Five tax mistakes actors make

Management

Editor's note: This article was a hit with financially un-savvy actors last year, so we're presenting it again as a service to our readers. Mark Bradley is a veteran actor who also knows his way around a tax form, and he's dismayed by how rare a claim that is. With tax deadlines rapidly approaching, he offers a brief primer on the accounting errors that most frequently bamboozle his fellow thespians.

Mistake #5: Bogus tax deductions
Actors are great talkers, and we love to spread rumors. Unfortunately, sometimes the rumors that get spread around about tax deductions are just plain wrong. Three immediately spring to mind.

First, I've heard some actors say, "Oh yeah, I deduct all my clothes." No can do. The rule is that clothing is deductible only if it isn't suitable for street wear. If you bought a business suit and never wore it for anything but auditions and commercial shoots, it's still not deductible, because you could wear it on the street. The only exception to this rule is dance wear. You can wear it on the street, but it’s considered specialized work wear, like a nurse’s scrubs. (Cleaning and maintenance of your clothes used on the job are always deductible.)

Second, unlike classes, health club dues aren't deductible professional expenses. If an agent or director told you to get in better shape, even for a specific role, a gym membership is still considered a personal expense.

Third, I was horrified to learn that a lot of actors were telling each other that they could deduct ALL their restaurant meals, as long as they talked about the business over dinner! This is total, utter, absolute nonsense. To be deductible, you must have a clear, current business relationship with the person you’re hosting and you must discuss a specific business opportunity, not just the business in general. Even if at some time in the future, your dining partner may hire you for a job, going out for dinner with your friends is essentially social in nature and should not be deducted as business entertainment.

Mistake #4: Missed deductions
The flip side of taking bogus deductions is missing legitimate ones. A couple of deductions that shouldn't be overlooked are items for research and expenses that are deducted from paychecks. Many items that would simply be entertainment for the general public are deductible by actors as ordinary and necessary professional expenses. Books, movies, subscriptions, and so forth keep you up-to-date in the profession. Theater and movie tickets are also absolutely legitimate deductions as professional research, along with a reasonable portion of your cable bill. And don’t overlook expenses that are deducted from paychecks. Two that come to mind are Equity working dues and commissions withheld by agents.

Mistake #3: Deducting business expenses on the wrong form
Most actors have two types of income: employee income, reported to you on a W-2, and independent contractor income (self-employment), which may be reported on a Form 1099. (If you got paid less than $600 by an employer, they don’t have to send a 1099, but you still have to report the income!) Your self-employment income and expenses should be reported on Schedule C (or C-EZ), and employee business expenses on Form 2106 (or 2106-EZ). Some folks have told me that their accountants deduct ALL their business expenses on Schedule C, even those employee expenses that aren't attributable to 1099 work. I think that’s completely improper, and could be dangerous. Maybe those accountants figure they could bamboozle an IRS auditor, but I’d prefer to report expenses properly.

Mistake #2: Forgetting about local transportation
A professional tax preparer friend of mine says that the most overlooked business deduction is local transportation. Be sure to record your car mileage, bus fares, parking, tolls, etc. for your local trips in pursuit of your career. Transportation to job-seeking and career-building activities is always deductible. These activities include actual auditions and interviews, but also meetings with your agent, trips for coaching and lessons, union meetings, and errands to photographers, studios and printers to get your head shots, demos, and résumés. All these activities are ordinary and necessary expenses, and this is probably most of your mileage. A singer probably wouldn't forget to deduct the cost of voice lessons, but might overlook the cost of getting there. This may be because you usually won’t have receipts for these local transportation costs. And that leads us to:

The Number One mistake actors make about taxes: Failure to keep good records
The best thing to do to maximize your tax refund is to keep good records of your activities. This means that you should write everything down, and keep those records as you go along. From the example above, when you go to an audition or interview, write down your car mileage and what you paid for parking, or make note of the fare for public transportation. You won't have receipts for these things, so contemporaneous records are essential. You can’t just make things up at tax time! I also heard an accountant point out that if you just guess, you’ll probably underestimate. So keep accurate records.

The most credible records are written in your own hand, so I keep an old-fashioned paper date book. If you prefer to keep track of things electronically, make a printout at least once a week and hand-sign and date it.

Remember: as a professional in our industry, YOU are a little business, and keeping accurate records is an important part of your job!

If these tips pique your interest, Mark is leading a tax workshop for actors Monday, February 24 from 6:30-8:30 p.m. in the Ethel Berry Room of the Southdale Library (2nd Floor) in Edina. Admission is free and everyone is welcome.

Comments

1099ed vs. non-1099ed Income

This was such a useful article! I have a rather urgent question and I was wondering if you or someone might know something about it...

Someone I worked for this year didn't get a 1099 to me soon enough, and I didn't think I was being "1099ed" on that income. I did claim it anyway and filed that income as additional "non-1099ed self employed income." I later found out that a 1099 was filed and finally received it. My question is, do I need to amend my taxes to put that income into the 1099 category? As in, does it look like I didn't claim it right now since I put it somewhere else without the ID numbers on the 1099? It does not affect my total income at all. I was planning on amending and then I started reading all this stuff online about how amended tax returns have a greater chance of being flagged for an audit, so now I don't want to amend if I don't have to.

Does this make sense?

Cable Bill

Thank you for this! What is a "resonable portion" of my cable bill to deduct? 20%?
Catherine Johnson Justice

Question about mileage

Awesome!! Thank you for posting this! I have had so many conversations with follow artists on this topic and this is super helpful!

Question, for Mr. Bradley or anyone who's in the know:
I'd always been told by my tax preparers (who are familiar with artist deductions) that the first and last trip of the day is considered regular commuting and could not be deducted, but all other business mileage can be deducted. True or false?

Deductible mileage

The basic rule is that mileage for job-seeking and career-building activities is always deductible. These would include actual auditions and interviews, but also meetings with your agent, trips for coaching and lessons, union meetings, and errands to photographers, studios and printers to get your head shots, demos, and résumés. All these activities are ordinary and necessary in the course of pursuing an acting career, and this is probably most of your mileage.

Driving to a regular job, including a theatre job, is commuting and not deductible. We encounter a grey area when it comes to driving to temporary (“freelance”) W-2 jobs. The Instructions for Form 2106 say that if you have at least one regular work location away from your home and you travel to a temporary work location in the same business, that’s not commuting – and is therefore deductible. So let’s say you’re doing a show in a theatre (a regular workplace), and then you get a radio spot. It would seem that your radio spot is a temporary job in the same business. But what if you’re not doing a “regular” job when you do the radio spot? Some would argue that since the work is temporary in nature, it should be deductible.

Other people are much more restrictive. They say that if you’re driving to work, no matter how temporary it is, it’s commuting and non-deductible. But what if you have a studio in your house? Then your home is your principal place of business (at least for voice work), and your commute would therefore be zero, and any driving you did away from home would be deductible…..for voice work. I have a very simple set-up in my house just to record voice auditions, but if I book the job, I go and do it in a studio. So do I have a workplace in my house or not?

See how iffy it can get?

Two instances of driving to a job that would be deductible are when you travel to a job outside your regular metropolitan area and when you drive from job to job. I would also include driving between a job and a job-seeking activity. That last point is probably the source of what you’ve heard about deducting everything except your first and last trip.

The foregoing discussion applies to W-2 work. The rules for self-employment business mileage as outlined in the instructions for Schedule C are much looser, and I think you can make the case that all your driving is deductible. Again, most of your driving is for job-seeking and career-building, not for shoots and sessions.

I can’t give legal advice here. I would advise you to keep your records as regularly and as accurately as you can, so that whatever choices you make in claiming mileage deductions will be logical and consistent.

My accountant basically said

My accountant basically said that if you are being paid for a job, like a theater gig, the performance mileage is not deductible. It is the same as taking a bus, getting a cab, going to work. The stationary aspect of the job makes it not deductible. Unlike doing sales demonstrations in stores, let's say, where you are sent anywhere on a whim (or a touring show).

Interesting about cable and movie tickets and such (but told not to get carried away).

Also, this year there is a blanket charge you can take for up to 300-square-feet of home/business use space...as long as it is only business performed in that space ($5 a square foot).

And, as a self-employed person, you must show a profit in two of five (or three of seven) years in order to take losses against other income in any year. Right?

Also, if you keep an appointment book, been told that sit down at the end of each month and go to Mapquest and figure out your mileage if you wish to escape the hassle of writing it down everytime you are in the car.

Class-ical acting for the screen and stage.
Voice, On-Camera, Big Presence.
www.JoelThingvall.com

Thank you!!

Wow, thank you for your detailed explanation! I really appreciate it!