There are many season’s in the entertainment industry- award season, pilot season, commercial season. But perhaps one of the most important seasons that not every actor prepares for is tax season. Most artists have no idea what to do when it comes to taxes, which causes them to leave money on the table that could be in their pocket. The entertainment industry is a business, and actors are the CEO of their own business- so why don’t they treat it like one? With this in mind, I reached out to extremely experienced licensed tax preparer Chuck Sloan who is considered one of the leading authorities on taxes for performers. He was the Chairman of the S.A.G.- AFTRA- EQUITY VITA Program (Volunteers for Income Tax Assistance) for many tax seasons, as well as participating in the program for over ten years. He will make sure you know which career-related write-offs are IRS approved and which are red flags. But in order for him or any tax preparer to do their job well, they need their clients to be on top of their expenses.
So many actors get told different answers on what they can and cannot write-off on their taxes. Is there a black and white answer? What are some of the do’s and don’ts of write-offs?
SLOAN: You’re absolutely right, actors get told all sorts of things.When they have questions, we urge them to visit our FAQ page on our website, where we explain what the IRS says is right and wrong and then we explain it to them in layman’s terms so the actors understand.
What should an actor do during the year that can help make their life easier come tax season?
SLOAN: The answer is to keep all of your receipts. It could be as simple as getting a big empty box and throwing all of your receipts inside. Then going through them at the end of the year to add them all up. The biggest problem we have is when people don’t keep any records and try to “creatively” make stuff up.
With the constantly changing laws and regulations on taxes, what can every actor do to be safe in case of an audit?
SLOAN: Don’t go crazy when you get your taxes done. Meet with someone who knows the rules. Report only the receipts you actually have in your possession. I can’t promise you won’t get audited but at least you know you’re protected if you do. And of course, prepare with someone who understands the industry- they won’t let you write off all sorts of things like thousands of dollars in hair, makeup, clothing, and nails.
Some actors have been told to incorporate. What are your suggestions for actors that are considering taking this step?
SLOAN: The amount of money you have to make to benefit by incorporation has lowered as a result of the new tax laws. In general, we’re now saying at least $70,000 of earnings under W-2s specifically as an actor and then, of course, significant deductions such as agent and manager commissions totaling 20 to 25%.
Anyone considering incorporating should also sit down with somebody who knows what they’re doing, not just from a tax viewpoint but from a legal viewpoint. Too many times actors are not paying themselves properly from their corporations and they’re trying to walk away with money that’s not really theirs and if the IRS catches up they’re in trouble.
What do you wish every actor knew about doing their taxes? Any resources etc.
SLOAN: With the new tax law most taxpayers will not be able to use their expenses anymore because that avenue has been erased. But that doesn’t mean they shouldn’t keep the receipts. They can still use those against their cash income and by cash, I mean Non- W-2 income.
As far as a resource goes go to our website and spend the afternoon reading everything you can.
Any last pieces of advice?
SLOAN: Number one piece of advice is that tax time is all the time. Meaning every time we go out and do something for the business keep the receipts and some sort of a record as to how you paid the bill. – Chuck Sloan
“Finance is not merely about making money. It’s about achieving our deep goals and protecting the fruits of our labor. It’s about stewardship, and, therefore, about achieving the good society.”
– Robert J. Shiller
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(Photos courtesy of footlights.click and flickr.com)