part of the deal, that count or is it only while you're traveling?

Christian P: Yeah. So that would count. if you're at a gig, buy a meal, that would be deductible. The key though is to have good documentation around these expenses, because every business meal needs to have a business purpose. So what you want to do is make sure you're saving your receipt. On the receipt, you write something like, maybe the name of your gig, where you were performing or where you were DJing. And then if you're audited, can say, is in the same town, but I was not just going out for a meal on my own. It was business related. I had it documented.

Jamie Selects: Okay. So it can't just be like dinner before a gig. There needs to be some business purpose.

Christian P: Yeah, exactly. Yeah, business purpose. think, yeah, it needs to have a business purpose. Generally, like you need to be with someone who is... is like a business associate, not just like a friend or something, but it has to have like a business purpose.

Jamie Selects: Got it. Okay. What about drinks? This is a common thing that DJs are into. the club owners are stingy, you know, they don't give you any drink tickets. Does that count or no as part of like networking or ⁓ supporting the bar? How would you how does that go up against the common sense rule?

Christian P: Yeah, that's, so this gets into, I would say, gray area for sure. generally speaking, entertainment is never deductible. That's just a hard and fast rule that the IRS puts out. So you're never going to be able to deduct things like tickets to an event. And if you're just getting a drink at an event, probably I would say, you know, maybe you could justify it in a sense if it was like, yeah, I got a drink. I was talking to this person for... 20 minutes that we talked about this topic, yeah, that could be deductible, but generally speaking, I would say anything you buy at an entertainment venue may not be deductible. It's definitely in a great area, unless, like I said, you can document it.

Jamie Selects: Okay, so rule of thumb here, if you are going to try and play that game of writing things off at bars that you're DJing at, you need to have a well-documented business purpose. Like, you know, if you're talking with the owner, I think that could make sense. You're trying to establish a relationship, but just make sure that on that specific expense, wherever you're tracking it, you have a ⁓ where you say specifically what it was for.

Christian P: Yeah. Exactly. That's going to help you in case you're ever out of it.

Jamie Selects: Okay, cool, that's good to know. Cool, documentation and record keeping, big theme. ⁓ Okay, next big topic is home studio. how does this work generally? Can it be anything from like a practice area to like an official home studio? How does that work?

Christian P: Yeah, so home studio needs to be a specific area, like a defined area of your house or home that is regularly and exclusively used for your DJ business. So that's the IRS's language. So regularly means that it's not a place that you're going to like once in a blue moon, you know, you're consistently going there and doing work for your DJ business. And exclusively means it can't be a place that you're also using for another purpose. So like if you work from home, in your office, ⁓ from a home office, for another job, but then you also use that office to work on your DJ business, it's not exclusively used for your DJ business. So it's gonna preclude you from doing that home studio production. You could probably make an argument. In some cases, like, you know, I spend 90 % of my time in this office on my job, maybe 10 % on my DJ business. And then maybe you could maybe get a partial deduction, but I would say that's definitely a great area as well. It needs to be regular and exclusive use.

Jamie Selects: What about the square footage rule where like, you know, if not everyone has multiple rooms for each individual thing, but if there's like a desk area where someone works from home, but then they have like their DJ set up in the same room, could they go the square footage route and just do like a box around where their turntables actually are?

Christian P: Yeah, that's definitely possible. that's kind of what I meant by like 90 % is for your deployment, 10 % for DJ business. So what you would want to do is measure like the square footage of that office. And then even if you wanted to go even more. granulated than that, like the square footage of your DJ section area of that office. So take the square footage of that and then divide that by the total square footage of the house and then that's going to give you your business use percentage. That percentage is... helpful because it's going to help you calculate your deduction for your home studio. let's just say you have an apartment and you have a second bedroom and that second bedroom is 10 % of the total square footage of that apartment. So that means you can deduct 10 % of your rent every month as a business expense and that's going to help offset your taxes. music business.

Jamie Selects: And what about utilities and other kind of bills for the house? Does that include in the 10 % essentially?

Christian P: That would be. So there are cases like, let's just say you have a studio and actually have a client who has like a separate... building on his property that is his studio and that studio has its own utilities hookup as well. So he's able to deduct 100 % of that utility bill because it's specific to that separate building. ⁓ in that case, it's 100%, but if it's like a utility that applies to the entire property, that's gonna be applicable to that business use percentage.

Jamie Selects: Got it. Okay, cool. Makes sense. Yeah, Home Office is a big one. think a lot of DJs don't get it, especially at first, so.

Christian P: Yeah, that can be a really big deduction too, especially if you live in a place like San Francisco, New York, where rents are really high, apartments are tiny. So like if half of your apartment is a studio, that's a huge deduction.

Jamie Selects: Right. Cool. Awesome. So this makes total sense with regards to categorization of expenses here. The categories that the IRS has listed don't always fit with specific type of businesses. so in your opinion, should we just try to fit all of expenses into what they use or should we break things down like an expense for music, for example? How is it best to categorize something like that?

Christian P: Yeah, ⁓ it gets a bit fuzzy, yeah, ⁓ the music, for example, ⁓ to me that's like a supplies expense, it's something you're using in the production of music, ⁓ whether that's like you're producing a track or you're producing a set. ⁓ me that's like a supplies expense and there's a category on your tax return for supplies so I think that's how you would line that up.

Jamie Selects: But there's also like another area where you can put in your own categories. when does it make sense to just say supplies and actually break those things down so you know some things like, know, pens for your office or music, or if it's more like an operations thing or like things like software. I don't, there's not like a specific category for that as well. So does it actually make sense to break things down further to get that more granular level?

Christian P: say keep it as high level as possible for tax reporting purposes or like if you want to see things more granularly on like your internal reports or like just know what you're spending your money on. definitely do that but for tax reporting I would just use the IRS categories whenever possible and then on that you're right there's another line create your own categories I would also try to keep those as high level unless you feel like something needs particular needs to be called out specifically I don't know there's a lot of instances where that makes sense but high level is best I would say just because ⁓ I think it will simplify the reporting

Jamie Selects: Okay, good to know. I think that wraps up expenses. We had a note here to talk about estimated taxes. So when should DJ start thinking about those and what are those exactly?

Christian P: Yeah, estimated taxes is something I would say catches a lot of people by surprise, especially if they're new to being self-employed or if they're a new business owner. And whether or not you need to even worry about self-employment, sorry, estimated taxes is another question. So I'd say if you expect to have a profit in your business this year, you might want to think about... as making estimated tax payments. And that's especially true if you are working full time for your business and you're not working at another job where you're having taxes withheld through the year. So if you're full time self-employed through your music business, what's gonna happen is you're making money throughout the year and you're gonna be profitable and you go to file your tax return because you haven't had taxes withheld from your earnings, you're gonna have a huge tax bill that has accrued. during the year, you might even owe late fees, penalties and interest on that tax bill. So, general rule of thumb, if you're profitable in your business and you're not having taxes withheld from a paycheck, consider making quarterly estimated tax payments to the IRS. Yep.

Jamie Selects: Got it. They don't pay us interest on the returns that we get.

Christian P: No, no, they don't. Exactly. That's one way.

Jamie Selects: okay. Good to know. So the tie things up here, wanted to circle back on just record keeping and documentation. So what's like if you're having a client and they're sending you things, like how would you like to see things and what do you recommend people do with regards to documentation?

Christian P: Yeah, so what I think is very complicated is like when people start sending receipts, because receipts are messy, sometimes a receipt can have multiple lines on it, and you gotta like tally up which line is business, which is personal. I'd say that is something to avoid. But also like it's very reactive because you're going through like your email or... paper receipts for meals and you're like typing them all into a spreadsheet at the end of the year and then you might miss it, forget some receipts, you might type something in wrong. So that's like a very reactive way to do it and takes a lot of time. So anything you can do to like automate the reporting process would be really helpful. So like something that connects to your bank accounts, ⁓ pulls in the activity into like a spreadsheet or like there's a... some kind of software you like to use. It's going to connect your bank accounts, you can categorize things, and it's going to give you a nice report showing what you earned. And then you can send that to your accountant, or you can use it to file your own taxes on TurboTax or something like that. I think would be a more proactive and efficient way to do that, to track your income expenses.

Jamie Selects: could make sense. Shameless plug, djexpensedirector.com. ⁓ Build for DJs meant to help make that process as seamless as possible. even if you use that or don't use that, some kind of easy, I think a spreadsheet is probably the most basic like MVP thing that you can do that's going to help keep everything organized. And then if you want to add the things on the software that can connect your card, that's really making it easier for you. but the main thing that you want to have is some kind of records of what you spent and how much you made at a high level.

Christian P: Yep, that's exactly right. And like I said earlier, everyone has their own tolerance for systems and processes and tools. So whatever works for you personally, I think is the best. While also keeping things organized is the best option.

Jamie Selects: Right. And just being consistent as well.

Christian P: Exactly. Consistency is key.

Jamie Selects: Cool. I think we have one other topic on here on hiring people. So if you're getting to the point where, you're, you're bringing a team on to, to help, what are the things that people should keep in mind? If I understand it correctly, there's like a minimum threshold where if you pay someone, I think it's $600, then you have to issue them a 1099. Can that be done outside of a software? When does it make sense to actually like bring on some kind of like payroll software to manage that?

Christian P: Yeah, so yes, so although the threshold is increasing to $2,000 from $600 in 2026, but yeah, so you would need to file a 1099 for anyone who you paid more than $2,000 in 2026 for services. like if you put on an event. for example, and you had staff working at the event and you're paying them over $2,000 throughout the year, you might need to file a 1099 for them by January 31st of the following year. And as far as how to do that, that's service like your CPA or like tax professional could do. There is also like software that'll help you do that as well. But yeah, think not too hard to do, but just be mindful of the requirements there of $2,000.

Jamie Selects: And when you say file, like does that mean you have to obviously have to send the person the form, but then you also have to send it to the IRS? Is that what that means?

Christian P: Yeah, exactly. So you've got to file it with the IRS and also send the vendor or contractor a copy too.

Jamie Selects: Okay, makes sense. Cool. As we close out here, what would you say if you had like three biggest mistakes you see businesses like DJs make when filing their taxes and then three things to keep in mind and they can be intermingled there as well?

Christian P: Yeah, I would say biggest mistake is not thinking about self-employment tax because that will really get you if you're new to being self-employed. And if you're employed, you might be familiar with self-employment taxes like that, Social Security, Medicare. ⁓ paying about 7 % as an employee but as a self-employed individual that jumps to about 15 % and that can be pretty significant. So you need to make sure, one, that you're billing or like your rate is high enough to accommodate that tax and also that when you are earning income you're setting aside money for taxes throughout the year so you can pay that self-employment tax and regular income taxes. estimate the tax payments. So that's kind of the big key things I'd say watch out for. Then of course being really good about like tracking your both your income and also your expenses because if you're not tracking your expenses you're leaving money on the table because the number well One of the best ways to pay less tax is to deduct as much as you are legally allowed to do. If you're not tracking those expenses, you're not deducting all of those expenses either, which means you're paying more tax than you should. So I think those are the big things to be aware of.

Jamie Selects: Awesome. Well, Christian, thank you so much for coming on. Where can people, I don't know if you're taking on new clients, but where can people come to find you if they find themselves in a situation where they need to talk to a CPA?

Christian P: Yeah, I mean I'd be glad to talk to anyone. So I am on, I think that my website would be the best place to find me. So my firm's website is www.auger.cpa. Just send me a message through there and tell me what you're looking for, how I can help. ⁓ schedule a introductory call. yeah, Jamie, thanks for having me on. This has been great. Appreciate it.

Jamie Selects: good. Thanks everyone. See you next time.

Christian P: See ya.