While you’re making a list of resolutions, you should start compiling another list—of your 2013 employers.
“The biggest thing we tell our clients at this time of year is write down a list of everyone who has paid you money in the last year,” said Chuck Sloan, a Los Angeles–based tax expert who works with actors. “That way you know who you should be expecting a tax form from and who to contact if you don’t get it.”
One piece of mail actors in Los Angeles don’t want to get is a letter from the city’s Office of Finance. Creative artists (a category that includes actors, dancers, and writers) are subject to the city’s business tax—but only if they make over $300,000 or fail to register with the city by the end of February.
Sloan noted the city’s tax is about $5 per $1,000, unless a penalty is assessed.
“If you’re a performer in the city, you probably want to file for the exemption with the city. Because you have no idea if you go out for a job when it may be paid in cash,” he said. “If you made cash income [non-employee income] in the city of Los Angeles, then in theory you have to pay the fine.”
The Scrooge-spirited letters from the city are worse than a visit from the Ghost of Christmas past.
“It doesn’t matter how long you’ve lived here, let alone if you’ve just showed up in town. The reality is you may not have a clue that this pertains to you and it’s a real pain in the butt for us,” said Sloan, a former columnist for Backstage. “We end up getting hundreds of phone calls every year from people who have received letters from the city of L.A. who have no idea what this is about.”
Another mistake actors make when it comes to their taxes, according to Beth Lynn Kelly, a tax expert and performer, is “assuming that a credit card statement without a backup receipt is enough for an audit. Most auditors want to see an actual receipt.”
Moreover, she said, people who work as independent contractors or receive 1099 income often forget that “they are going to pay 15.3 percent to Social Security on top of the federal and state taxes already owed on the income.”
And don’t think the employer at your day job has you covered, she added. “If you make $20,000 at a restaurant and they took out only $100 for state tax, you’re probably going to owe the state money at tax time,” she said.
Another place actors run into trouble is claiming too many work-related expenses. “If you’re making $40,000 and you spent $30,000 on classes, the IRS notices that,” said Lynn Kelly. “There’s just red flags with actors. A lot of them are trying to claim a lot of miles, business meals. If you’re making $35,000 as an actor, you did not spend $7,000 on business meals.”
Lynn Kelly suggests that actors look at doing their taxes as an opportunity for reflection.
“It requires them to look at their receipts and see what they’re putting into their career,” she said. “A tax return isn’t just a tax return. It’s an overview of your whole year. I know it can be very tedious and boring, but it empowers you as an actor. It’s a reality check.”