I have always believed that every taxpayer should understand taxes well enough to prepare his or her own returns. Nevertheless, unless you prepare returns regularly, I would urge you to have a professional at least look over your work, if not prepare your returns for you. Although the associates in my office—all of whom are also actors—have many years of tax experience, they all ask one another to look over their personal returns just to be sure they didn't miss anything. It's a matter of not seeing the forest for the trees: They are so close to their own numbers that they often fail to consider the whole picture.
This doesn't mean you shouldn't participate fully in the process. You are the only person responsible for the tax return you are signing, and you will be paying the bill if you're audited or paying additional taxes down the road if something is left out. It's important for you to understand which deductions you are entitled to use every year, and to be able to point out these deductions to your preparer. All too frequently, career tax preparers don't fully understand write-offs for performers—and thus can miss valid expenses.
Some preparers believe they're doing you a favor by claiming a few invalid expenses. These deductions may increase your refund—and for the moment make you a very happy client—but they also increase your chances of being audited and paying the consequences (plus interest). You need to be able to spot such claims. Remember, actors who do their homework throughout the year (keeping receipts and a written log) usually have more than enough legitimate write-offs. They have no need to make up numbers or use bogus deductions. And in any case, why would you want to sign a return that will keep you wondering and waiting, looking in the rearview mirror to see if the IRS is going to come a-knocking?
While commercials for personal tax-preparation software may promise that its computations are 100 percent accurate, there's no guarantee that the information you feed into the program will be equally accurate. Tax software allows you to claim "qualified performing artist" status (and get a substantial break) whether or not you qualify according to the law. And these programs won't stop you from putting all your acting deductions on the wrong form. Either of these mistakes could cause the IRS computer to select your return for a manual review by an employee, who may then decide that some of your deductions aren't legitimate.
One of the secrets of a successful return is to prevent the IRS from having any reason to take a manual look at your paperwork—and if it does, to make sure there's nothing about the return that would cause the IRS to call you in. I don't know of any home software with a special understanding of taxes for performing artists that can guarantee such an outcome.
Of course, to be honest, no preparer can make a 100 percent guarantee that you won't be audited. Anytime you choose to itemize your expenses instead of taking the standard deduction, the IRS may have a reason to challenge the return. But don't put yourself in the position of losing potentially hundreds or even thousands of refund dollars each year because you fear an audit. With the correct preparer and confidence in your own paperwork, you should be secure.
Because of the business you're in, and the expenses you're forced to pay to remain in the business, at some time you're likely to face an IRS auditor across a table. But that doesn't mean it should cost you one dime more.