entertainment Archives

You No Longer Have to Bring the IRS to Tears for a Home Office Deduction

Years ago I was representing a screenwriter before an IRS audit. We did not prepare the
return but was defending our client’s home office deduction in a place that the client no longer lived, or had pictures. The agent baulked on allowing the deduction due to the lack of verifiable facts. I then leaned closer to the female auditor and told her that this client had written the screen play of a famous Disney animated movie in that very same home office. The auditor teared up and said, “My daughter loved that movie!”

We got the full deduction.

The IRS just waived a magic wand by listing some tips on the new law that offers an easier way to deduct a home office without substantiating expenses. Here are the facts:

This simplified option does not change the rules for who may claim a home
office deduction. It merely simplifies the calculation and recordkeeping
requirements. The new option can save you a lot of time and will require less
paperwork and recordkeeping.

Here are six facts the IRS wants you to know about the new, simplified
method to claim the home office deduction.

1. You may use the simplified method when you file your 2013 tax return
next year. If you use this method to claim the home office deduction, you will
not need to calculate your deduction based on actual expenses. You may instead
multiply the square footage of your home office by a prescribed rate.

2. The rate is $5 per square foot of the part of your home used for
business. The maximum footage allowed is 300 square feet. This means the most
you can deduct using the new method is $1,500 per year.

3. You may choose either the simplified method or the actual expense
method for any tax year. Once you use a method for a specific tax year, you
cannot later change to the other method for that same year.

4. If you use the simplified method and you own your home, you cannot
depreciate your home office. You can still deduct other qualified home
expenses, such as mortgage interest and real estate taxes. You will not need to
allocate these expenses between personal and business use. This allocation is required
if you use the actual expense method. You’ll claim these deductions on Schedule
A, Itemized Deductions.

5. You can still fully deduct business expenses that are unrelated to
the home if you use the simplified method. These may include costs such as
advertising, supplies and wages paid to employees.

6. If you use more than one home with a qualified home office in the
same year, you can use the simplified method for only one in that year.
However, you may use the simplified method for one and actual expenses for any
others in that year.

______________________________________________________________________________

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any
tax advice contained in this e-mail (including any attachments) is not intended
or written to be used, and may not be used, for the purpose of (a) avoiding
penalties under the Internal Revenue Code or state tax authority, or (b)
promoting, marketing, or recommending to another party any transaction or
matter addressed herein.

The Strategy of the “Argo” Writer and Why You Should Take Notice

Do you use “vertical” logic to solve a problem? This classic method for problem solving works out a solutions using a step-by-step method until a person arrives at a conclusion. Engineers I’ve known, have used this approach.

Or do you address problems “horizontally”? That is, having a thousand ideas but being unconcerned with how to implement the strategy of arriving at your destination.

Many will look at these two approaches and say the first is more left brain, the second more right brain. However, the better approach is to use both sides of your brain and think more entrepreneurial.

This appears to be the thinking of Joshuah Bearman, the “Argo” writer according to a Los Angeles Times article. According to the article, “Argo” prompted Bearman, …to think about storytelling in a different way–and to go entrepreneurial with his latest project, a tale of San Diego drug smuggler called ‘Coronado High’.” According to the article, Bearman negotiated a trifecta revenue package with publishing with GQ magazine( print), Atavist (a digital e-book publisher), and Sony Pictures (movie). These avenues displayed different “colors” of the project serving different audiences.

This strategy pushes Bearman into his own “Blue Ocean” by distinguishing his project from other journalists, novelists, and screenwriters. Though these multiple platforms operate separately, they will complement each other making this project greater than the sum of its parts. Why? Because one person hearing the audio version may want to see the movie, for example.

Some say that other writers will not be able to duplicate Bearman’s strategy because of his “Argo” clout, but I disagree. In business, there is always an industry leader that tests the water. If Bearman is successful, these(and other) publishers will be looking for other authors to replicate the success.

Multimedia is hear to stay, but the industry leader will be the person who can change with it. Multimedia platforms are not stagnant and demand a dynamic entrepreneur to change with them.

Innovation:There is More to Emulating Than Playing Air-Guitar

When I started playing guitar in the early 1960s, nobody played “air guitar.” Those who didn’t want to play, didn’t, and those who wanted to play guitar copied Jimmy Hendricks, Chuck Berry, and many others in the entertainment industry.

Anita Campbell’s article Finding Innovation Through Emulation discusses innovation using this method in the business world. She recommends picking a company you admire, copying it, and reinventing it.

This approach is fine, but limited both inside and outside the entertainment industry. Ted Whetstone’s chapter in The Book of Business from A to Z (The 260 most important answers you need to know) takes a more holistic view. He discusses the many types of innovation:

Disruption innovation: New technology, process, etc. that gives your company an advantage.

Product innovation: The product development cycle of concept, prototype, testing, etc.

Process innovation: Changing the production or process of delivery method.

Marketing innovation: Positioning yourself and product differently in market segments.

These points are just a thumbnail sketch but could be a daunting task to a novice at strategic planning. So, the place for businesses and those in the entertainment industry to start is VISION. A business owner or an artist must establish a vision that sets them apart from the rest of the world. By vision, we are not discussing a five year plan. No, we are challenging the business owner and artist to look at the next twenty years and answer how they will change the way things are done in the world.

But why emulate other artists or companies when establishing a vision that will change the world?

Let’s take the Beatles for example:They were influenced by early Motown music. In fact, you may recall that one of their earlier albums covered three songs by Motown: Wait Mr. Postman, Money, and You’ve Really Got a Hold on Me. Sure, they performed their version of these songs, thus improving on them, but these songs did not limit their visions. Instead, they acted as stepping stones to a style that the Beatles were to be known for.

In strategizing, a business owner (and artist) must stay the course of their vision, though they are emulating others. This process infuses tactics in achieving the ultimate vision.

Music Royalties: Never Leave Money on the Table

I remember about six years ago when a relatively unknown organization, Soundexchange, contacted us (CPA entertainment business managers) about signing up one of our music artist clients. They said that our client was not collecting all music royalties through ASCAP, UMG, EMI, etc. Instead, there were an increasing amount of royalties being left on the table from certain digital transmissions like streaming.

I was skeptical. However, according to some industry opinions, the public’s method of listening is changing. This is confirmed in the most recent growth of digital music in the last 3-4 years. According to How Artists get Paid for Internet Radio: An interview with Mike Huppe, President of Sound Exchange by Chris Castle, “More and more people are accessing music through digital devices, mobile devices and through streaming content rather than downloading it. The article also informed me that “Soundexchange pays performers directly, regardless if they are recouped through their record deal.” (“Recoupment” is the method of recovering monies advanced to the artist before any royalties are paid out to them.)

So, what does this mean to you?

Make sure you have good representation in your contracts. You can lose a substantial amount of money because of a poorly-worded contract.
You don’t have to be a CPA entertainment business manager to know what you don’t know. Even though you are an artist, you should at least know the basics of your industry. There are a number of good reference books that speak of the music industry. After that, leave the rest to your attorney and CPA entertainment business manager.
If you receive substantial royalties payments, don’t be afraid to hire an auditor that specializes in music royalties. You must keep the payers honest.

Music artists and writers have the best copyright laws in our nation’s history. Don’t squander it by sticking your head in the sand.

Artists’ Futures are Truly in Their Hands

I was twenty-one in 1978 when I got my first part-time CPA accounting job while studying at UCLA. The adding machine I used had a crank…really.

Over the last year or so, I have written about apps that help business people run their businesses better. Recently, I came across Artistgrowth that literally puts “organization” in the hands of the artist, manager, and others in the music world.

The app helps you manage your schedule, gigs, and tours. In addition, it helps you and your CPA manage your finances by allowing you to photograph your receipts and attach it to a report. The app also has a portal that connects you to many different informational sources, videos, etc. that discuss such things as promotion, songwriting, and instrument repair.

The Action Packs section helps you implement the knowledge you learned in the informational sources. I thought the business plan pack was very superficial, but at least it displays the basic concept. (These packs are limited depending on your subscription level.)

Before jumping on your phone and buying it, step back and think about what you and your music business lack. The problems with apps is that they offer a whole list of bells and whistles that you may not need.

I have written several times during the last year that now is the best time in the last 100 years to start a business because of all the resources available online. This app seems to be one of those gems that a music professional can leverage. The boundaries that separated CPAs, managers, and even artists are changing. The things that one person used to be responsible for, may no longer exist. If you have the ambition and maturity, you can evolve your role to further your career and maybe save you a lot of money and grief.

I am not saying that you should replace your CPA or manager with this app. However, by assuming some of the lower level responsibilities, you can empower your CPA to provide higher level services that could multiply the financial return of this app.

With FaceBook Music, You Don’t Need No Stinkin’ Payola

My father sang rockabilly in the 1950s under contract with Capitol Records. (Click here for a Bobby Norris sample.) When I was young, he told me stories of “payola.” Payola is the (illegal) practice of record companies (and I guess artists) paying discjockies to play their songs during the normal daily rotation.

Capitol Records, to his knowledge did not offer payola for him and his records didn’t sell much. However, with the rockabilly resurgence of today (nine years after his death), his music is making its way to loyal fans.

Carl Jacobson’s article Fans on Facebook: What to Do Next to Engage Your Fans, Increase Sales and Grow Relationships provided some ideas that my dad would have benefitted from if such an opportunity existed in the 1950s.

IDEA 1 – Be Ready to Sell Today! Carl’s idea, here, actually transends any art or commerce. Don’t launch your product of art until it is ready. This is one of the biggest errors authors make with their first book. They are so excited about getting their first book out that they fail to hire someone to read it and provide feedback. The result many times is the author blows his or her chance to sell a great story because it is poorly written. Carl suggests Mystore for Facebook to capture fan’s information. But, make sure your product is absolutely perfect. This concept transfers to any business, in that you should not reach out until you have perfected your strategy, product, and service.

IDEA 2 – Engage…Don’t Advertise This works with any business of relationship. People want to be involved; people want to contibute to a goal; people want to feel like they matter. Don’t lauch your music saying “Buy this!” Remember the advent of American Idol? FaceBook allows people to share their opinions, so ask them to.

IDEA 3 – The Virtual High-Five The FaceBook “like” gets a lot of traction these days. Thank and compliment others when the opportunity arises.

IDEA 4 – Reward Fans Then Ask Them to Reward Their Friends Freebees are nothing new in business. Just make sure you limit what you are providing to your fanbase.

IDEA 5 – Advertise Yourself to Fans of Similar Artists In business we call this strategic relationships. You can trade recommendations with other artists using MyStore. This can also work in other business contexts. Use complimentary companies to partner with in promotion. For example, let’s say you own a beauty salon. Women that go into beauty salons are concerned with their appearence. So, you may want to partner with a Yoga or Spinning instructor to advertise and offer combined deals. This way, your customer is enhancing her appearance in different ways.

With the proper use of social media(e.g., MyStore for FaceBook), you can reach your fans with investing just your time. Payola is Gonola.

Strategic Planning for the Artist: A Los Angeles CPA Business Manager’s Attempt to Integrate Business Concepts

Tomorrow, as a Los Angeles CPA business manager, I will be merging two of my skills with a client. My entertainment business management skills, and my strategic planning skills. This client is a singer/songwriter who produced a music demo and video. My question to her was, “So what?” If you pursue the path of other musicians to acquire a contract, a 360 deal, you are no better than them, and may be just one of many homogeneous artists trying to make it.

This actually happened to my dad, Bobby Norris, in the 1950s. He signed with Capitol Records as a rockabilly artist, only to receive very little promotion for his records. It wasn’t until after he died, 2003, that he receives the recognition that he longed for as one of the original rockabilly personalities.

As a Los Angeles CPA business manager, I really don’t see artists driven in their profession from a real strategic planning position. I did stumble onto a book that seemed to address strategic issues. But I will have to buy the book to see if they do more than just scratch the surface.

So how would I, as a Los Angeles CPA business manager recommend how an artist should strategically work their career? Here is a short answer to a long question:

Identify an issue. What are you really trying to accomplish? It has to be more than “be a star.” You have to really focus on something and list your assumptions on why you are equipped or not equipped.
What is your vision? Quantify what you want. For example, to have 1 top ten single on the charts every year, or play to an average of 200,000 per event. See Jim Collin’s Good to Great and Build to Last for big, hairy audacious goals.
Why would the fans want you? You must focus on your fans. Many books like Blue Ocean Strategy help you think on a level of satisfying your fans and creating an uncontested marketplace. Don’t give the fan more of what they heard. Find out their needs and satisfy them.
SWOT analysis and quantifying: Now you can look at your strengths, weaknesses, opportunities, and threats. You must also put some real numbers to your goals.
Lay out your strategy
Reduce the strategy to tactics

I’ve produced this approach, in part, from Johnson and Smith’s 60 Minute Strategic Plan.

In my opinion, as a Los Angeles CPA entertainment business manager, you must think strategically about your career and stop focusing on yourself. Focus on your fan base and serve them the art they deserve and are entitled to. As Los Angeles CPA business managers, we try to work with clients on the front end, not just record the results on the back end. That is where we strategically differ in our profession.

Jeff Bridges: Be an Actor or a Singer, His Skills Are Transferable. And In Business, So are Yours

Many articles surfaced earlier this year about Jeff Bridge’s crossing over to country music. Some were not flattering. For example, theweek.com quoted comments that branded Jeff as “country-lite,” and “a troubadour tourist.”

But the critics missed the biggest point about Jeff Bridges. Back in the late 1980s I work on the Bridges family(Lloyd, Jeff, and Beau) in a business management firm. I remember my boss commenting about Jeff being the consummate artist. He said Jeff knew what he loved to do (act) and did it intensely. He also mentioned that Jeff’s wife, Susan, took care of the typical things in life and family allowing him to pursue his career unheeded. It is no surprise that Susan was the first person Jeff acknowledged after receiving his Oscar.

But the critics missed the point. What Jeff demonstrated, was that he could transfer his artistic skills from one medium to another. The movie Crazy Heart was just his first vehicle, and it won’t be his last.

The same can be said for anyone today, whether an artist or small business person. This is echoed in 8 Tips: How to Make Your Company And Career More Dynamic by Shira Levine. In the article, Shira quotes James Marshall Reilly who says:

“We’re lucky, because these days, our skills are more transferable. ‘Advances in technology have facilitated easy access to self-education and idea exploration,’ he says. That makes it easier to take information we’ve previously learned and apply it to other ideas, concepts, industries and businesses. ‘These iterations allow the individual to grow intellectually rather than stagnate in one position,’ says Reilly. ‘They also allow for the influx of new ideas to established fields as people move around and infuse new lines of thinking into conventional and often rigid spaces.'”

The Reilly article equates our current society status to the Renaissance period, when there was an explosion of ideas in society leading to leaps in the area of art, science, literature, etc. If he is right, then everyone reading this article, no matter what you profession, has the opportunity to be a part of it.

For example, if you are a singer/songwriter, are you just trying to match the path of those before you, like acquire a recording contract? Or how about a small/medium sized business? Are you evaluating every new technology in light of how you can change your company?

Looking at our CPA practice, we have done just that. Many companies cannot afford comptrollers and an accounting staff due to the economy. What we have devised systems that provide accounting, tax, bookkeeping, and access to any of our financial affiliates. We have leveraged the current paperless and remote access technology, among other things, to provide this service.

The skill transfer also surfaces from our entertainment industry experience. As business managers, we sometimes deal with all financial aspect of entertainer’s lives. We have transferred that skill to our small business clients if needed.

You don’t have to be an actor to transfer skills. The pallet of gifts are there for you to use. You just have to grab the brush and execute a strategy.

What is the Difference Between a Business Plan and a Strategic Plan?

Business plans are very familiar to me. I receive calls from time to time to design one for individuals who have potential investors. In doing so, I try to incorporate some form of a strategic plan in the product because new entrepreneurs rarely think on that level.

Business plans and strategic plans are different though. Take Johnson and Smith’s book 60 Minute Strategic Plan for instance. They state that, “a business plan is [used] to evaluate teh viability of a business…Business plans keep the company on its rails as it relates to key tactical financial and operational ratios…In a word, a business plan explains the ‘what.’

Johnson and Smith contrast strategic plans as “requiring leadership and inventive thinking and assume higher risks, leading to higher rewards. The strategic plan is an internal leadership tool used to plan a course of action to address unanticipated problems or opportunities…” In other words, it explains the “why and how.”

Bill Birnbaum, author of Strategic Thinking distinguishes the two types as strategic thinking and tactical thinking. I would have to side with his distinction between a strategic plan and business plan. The strategic plan is used to help you decide what to do, and the business plan (or company budget forecast) is used to decide how to do it.

If you are a small business owner, or an entertainer, the concept is the same. Strategic thinking will make you focus on the needs of your customer, how your product benefits your customer, and the reason why a customer would want to buy your service. Or as Birnbaum states it, “In thinking strategically, you’ll be concerned with doing the right things, rather than doing things right.”

Let’s take an entertainer for instance. I am meeting next week with a recording artist who wants to stand out. What we will not look at in the recording industry is what is being done now. The reason why is that why duplicate things that are working in an industry that is moving a break-neck speed, or duplicate business models that are not working? No, instead, we will be exploring her talents not only in the recording industry, but other industies with the vision of producing a specific message about who she is.

The same goes for small business. If you want to be an industry leader, you must distinguish your strategic plan from your business plan. Using Jim Collin’s phrase, you will never achieve your “Big Hairy Audacious Goal” (BHAG) if you are 1) duplicating what others have done in your industry, or 2) just doing an annual budget. The annual budget is contained in the Annual Operating Plan (OAP) which must move an organization towards teh BHAG.

If you want to move your career and/or business beyond your competitors, you must start thinking strategically by implementing and executing a strategic plan. If you are one who only focuses on the future business plan or budget by looking in the past, you will be on operating on a financial treadmill. You may seem like you are moving forward, but all you will be doing is spinning your wheels.

Strategy: The Placement of Music in Film/TV(or the New is the Old)

Back in the day…music from TV crossed onto the charts. Remember Hawaii 5-0, Mannix, Peter Gunn, Mission Impossible, and Magnum PI? I don’t know if there was a strategy to cross over, but you don’t see this type of proliferation of TV music today. Instead, some of the highest rated programs are using music from the 1960s and 1970s. For example, The Who’s music on CSI: Miami.

So what kind of strategy is a musician suppose to undertake?

Cliff Goldmacher’s article, Four Things You Can Do To Improve Your Odds in Film/TV Song Placements seemed to advocate a person to be more of a business person, than musician. Cliff offers the following suggestions:

1. Make sure your song is professionally recorded and performed–Well this is hardly advice. Anytime you set out to launch a strategy, you always do your best. It may be the last chance you get. Don’t be afraid to hire outside people and take your time. To rush the implementation could blow your only chance.

2. Do your homework–This reminds me of the businesses who still send out mass mailings. Focus your strategy using all available information about the industry you are approaching. You may be able to find a new tactic on pitching someone. My favorite was when Kris Kristofferson landed a chopper on Johnny Cash’s property in order to give him tapes of his music. (Kristofferson previously flew a chopper in the army.)

4. Get Known for a Style–Now this is where the 60’s differ from today. The styles born out of the counter-culture varied from folk, to British, to rock, not to mention the jazz horizons that were crossed. If you have a unique style, use it. If not, at least be known for a certain style, so that music supervisors will know who to call for it.

In any event, strategizing a music career to TV or film is like any other business strategy. It all comes down to what makes your product different, and how does it meet the needs of the end user. This theme is repeatedly discussed in such strategy books as The Blue Ocean Strategy and Good to Great.