One of the areas of greatest concern to actors is the deductibility of road expenses. It doesn't matter whether you toured or were in repertory, at a regional theatre or in a dinner theatre. Away from home, however, means that you must be away overnight. For instance, living in Manhattan and working at a theatre in Westchester would not be considered out of town, since you came home to sleep every night.
Most living expenses you incur while working away from home are deductible. These include hotel and lodging expenses (including business phone calls while away from home); food; local transportation in a strange city; rental of an automobile for business purposes; tips to porters, maids, and bellmen; and transportation costs if you were called home for an audition or to meet with your agent.
Of course, the most important receipt to keep is for lodging. If you stayed in a hotel, make sure that the bill has your name on it. If you shared a room with someone, make sure you are billed separately and that the bill has your name only. If you rented an apartment while away, make sure you get a rent receipt. Paying by check might not be enough verification. You need something that specifies that the amount you paid was for rent.
The Cost of Meals
You may deduct the actual cost of your meals while away, as verified by your restaurant receipts or grocery bills, or you may take the standard meal allowance. We touched on this a few weeks back. This method replaces the actual cost method and allows you to deduct a set amount both for meals and incidental expenses (i.e., laundry and tips), depending on where you travel. This method would be used instead of keeping records of actual meal expenses.
If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. The standard meal allowance varies from city to city. The rate is either $30, $34, $38, or $42 per day. (These rates are up from last year.) A list of these cities can be obtained from the IRS. To be sure, check the list carefully. If the city that you visited does not appear on the list, you can assume that it falls into the $30 category. Also, don't forget that when deducting meal expenses, you are only allowed to deduct 50% of the amount, no matter which method you choose. Be careful about this.
Per Diem Rules
Now for the fun. On a lot of out-of-town jobs, the actor receives per diem payments. The rules concerning the accounting of these per diem amounts are somewhat confusing. Simply put, under certain conditions, employers are not required to include on your W-2 the amounts paid to you for per diem or expense money. Generally, if an employer gives you per diem that is equal to certain government rates for various cities in the country, and provided that you are able to substantiate those expenses to your employer, you won't find per diem included as income on your W-2.
Of course, if the per diem is not reflected as income, then you should not deduct the amounts you spent while on the road for items usually covered by per diem (i.e., lodging and food). However, if you determine that you spent more than the amount received in per diem, you may deduct this excess amount. If an employer gave you an amount that was in excess of the specified government rates, that amount will be included as income on your W-2. These rules and the specified government rates for the various cities are explained in full in IRS Publication 463, available to everyone free of charge.
Commuting Is Not Deductible
We mentioned above a situation in which a person lived in Manhattan and worked in Westchester. Since he came home every night he could not deduct his day-to-day expenses. Well, what about at least his expense for getting up to Westchester every night? This is very expensive. We had mentioned earlier that transportation expenses incurred while looking for work, whether away from home or in your home city, were deductible. Do not, however, confuse this with the cost of travel to get to and from your job. This is called "commuting" and is definitely not deductible! Even if you take a cab home from a late-evening performance--even if it is required by the stage manager, so that you can get home safely and return for tomorrow's performance--it is still considered commuting and as such is not deductible.
Check Your W-2s
Many times you hear the saying, "If it appears in print, it must be true." Don't believe it. Especially when it comes to your W-2s. All too often, people assume that the amounts recorded on their W-2s are totally correct, without even bothering to check the amounts against their own records and pay stubs. The results could be disastrous. We told the story last year of an actor who was paid $900 a week--no per diem or extras, not one penny. He came to us, noting that he had been on tour for exactly 12 weeks. This should have come to $10,800 from this employer. His W-2 read $14,700.
Of course, this "extra money" had already been reported to the IRS as income--money he never received. He said, "I never noticed it." The actor tried to contact the production company, but was informed they were out of business.
Several days later, two more actors from the same show came to us and each one had a difference of more than $2,200, which they never received. Can you imagine how much more tax these actors would have had to pay if this "error" had not been picked up?
We must admit that this was discovered by accident. The best tax preparers have no way of knowing if an error has been made on your W-2. You must know this yourself. The only way: You have to keep a record of the deductions from these checks. A nuisance and a drag? You must bother with it! These "errors" happen too often. No one knows better than the writer of this column that most actors dislike keeping books, but this record is a must.
What Do I Write?
Did you ever get anxious about how many exemptions to write in when filling in your W-4 for a new job? The instructions for this form are lengthy and just a bit convoluted. We provide a service to our clients year-round that has proven over the years to be of tremendous assistance and has avoided headaches. Our clients are told to call us any time they are required to fill out a W-4 for a new job and they are unsure of how many exemption allowances to put down.
When you are given a W-4 to sign, think carefully before you write in how many exemption allowances you are claiming. A lot of people claimed too many last year and they are in a grand mess now.
Imagine: an actor gets into a first-rate road company, with a salary of $1,400 plus $600 per diem, and he claims nine or 14 dependents. Even with that kind of income, many actors can't save a dime on the road. When their taxes are prepared, they are told they owe a bundle and they are at a total loss. Always the weak excuse, "But they told me it would be okay."
Who told them? Of course, someone who knows nothing about everything. If you are one of the lucky ones who have a year-round theatrical tax man, you can talk to and get the proper information from, then you are in good shape. But don't ask around. If you are in doubt, always claim "one"--if you are single, of course, and have no other dependents.
Claiming too many has been a cause of so much pain to so many at tax time. We tell our clients the proper number of exemption allowances to claim so they get the most money from each paycheck and have a modest refund at tax time. In our profession, an actor could be idle for months and when he does "connect", he must have someone to guide him. And nobody but your TC--who has your records in front of him when you call--has the right to give you the proper guidance.
Late W-2s
We are now well into the tax season and many actors are complaining they have not yet received their W-2 forms from their former employers. If you are still waiting for some of your W-2s and want to hasten them along, send us a self-addressed stamped envelope and we will forward to you a "W-2 Request Form." It is an extremely official-looking letter which you will fill in and send to your former employer.
Where phone calls and ordinary letters have failed, this form has served actors well in past years. Of course, this will be sent to you at no charge. Make certain the envelope is legal size so the form does not have to be creased. It really works. q
ENDIT