Lil Wayne (Getty Images)
In 1966 George Harrison wrote the Beatles' song 'Taxman' when he found out that the Beatles were earning so much money that they qualified for a 95% tax on their earnings. The tax rates have come down in England and here in America, but the Internal Revenue Service (IRS) is keenly after their cut. According to Rock 'n' Roll accountant Bill Zysblat, a partner at RZO Productions, a leading authority on global touring accounting, the IRS has a special division chasing entertainers.
"When the IRS finds an area that they believe is being abused or could yield more taxpayer dollars, they add manpower to it," says Zysblat. "A few years ago, they concluded that athlete and entertainer taxes might be escaping their radar. So they reinstated a division to only deal with this area."
What started as a means to collect tax revenue from foreign touring musicians and overseas athletes competing in the US has turned into a bonanza of tax collecting from American musicians, Hip Hop artists in particular. Artists and executives like Suge Knight ($6 million), Nas ($3 million), DMX ($1.5 million), Lil Wayne ($1 million), Swizz Beatz ($645,000), Snoop Dogg ($598,000), Fat Joe ($140,000), Method Man ($40,000) and numerous others have been rung up by IRS in the past year alone.
The athletes and musicians from overseas have started to negotiate tax rates with the IRS before they even embark on a tour. They are generally required to pay taxes in the countries they perform in. They also have to pay taxes in their home country, but most are given tax credits for what they have already paid in the US. It has become standard practice according to Zysblat who has had U2, David Bowie and Sting for clients.
"Over the last several years, they have come down hard on artists who do not negotiate well in advance of their tours," he says.
"We are seeing a number of smaller artists who traditionally toured and possibly filed tax returns after year-end, now being approached in advance," Zysblat says. American touring musicians are being caught after the fact, while foreigners pre-negotiate deals to lower their tax rates. The entertainers here in the US should take a hint and run their expense and revenue schemes past the IRS in advance to avoid huge tax bills and penalties.
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