Tax time is no fun for anyone. It’s not fun when you’re rich and it’s less fun when you’re broke. And as an artist, nothing could be less sexy. I’m hoping to make it slightly sexier today. Fingers crossed.
No matter how much money you’re making as an actor/waiter/temp/other, let’s reframe the way you think about tax time. It’s really easy to forget about it for most of the year, but you’re doing yourself a disservice by not keeping adequate records. I’m sure you’ve heard the old advice: As an actor, you are the CEO, CFO, Head Marketing Director, etc. for your business. I want you to treat it as such. As Steven Pressfield would say – It’s time to “Turn Pro”!
Log Your Income
Set up a spreadsheet in Google Drive. It’s free and you can access it from anywhere, so no excuses. If you don’t know how to set it up, click the gold bar below for access to a swipe file of my own spreadsheet!
When you receive a payment, make sure to log it like so:
It’s a pain in the booty, but you’ll be thankful when it comes time to do taxes and know exactly how much you made and how much commission you can deduct!
Keep Your Receipts
Keep the physical/e-receipts receipts for everything. I thought it was okay to just keep my bank statements. I was wrong. I don’t mean to be scary, but actors get audited up to five times more frequently than “regular” folk. And if that day comes, you will need the physical receipts to take the deductions. For e-receipts, you can create a folder in gmail or on your computer, or sending everything to Evernote.
Track your 1099 income
If you didn’t fill out a W-4 on set, or if it’s a non-union job, chances are that it’s 1099/independent contractor work. It may be super sexy to get that $10,000 check into your hands without pesky taxes taken out. But beware! Uncle Sam always gets his cut! Someone’s gonna come a-knockin’ for at least 30% of your 1099 income around tax time. Do yourself a favor and DON’T SPEND IT. Put that money away into another account.
If you anticipate earning a lot of 1099 income this year, I’d consider making quarterly tax payments of a couple hundred bucks each. Ew! Gross, I know. However, on April 15th when you’re already crying over shelling out that 30%, guess what’s going to happen! The IRS is gonna slap you with a “late payment fee” for all of the money they should have had throughout the year. And it will be far more expensive than the piddly 1% interest you earned in your savings account. Just bite the bullet and do it!
Also with a lot of 1099 income, I think it’s extra important to pony up the dough for an accountant that specializes in the performing arts. They can help you by applying deductions against the 1099 income and significantly reduce the amount you owe.
Understand Your Deductions
There are many rumors about what actors can deduct. I’ll quickly try to address some of those here.
1. Clothes/Hair/Makeup/Nails – You may only deduct these things if they were for a specific job. And, if push comes to shove, you need to be able to prove that it was required with a written note from the employer. For example – if you’re asked to have your nails done for a print job, that would count. Keep the receipt and write the job on the receipt. The criteria the IRS uses for clothing deductions is this: If it is suitable to wear on the street, it is not a deduction. So, your chicken suit for that KFC audition? 100% deductible!
2. Medical expenses/Car expenses – YES! Keep all receipts! And, as TERRIBLE as it is, track your mileage. Download a free app on your phone and just do it.
3. Meals – Any meal in which you discussed business (agents, scripts, classes) you may deduct. Make sure to write on the receipt who you met with and what you talked about.
4. Gifts for agents/managers/casting – You’re allowed $25 in gifts per person, per year. Keep your receipts and write it down.
5. Your gym membership/cell phone/cable – You may deduct a percentage of these. You’ll be asked to calculate how much you use your phone/cable for business. I usually deduct 75% for my phone and 50% for my cable.
6. Classes – YES! 100% Deductible. Woohoo!
There are many more deductions and situations than I’ve been able to list here, but these seem to be the ones that get argued about the most.
Hopefully, these quick n’ dirty tips help you out a little. Just remember to keep records as best you can and sock a little money away so that you’re not hurting when Uncle Sammy wants a slice.
****DISCLAIMER: I am not an attorney or a CPA. All info here is to the best of my knowledge from personal experience and you should call your accountant with any questions. If you find any info in this post to be in error or that laws have changed, kindly let me know at firstname.lastname@example.org and I will update the post. Thank you!****
****This post originally appeared on Msinthebiz.com****