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Financial Advice

New Year, New Start

New Year, New Start
If you're taking the time to read this column this early in the year, then congratulations on your wisdom in wanting to be prepared. The reasons most actors are concerned about their taxes are: to stay out of trouble with the Internal Revenue Service and to receive every penny possible in their tax refunds. Success in both areas requires that you keep thorough records throughout the year, but that process doesn't have to be difficult or overwhelming. Just develop some simple habits, so when it comes time to prepare your tax return, you'll be ready. And the time to develop those habits is right now, at the start of the year.

Keep Records

Find a location in your home where you can store your records and receipts safely and consistently. A large desk drawer, a filing cabinet, even a sizable cardboard box is fine. Then, when you spend a dime on anything to do with your career, get into the routine of keeping the receipt and making sure it gets into your file at the end of the day.

If there is even the slightest question as to whether the expense is deductible, keep all the paperwork connected with it. Don't keep just your credit-card slips, copies of the checks you write, and debit-card statements as proof; always keep the original receipts as well. Duplication works wonders with the IRS.

For example, if you spend money at Target, you will need proof that what you purchased was related to your career. Only an itemized receipt will specify what the purchase was. Your debit-card statement will simply note "Target," the date, and the amount—and that's not enough for the IRS.

Keep records of your auditions. If your audition appointments arrive by email, print out copies and put them in the file. If you care more about saving a tree than getting audited, create a PDF copy and save it in a special folder on your computer. Then periodically copy the folder onto a USB flash drive and store the flash drive in the file. That way, even if your hard drive crashes, you are protected. A four-gigabyte flash drive, enough for all your records, now sells for less than $20.

If you get your audition appointments by phone, write them down on a piece of paper, then put that paper in your file at the end of the day. Believe it or not, that handwritten note is as good as or better than an email as proof for the IRS.

Business Activities

As you go through the day, you should try to keep a journal of all your activities that are related to your business as a performer. Meetings, classes, auditions, rehearsals, and trips to purchase supplies and props all count as business trips when writing off business expenses. This is hugely important for business mileage when you drive a car, but it's also valuable when you want to claim a portion of your MetroCard or cab expenses on your tax return.

The IRS prefers "contemporaneous" handwritten notes in day-to-day journals, but many of us are now using smartphones and other electronic devices to store our daily calendars. Be sure to periodically back up your calendar onto your regular computer, just in case you lose your phone. To be extra safe, also back it up onto the flash drive you store in the file.

And whatever you do, when you get paid, don't throw away your check stubs. At the very least, toss them in your file. But even better, put them in a large envelope first, so they're separated from the rest of the receipts in your file, making for easy access throughout the year.

Car Owners

One last thing: If you own a car, go out right now and write down the odometer numbers, along with today's date, and store the note in your file. You will always need your start-of-the-year and end-of-the-year mileage to validate the business usage of your car. Maybe for 2010 you'll be able to use the real numbers.

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