All your W-2s should be in by now. If you haven't got them yet, they don't know how to find you. Start calling around. The IRS will not accept the excuse that a W-2 wasn't sent to you. Don't help balance the budget all by yourself with penalties.
It's hard to believe, but Congress has actually given the Actor a special deduction. Whether it's because we once had an actor for President or because all politicians are actors under the skin, someone has taken into consideration the fact that actors have to spend a big chunk of their income looking for work. What they came up with is the QPA (Qualified Performing Artist) Deduction.
This is how it works. Nearly all occupations must choose between taking the Standard Deduction or their actual deductions. If you qualify for the QPA deduction you get to take both. To qualify, you must meet all of the following requirements: You must have received two significant acting W-2s during the year ($200 or more is considered significant enough). If you had only one job, you can't claim the deduction no matter how large or small the income is. Your acting deductions must be 10 percent or more of your total income and your total income cannot be more than $16,000 for the year.
It's also important to note that you can claim acting-related expenses only. Don't mix up medical or other deductions in your computation. If you're married, you must file Married Filing Jointly and each person (if both are actors) must each have two acting W-2s. The gross income limit is the same as Single, so here's a case where it's better being Single. Put your deductions on Form 2106 and carry the total to line 31 on the 1040 and write "QPA" to identify the deduction. If you're filing MFJ, both husband and wife would use their own Form 2106 and both must meet the 10-percent rule.
If your remaining deductions: medical, charitable, other employment expenses, etc. exceed the Standard Deduction, you would still use the Schedule A.
Tips on Tips
Once you've gotten your W-2s, there are a couple of things you should be looking out for. If you're still struggling as an actor, you're probably doing all sorts of non-acting jobs. Have a look at Box 8 (Allocated Tips). If you've been working as a waiter in between acting assignments, the IRS wants to make sure you've been reporting all your tips. If you're confused on how they come up with these numbers, here's how it works. Every day at the restaurant, the bookkeeper totals up all the sales that were made at your station, he takes an average tip amount of eight percent, subtracts what you reported that day (the amount in Box 7) and the difference goes into Box 8. This amount has to be included in your income and the Social Security Tax has to be paid by filling out Form 4137.
But you tip out to the busboys and cooks, you argue. Sorry. The eight percent was a compromise between the IRS and your employer. They wanted to tax the tips at a higher percentage, but they gave everyone the benefit of the doubt and settled for the eight percent. In truth, most good waiters make more than that. If you truly believe that you don't average out at eight percent, you must keep a daily tip record that shows the tips you made and how much of it you shared with others. And be prepared to offer it as proof if you disagree with the amounts in Box 8.
If you're a resident and worked out-of-state, another problem frequently arises. You'll often find the employer has taken out taxes for the location state. This is a correct action on his part, but your problem lies in the fact that as a resident of California, this income is also taxable here in California. What you're obliged to do is make out two State tax returns. If this sounds like double taxation, don't worry. California allows you to claim a credit against any taxes you pay to another state.
There's one more thing to watch out for. If you do a film in more than one state, you will probably receive a W-2 for each state that shows only the income earned in each of the separate states. On your California return, you should report the amount that appears on your Federal W-2. Remember: a full-year resident of California must report income from all sources.
Next week: more deduction trials and tribulations. BSW
Frank Wyman is a tax consultant for Amanda Tax and Financial Services.