When you work as an employee—and if you're working under a union contract, that's what you're doing—you must have taxes withheld from your paycheck. This means that when you get your paycheck, the amount on it can be considerably less than your actual salary.
Of course it's frustrating to see your earnings whittled down, but consider the alternative: If you don't pay as you go by having taxes withheld throughout the year, you'll owe all that money to the government in one lump sum at the end of the year. And that sum could be more than you have available in your bank account. After all, anytime actors have a few "extra" dollars in their pocket, they tend to spend them on new headshots, another class, or some other expense to further their career. That's why you should be glad the government insists on withholding your taxes, because when tax time comes, you don't want to owe money you can't pay.
The amount withheld from your paycheck for federal taxes is an estimate based on your gross income for the week. (Although this is an oversimplification, it gives you a basic understanding of the process.)
When you start a new job, you fill out a form called a W-4, which asks if you're single or married and how many exemptions you'll be claiming on your tax return. Armed with that information, in tandem with your weekly salary, the payroll computer estimates the amount that must be withheld from your paycheck to cover federal taxes. To make this calculation, it assumes you will earn the same gross income every week of the year. The computer doesn't care whether your paycheck reflects only one day's work or a full week; it considers the amount weekly income, calculates your projected yearly income based on it, and withholds the proper amount.
That's why if you earn $5,000 in one week, federal taxes are withheld at a 35 percent rate and your big check turns into peanuts. As far as the computer is concerned, $5,000 in one week means you must be earning $260,000 for the year. However, if you make only $200 the next week, a much smaller bite will be taken out of your paycheck. Why? Because based on that salary, your yearly income would come to only $10,400, which places you in a lower tax bracket.
If you're single and earning $260,000 per year, paying taxes in the 35 percent tax bracket means your annual federal tax bill will be about $90,000. As a result, the computer has to make sure it withholds a weekly amount that, multiplied by 52, will add up to $90,000. That requires withholding about $1,750 of your $5,000 check
In addition to federal taxes, you must have 7.5 percent of your gross income withheld to pay your share of Social Security and Medicare. This withholding ceases once you've earned $90,000 in yearly income. Unfortunately, most performers don't earn $90,000 from just one employer. The result is that an actor is likely to have 7.5 percent taken out of every check he or she receives, because one employer's computer doesn't have a clue what you made working for other employers.
So when you combine federal taxes, Social Security, and Medicare, you can end up having as much as 42.5 percent of your gross salary withheld from a large weekly check. And we haven't even factored in state and city taxes.
State tax rates are usually lower than federal tax rates, although, at up to 9.3 percent in California and 7.35 percent in New York, they can still hurt. You may also have something withheld for disability insurance; in California, it's usually 0.8 percent of your income. And though many cities don't levy city taxes, if you live and/or work in New York City, for example, you may be taxed at up to 4 percent.
Thus, on a sufficiently large one-week paycheck, you can find more than 50 percent of it being withheld in taxes. This may seem onerous at the time, but it won't seem so bad when you get a large tax refund because the government has greatly overestimated your yearly income.