What are some common mistakes to avoid when receiving royalty payments?

1 Not registering your works

One of the most basic and essential steps to ensure you receive your royalties is to register your works with the relevant entities, such as your PRO (performance rights organization), your MRO (mechanical rights organization), your distributor, or your label. If you don't register your works, you may miss out on potential income or lose track of your ownership rights. To avoid this mistake, make sure you register your works as soon as possible and keep your information updated.

2 Not understanding your contracts

Another common mistake is to sign contracts without fully understanding the terms and conditions, such as the royalty rates, the payment schedule, the deductions, the recoupment, the audit rights, or the duration. This can lead to disputes, underpayments, or unfavorable deals. To avoid this mistake, always read your contracts carefully and consult a lawyer or an accountant if you have any questions or concerns. Also, keep copies of your contracts and review them periodically.

3 Not tracking your royalties

Even if you register your works and understand your contracts, you still need to track your royalties and monitor your statements. Sometimes, errors, delays, or discrepancies can occur due to human or technical factors, such as missing data, incorrect calculations, or system glitches. To avoid this mistake, always compare your statements with your expectations and verify the accuracy of the information. If you notice any issues, contact your payor and request a correction or an explanation.

4 Not filing your taxes

Receiving royalty payments also means paying taxes on your income. However, some musicians may neglect or forget to file their taxes or report their royalties correctly. This can result in penalties, interest, or audits from the IRS or other tax authorities. To avoid this mistake, always keep records of your royalty payments and expenses and consult a tax professional if you need help. Also, be aware of the tax treaties and withholding rates that may apply to your international royalties.

5 Not conducting an audit

Finally, one of the most effective ways to ensure you receive your royalty payments is to conduct an audit of your payor's books and records. An audit can help you identify and recover any underpayments, errors, or breaches of contract that may have occurred over time. However, some musicians may be reluctant or unaware of their audit rights or the benefits of an audit. To avoid this mistake, always check your contracts for the audit clause and the statute of limitations and hire a reputable royalty auditor if you suspect any issues.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?