Don't Cheat Yourself or the IRS

Every year, we are confronted by actors who either didn't know about or simply disregarded the advice to keep their receipts and records. As a result, they decide to skip the process of writing off their legitimate expenses on their tax return. Even worse are those who estimate or make up numbers. They think this is acceptable because they know they spent money on their career during the year and believe they should be able to get credit for it, even if they didn't keep their receipts. Many of them go to tax preparers who are more than willing to go along with this charade; some even help them create these imaginary figures. But please, don't try to cheat your way through this process. When you fabricate numbers to boost your expenses, you bring on a world of hurt and fear.

A couple of years ago, we had someone come into the office who was being audited and was scared stiff. Looking at his deductions, we saw he had written off $2,000 for cell phone use. That's certainly possible. The Internal Revenue Service allows you to deduct whatever amount you can establish was spent in the business of being an actor. Thus, assuming our client could validate 50 percent of his cell phone use for acting, his bill for the year should have been at least $4,000. Unfortunately, it was only $1,200. When I asked where the $2,000 figure came from, he told me, "My preparer rounded up, then wrote off the entire amount." The rest of his expenses were calculated pretty much the same way. He was in trouble, and he'll be an audit target for years as a result.

This kind of game-playing is completely unnecessary. Would you try to ad-lib your way through an audition or go on stage without learning your lines? But when it comes to taxes, actors complain to us that "it's a real hassle" or "it takes too long."

Really? Why would you bust your butt to get work throughout the year only to give your money away by not doing everything possible to keep all your receipts in order to get a full refund? Every $1,000 you can add to your deductions means an extra $150 in your pocket—and that's just in the 15 percent tax bracket. Records and receipts worth just $4,000 can mean $600 back from the government. Isn't that worth about eight hours of work to add them all up? For many actors, this becomes one of their best-paying days of the year.

If you didn't keep your receipts throughout the year, it isn't that hard to replace them. Most of us use checks or debit and credit cards for payments, and most of these records are available online. They can be downloaded in minutes through your credit card company or bank. Place those files in a separate folder on your hard drive, then back up the folder to a USB flash drive for additional protection.

Go through those records, mark down all the acting-related expenses, and add them up. Admittedly, any expenses you paid for with cash won't show up. But if you made substantial cash purchases, chances are you can remember them. In that case, go back to the vendor and ask for a second receipt.

Now is also the time to record in a calendar or journal your acting classes, auditions, and any regular business-related meetings you had during the year. You'll need this for the purpose of deducting mileage expenses. If you didn't keep a list of all your auditions, your agent or manager may have a record of them. Check it out. That list—and your memory—probably won't be around in a few months.