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The One Where The Indie Folk Singer Gets Audited by the IRS

Jan 28 | Posted by: Rebecca Loebe |

It was early September and I had only been home in Austin for 36 hours. I still hadn’t fully unpacked from the Labor Day festival run in Arkansas, and I was scrambling out the door to catch a flight to California. As almost an afterthought, I looked around for the mail and found a pile my roommate had made for me on the kitchen table, partially obscured by a ceramic bowl of fruit. Riding shotgun to the airport I absent-mindedly sorted through bills and junk mail in my lap until I came to it: a thick envelope from the IRS.

I froze. Sometimes thick envelopes are good; I remember praying for them when I was a high school senior applying for college. As a fulltime independent musician, a thick envelope from the IRS is definitely not considered ‘good.’ I read and re-read the letter in the car, at the terminal, on the plane, on the hotel shuttle. The IRS wanted me to come to their office to discuss five expense categories from my 2012 income tax return.  

Now I have a shocking confession to make: I am thoroughly, nerd-ily, ridiculously honest in reporting my income. I know, I might lose my indie musician cred if people find out… But at the beginning of my career I noticed friends buying houses with income and pay stubs from real jobs and I realized that if I ever wanted to have a shot at a “normal” life I would need to account for every dollar I earn. Plus I pay my manager and booking agent based on my gross income, so all that has to be out on the table.

I am equally diligent in reporting my expenses. Pretty much everything I earn playing music goes right back into my career; commissions are paid to the manager and booking agent, plane tickets, gas, food and hotels on the road, postage and other business expenses (not to mention little things like rent, clothes, guitar strings, groceries, health and car insurance and the occasional ill-advised app purchase). And that’s ok! I’m not complaining. I love what I do. Some mornings I’ll look up on my drive to work and I’m rolling through the Rockies in Colorado. Or cruising down the Pacific Coast Highway in California.

And sometimes I sleep on dingy couches in all-night downtown Boston rehearsal studios and/or wake up at 5 am to drive 300 miles to return the rental car and catch a flight to the next gig. This is the life I have chosen, these are the things I choose to do to make it work and I am grateful for every minute of it. But the mathematical realities of it must look pretty weird to the IRS. There’s cash coming in pretty much every other night, but at the end of the year there’s often little or nothing left (often less than nothing – I actually took a loss in this particular year, and I don’t even think I wrote off everything I could have). Besides all that, they must have been wondering how could one person really drive that much in a year.

As I digested the contents of the letter, I was frustrated that I was at the beginning of a trip that would keep me away from home (where what records I have are kept) for two solid weeks. Over the course of the following month I was home only in bits and spurts, a day or two here and there in between weeks on the road, never long enough to really pull out my various papers, spread them across the floor and have a good long cry  (widely regarded as the first step of preparing for an audit).

Luckily, one of my closest friends and touring cohorts Raina Rose was having a baby in October and I had cleared some time in my schedule to be home and help. Also luckily, Raina has a large supportive family who convened from all over the country to do the same, so no one really noticed when my “assist best friend with her new baby” time turned into “frantically photocopy, highlight and hole punch a bunch of old receipts and bank statements” time (I did get to meet her son Benny on the day he was born, and that was very special).

With a limited window of time before touring picked up again, I worked hard to focus and filter out distractions. The one diversion I allowed myself to indulge in was songwriting (I mean, there would be no business to audit unless I allow myself to pursue songwriting ideas when they come, right?). And that is how I wrote more songs in the past six weeks than in the 18 months preceding. Thank you IRS, I will remember you fondly in the liner notes for my next album.

The good news is that I have an awesome CPA. He’s the guy who represented Willie after everything went wrong. He came recommended to me by many established musicians that I respect, and he was very comforting when I told him the news. From the beginning he encouraged me to represent myself in the audit. He said his normal rule is to “never ever ever ever ever let the tax payer in the same room as the auditor,” but that he thought I was the exception to that rule.  His instinct was that I could explain myself better than anyone else, and that since I had filed “an honest return” I would have nothing to hide. After spending several weeks agonizing over whether or not I should hire representation it occurred to me that I actually didn’t have enough money to hire anyone, so… Decision made!

The meeting was pushed back a month to early December, because some credit card statements I was waiting on took almost a month to arrive (they finally came in mid-November. Side note: I will never go paperless again!).  As it turns out, I was only home for four days of that bonus month, but it was just enough time to get everything together.

On the big day I got up super early. My breakfast went cold as I checked and double-checked everything in my binder. I wish I could say that I meditated and stretched and did the other items on my ambitiously zen to-do list, but it took everything I had just to get out the door wearing matching shoes.

I parked and hustled into a giant federal building downtown that I somehow never noticed before (seriously, this thing is the size of the Deathstar. My only guess is that it has similar cloaking capabilities).I smiled wide, as I do when I’m nervous, and asked the security staff, cheerfully and loudly, how they were all doing. The head guard snarled in response and asked if there was any reason that I had just photographed a federal building. I was startled by the question. My historically short fuse with authority began to twitch.“Well…” I looked him in the eye. “I was planning to post a picture on Instagram with a snarky caption about how much it sucks that I’m being audited. Is that OK? I can erase it if you want.”He grumbled that it was fine. I was eventually released into the building and headed down the hall. I decided to tone down the friendliness offensive a wee bit.

I sat in the waiting room, clutching my binder. My auditor greeted me and led me into her cubicle. My mind raced with all of the advice I had received from various sources over the past few months (Look her in the eye! Don’t tell her anything! Be straightforward! Hire a professional to represent you!). I told her I was nervous. She said that was natural but that I shouldn’t be worried. She was very nice.

After a few minutes of small talk, she got down to it. “So,” she started. “Where has your music taken you?”It was a broad question, one that I could easily spend an hour or four answering if given the chance. I showed her my travel itinerary with the 150 shows I played that year and shrink-wrapped copies of my three most recent CDs. I told her about being on the first season of The Voice. Towards the end of that tale, I noticed one of her co-workers lingering in the doorway. He said he had watched the whole season, and remembered me from the show! As he drifted back to his desk I silently showered him with gratitude for making me feel just a little more legit.

She started asking specific questions about my life, my career, and then, my expenses. In the course of preparing for the audit, I had noticed a few small bookkeeping errors and decided to follow the advice of some - and ignore the advice of others - by just telling her about them up front.  She nodded and made a few notes. As I tried to paint a full picture of what my career and life look like I was completely unsure of whether I was doing a good job, talking too much or explaining too little. 

The best advice my CPA gave me before the meeting was that I should be prepared for long bouts of unbearable silence, and to not interpret these in any way or feel the need to fill them. As the meeting was winding silently down, the auditor informed me, still staring at her computer screen, that there would be no change to my 2012 tax status. More silence. I waited for the other shoe to drop.
She printed some forms for me to sign, and asked if I had filed taxes for 2013.  I nervously said yes, terrified that I was going to have to repeat the entire process. After a few more beats she squealed out loud.

“Oooooh! You made a profit in 2013!” The figure she was pointing at didn’t have many digits to it, but it was in the black. She beamed and said, “That makes me so happy!”

We shook hands and I exited the Deathstar smiling inwardly with the knowledge that she ‘got it.’ I often say that I survive and thrive as a professional musician thanks to my made up Pathological Brightside Oriented Personality Disorder - that is the ability to slough off obstacles and rejection as quickly as possible and instead celebrate every victory, no matter how big or small.Tonight I am celebrating what feels like a pretty significant victory – I faced many of my biggest fears all at the same time. I was audited. I defended myself. I looked The Man (who in this case was a very nice woman) squarely in the eye and explained my unconventional existence and, gosh darnit, I lived to tell the tale.  

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MANAGEMENTRalph Jaccodine. rjaccodine@gmail.com (617.393.9800)

US CLUB & FESTIVAL BOOKING: Mary Granata. mary@granataagency.com (973.208.7291)

RECORD LABEL: Blue Corn Musicdaria@bluecornmusic.com

PUBLICITY: Nick Loss-Eaton. nick.losseaton@gmail.com

EMAIL REBECCA: rebecca@rebeccaloebe.com