By Mark Battersby

It’s that time of year again, the annual rite of Spring. Like most people in any profession, DJs anticipate the April 15 tax deadline as if it were root canal surgery. Fortunately, our Government isn’t too sadistic. In fact, Uncle Sam rewards small businesses by allowing many of your expenses to fall into what we’ll call the Tax-Deduction Zone.

What is the Tax-Deduction Zone? And how do you know what’s in it? Basically, a variety of tax deductions are av- ailable that can reduce your company’s taxable income, thus reducing your tax burden come next month. Furthermore, they’re all perfectly legal, so you needn’t worry about returning client phone calls from your dank prison cell.

Of course, you’ve probably already hired an accountant to wade through this tax minefield, but it helps to know some of the basic, often-neglected nuances of our tax code. What follows is the list of expenses that commonly fall into the Tax-Deduction Zone.

Capital Expenses: If it increases the value of your property, such as audio equipment, or a computer, consider it a capital expense (for example, the capital expense of an amplifier purchase includes the cost of the amplifier, the sales tax and the delivery cost). And when it comes to capital expenses, there’s some good news and there’s some bad news.

First, the bad news: Capital expenses can’t be written off immediately; instead, they’re deducted by means of depreciation. (For example, your computer is depreciated over three years, most audio gear in five, and office furniture over seven years.)

The good news? You, the average DJ, can take advantage of a loophole in our tax code known as Section 179. This allows you to write off all of your equipment purchases immediately – provided you only spend less than $19,000 in a year. Naturally, the total cost of property expensed each year cannot exceed the total amount of your taxable income for that year.

And, don’t forget to claim a tax deduction for property that your company no longer uses. This is called an abandonment loss, and it’s often overlooked. This means if you donate a CD player to the local church or give an amplifier to a friend, the cost of that piece of gear can be a deduction – a figure equal to the amount the gear was carried at, on the books, while it was in use. Remember, abandoned property can’t be simply stored away for future use; it must be clearly abandoned.

Advertising: Let your fingers do the walking right into the Tax-Deduction Zone. That’s right, as long as they are reasonable in amount and they’re related to your DJ business, your advertising expenses are deductible. That includes your ad in the Yellow Pages, the cost to print brochures, the fee for a bridal fair, the cost of making banners with your logo, and, yes, even the cost of designing your web site; they all fall into the Tax-Deduction Zone.

In fact, if the advertisement is designed to merely generate goodwill, rather than immediate sales, the expense is still deductible.

Legal Expenses: An IRS audit is everyone’s worst nightmare, but if you do receive the dreaded letter, just remember: As a sole proprietor of your DJ business, not only are you allowed to deduct the cost of tax-return preparation, but also those expenses that are incurred to resolve tax deficiencies. In other words, while your accountant works feverishly to keep you out of debtor’s prison, he’s doing it in the Tax- Deduction Zone.

Entertaining: Yes, there are limits to the deductions allowed for business-related entertaining. In order for it to be tax deductible, the cost of the amusement must be related to the active conduct of your DJ business. In other words, the fee for a game of bowling is on your own dime.

Usually, only 50-percent of otherwise allowable meal and entertainment expenses are tax deductible. This 50-percent rule is applied only after determining the amount of the otherwise allowable deduction. For instance, the portion of a travel meal that is "lavish and extravagant" must first be subtracted from the meal cost before the 50-percent reduction is applied.

Transportation: The cost of transportation, as long as it’s incurred for business, is definitely in the Tax Deduction Zone. This, of course, includes leasing a van or truck. Businesses – including self-employed DJs and their employees – may deduct ordinary and necessary local transportation expenses from their gross income. And if you’re ever caught in the dire circumstance of taking a taxi to your gig – that’s deductible, too, along with rail and bus, although we have yet to hear of a DJ who needed to take a bus to a gig.

On the other hand, commuting expenses between your home and your business is generally not deductible. An exception does exist, however, that permits a tax deduction for expenses incurred in excess of ordinary commuting expenses for transporting job related tools and materials.

But if your home is your principal place of business, you are permitted to deduct the cost of transportation between home and another work location – regardless of whether the work location is temporary or regular and regardless of the distance.

Car Expenses: Next time you slip on an oil slick in your driveway, just think of it as sliding through the Tax Deduction Zone. Expenses for oil, gasoline, tires, repairs, insurance, depreciation, parking fees, tolls, licenses and garage rent for your car are tax deductible. Naturally, the deduction is allowed only for that part of the expense that is attributable to the business.

Although you can prove your car expenses by keeping a record of the amount paid for gasoline, insurance and other costs, Congress has established a simplified method, the Standard Mileage Method. Rather than calculating the operating and fixed costs allocable to your business, the standard mileage method determines your deduction by multiplying all business miles driven last year by the standard mileage rate.

This standard mileage rate is 32.5 cents a mile for all miles driven in 1998, as well as for all miles driven between January 1, 1999, and March 31, 1999. (For transportation expenses after April 1, 1999, the rate drops to 31 cents per mile; for 2000, the rate returns to 32.5 cents per mile.)

Naturally, the business portion of parking fees and tolls may be deducted in addition to this standard mileage rate. And, oh yeah, parking tickets are not deductible.

Paying Your Dues: If you’re a member of the A.D.J.A., N.A.M.E., or any local DJ association, your union dues and initiation fees are tax deductible – usually as an itemized deduction, subject to the two-percent floor imposed on personal deductions. Self-employed DJs may also deduct union dues, usually as a business expense. Your athletic club dues are not in the Tax-Deduction Zone.

Tuxedoes: Although somewhat controversial, the cost and upkeep of a "uniform," including cleaning, are tax deductible – but only if the uniform is required as a condition of employment and is not adaptable to general wear. Tuxedoes, unfortunately, are in the Ambiguous Tax-Deduction Zone: some accountants say tuxes are not deductible; others advise to take it as a deduction. But be prepared for a fight with that newer, friendlier IRS auditor. Here, the key is "not adaptable to general wear." In other words, your sequined tuxedo is not considered general wear, so it’s in the Tax-Deduction Zone, or on the Tax- Deduction Rack, or something like that.

After The Facts

Although every DJ will make use of the extended period allowed to file tax returns (until Autumn, in some cases), there is nothing in our tax rules that would prevent you from changing your mind about the income and deductions reported on an already-filed tax return. In fact, you can change your mind on your income and deductions on any tax return up to three years after you filed.

Your claim for a refund is made on Form 1040X (Claim for a Refund or Credit) by an individual who filed Form 1040, 1040A or 1040EZ. If you’re a corporation that filed Form 1120, your refund claim is made on Form 1120X.

And, no, the IRS won’t automatically bring you into the Audit Zone if you request an extension, file late or change your mind about an already filed tax return. In fact, I believe tax returns that are given a closer look by the IRS are selected in the early summer, from returns that are already in the hands of the IRS.

Preparing and filing your income tax returns – and paying the taxes owed – should be a no-brainer. Hopefully, that tax return will be based on the correct amount of tax computed on income from the DJ operation properly labeled. Naturally, that tax bill will be based on income that has been legitimately reduced to the bare minimum, thanks to the plethora of tax deductions available to the average DJ.