Uke groups - handling money, non-profit status?

aarondminnick

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My local uke group (Buckeye Ukulele Society) is starting to get paying gigs at retirement homes and the like and we are running into a new requirement: these places need to issue 1099's and are looking for a tax ID number. Also, we are of course running into the question of where to keep the proceeds -- should we get a bank account for the group, etc.

I just wanted to get a read on how other groups have handled this growth challenge. Did you charter as a not-for-profit? Designate one member of the group and use their tax ID? Or something else?

Thank you!
-Aaron
 
One challenge you haven't mentioned is what to do with the money. It should be a group decision. I was in a group and we earned some money. The leader decided to go shopping. grrr....when we broke up he got the fancy-dancy microphone. But he also ended up with over 2 dozen t-shirts nobody asked him to buy. Ha!
 
At what point do you get to start calling yourselves professional ukulele players?
 
Our income has not been so great that this has been a problem. but this is what we do. A couple of our members have tax numbers, and the check is sent to one of them. They in turn either split out the cash or there is an agreement to buy something, or used to compensate a group member for all his printing costs or whatever. That person might reserve a small amount of the total for his eventual tax implication.
 
We're covered in terms of what to do with the money. :) We did some organizing recently and created an executive board, bylaws, etc. Specifically, first we reimburse our meetup.com organizer for fees, then in the past we've used funds for a workshop.
 
That's actually a very good question! I'm involved in several different music activities (recorder, sax, uke, singing) and a while back I started referring to mysef as "semi-professional." I explain that as, "I have a regular job but I sometimes get paid to play." Everyone seems to like that definition.

At what point do you get to start calling yourselves professional ukulele players?
 
I didn't really say that tongue in cheek. Well, actually I did, but not completely. There is a point with the IRS, where an activity goes from hobby to profession. It is based on how much money you make at it. Having a day job doesn't really have anything to do with it, except, if you are close to the top of a tax bracket in your day job, and your sideline puts you over the bracket, sometimes your tax increase is more than what you are making at the sideline. Just some thoughts. My wife had to deal with that a few years ago. Her hobby turned into a profession.
 
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I didn't really say that tongue in cheek. Well, actually I did, but not completely. There is a point with the IRS, where an activity goes from hobby to profession. It is based on how much money you make at it. Having a day job doesn't really have anything to do with it, except, if you are close to the top of a tax bracket in your day job, and your sideline puts you over the bracket, sometimes your tax increase is more than what you are making at the sideline. Just some thoughts. My wife had to deal with that a few years ago. Her hobby turned into a profession.

It's always hard to read tone in email or online posts - I picked up on a bit of tongue in cheek but you do raise a valid concern.

I can see where it could get really sticky for groups - who in the group, for instance, gets to claim the tax benefit of being able to write off all equipment and music-related purchases, for instance. If uke group income was something I had to deal with, I'd probably look into setting the group up as a 501(c)(3) educational group; a benefit to this would be that payment for performances could be considered a donation, if I understand correctly.
 
It's always hard to read tone in email or online posts - I picked up on a bit of tongue in cheek but you do raise a valid concern.

I can see where it could get really sticky for groups - who in the group, for instance, gets to claim the tax benefit of being able to write off all equipment and music-related purchases, for instance. If uke group income was something I had to deal with, I'd probably look into setting the group up as a 501(c)(3) educational group; a benefit to this would be that payment for performances could be considered a donation, if I understand correctly.
I have no experience with not for profit organizations, so I can't say anything about that. After watching my wife deal with her hobby turned profession however, I can tell you that our interpretation of the tax code, and the IRS interpretation is not always the same. In fact, sometimes one IRS person's interpretation is not the same as another IRS person's, and that is really frustrating. But people do it all different ways, and actually, I'm not sure how closely the IRS monitors it. I think that something small, like a ukulele club or band, would fly under the radar fairly easily, as long as no one pushed the limits. But I do know, that if one has a business, and if they take a tax deduction from that business, and that business loses money three years in a row, it is flagged by the IRS. That doesn't mean that you have to quit, it just means that the IRS starts looking at it. So that is just a little tid bit.
 
It's always hard to read tone in email or online posts - I picked up on a bit of tongue in cheek but you do raise a valid concern.

I can see where it could get really sticky for groups - who in the group, for instance, gets to claim the tax benefit of being able to write off all equipment and music-related purchases, for instance. If uke group income was something I had to deal with, I'd probably look into setting the group up as a 501(c)(3) educational group; a benefit to this would be that payment for performances could be considered a donation, if I understand correctly.
I have no experience with not for profit organizations, so I can't say anything about that. After watching my wife deal with her hobby turned profession however, I can tell you that our interpretation of the tax code, and the IRS interpretation is not always the same. In fact, sometimes one IRS person's interpretation is not the same as another IRS person's, and that is really frustrating. But people do it all different ways, and actually, I'm not sure how closely the IRS monitors it. I think that something small, like a ukulele club or band, would fly under the radar fairly easily, as long as no one pushed the limits. But I do know, that if one has a business, and if they take a tax deduction from that business, and that business loses money three years in a row, it is flagged by the IRS. That doesn't mean that you have to quit, it just means that the IRS starts looking at it. So that is just a little tid bit.
 
Frankly, if you get paid, you are a professional. That does not imply, in any way, that you're any good at it. It also doesn't imply that you're doing it full time, as your only source of income, or that you are widely recognized.

As for me, I think of it this way: I'm a novice uke player and I perform with groups that sometimes get offered an honorarium. I, myself, am not a professional musician and I haven't personally accepted any payment for playing.
 
If it becomes an issue for your group then just set up a small non profit. Apply for a tax ID number and set up a bank account, it takes about 15 minutes. Then make up some simple bylaws and articles of incorporation - they are all kinds of free templates on the web, takes about 10 minutes. Then, file with the state you're in, another 5 minutes and maybe up to $25 dollars. Finally file what's called a Form 1023EZ at the IRS website -takes about 20 minutes, after you get your exemption file a Form 990N annually - another 5 minutes. For very small organizations - under $50,000 gross revenues, the IRS realized it's not worth the time or effort for either entity to jump thru all the hoops and has made these easy forms available.

It makes you legit and gives everyone peace of mind. It takes maybe an hour of time and costs less than $500. Then your group can easily get paying gigs and the person hiring you gets a small write off, it may actually be an incentive for small coffee houses and such where you could play for a small fee they could write off and not just tips.
 
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