Robert J. Fedor, Esq., L.L.C.

Musicians often susceptible to pitfalls of stardom

Many Ohio residents have likely heard about the tax woes of stars within the music industry. Willie Nelson, Mary J. Blige and Lauren Hill are three of the most-recent and notable music megastars to face tax crimes charges. In fact, it seems as though there is a disproportionate number of music artists who encounter tax problems. Many within the industry point to a variety of factors that often contribute to the financial downfall of artists within the music industry.

In many cases, musicians come from humble means. When faced with fame and fortune many simply make poor financial decisions that eventually have serious tax implications.

In the music industry, artists are typically paid upfront and in full. This means that if an artist is promised a sum of $50,000, they receive a check for that amount with no taxes withheld. Likewise, stars and musicians alike often agree to make special appearances or perform at events for cash payment. Many also, unfortunately, wrongly assume they are not required to count such cash payments as income on IRS tax forms.

While it can be hard to feel too sorry for anyone who regularly receives payments in excess of $50,000, most music stars also have numerous costs associated with their fame. The term entourage is typically used to describe the group of paid individuals that reguarily accompany a musician. From body gaurds to hair stylists, these individuals often depend upon the artist for an income. One artist, therefore, may be supporting a dozen or so individuals.

Add to the costs associated with having an enterouge botched sales or failed side ventures like devalued real estate, and it's easy to see how a musician's seemingly handome earnings quickly dwindle to nothing.

The best advice for musicians or any individual who suddenly encounters considerable amounts of wealth is to hire a financial advisor and attorney. Financial and legal professionals have a fiduciary duty to always act in a client's best interest.

Source: Press of Atlantic City, "Why so many music stars run afoul of the tax man," Jim Beckerman, June 1, 2013