With the new year looming, it’s time to think about getting your finances in order, especially when it comes to taxes. To help you get started, here are some relevant tax tips to ensure that as an actor, you’re ready to deal with your personal taxes.
1. Work with a pro...
First things first: seriously consider working with a professional tax preparer instead of trying to do your own. Though there will be some upfront costs, the modest amount will be offset by potential tax savings this professional will find.
2. ...but not just any pro.
Be selective. Seek out a tax professional who has specialized or has expertise in the entertainment industry.
Large, multi-office tax companies may do good work for people with office jobs, but they simply aren’t aware of the unique aspects of taxation that a working actor’s return represents. To start, simply search phrases like “tax prep for actors.” Ask your colleagues, fellow actors, or even a producer, director, agent, or manager for recommendations.
Once you have a few names, check their websites for experience and professional recognition. If you see “EA” (Enrolled Agent) after a preparer’s name, it’s a solid endorsement of that person’s knowledge and skills as it means they’re part of a list compiled by the IRS that denotes he or she has passed a grueling three-day exam and their background has been carefully vetted.
Of course, the CPA (Certified Public Accountant) designation is also important, but be sure to do your due diligence as many CPAs work in internal corporate capacities and do little tax prep work.
3. Know your professional standing.
Are you a professional actor? If you worked as an actor and have been monetarily compensated (or are awaiting receipt of compensation), you are a professional actor. There is no minimum payment required to be considered a professional actor, and yes, a residual can count.
Unfortunately, this means that if your work as an actor did not result in payment in the form of money (ie you took a job for exposure, contacts, or experience), you don’t qualify as a professional actor.
4. Stay on top of your records and receipts.
I cannot stress this enough: Make yourself a promise to keep excellent records and receipts in 2019. This may be the most beneficial and monetarily rewarding single piece of advice I can offer.
Make copies of every single receipt you think can be counted toward a deduction. If the IRS or state tax authority asks for proof of your deductions, you’ll need a copy to send their way.
Make sure you’re keeping track of income. I recommend an income ledger, which is a simple list of anyone who paid you money throughout the year.
Keep an eye out for your income documentation like W-2 and 1099 forms. Federal law says employers must send W-2s by January 31, so use that income ledger to make sure you’ve received every one you’re supposed to receive. The same applies to work as an independent contractor, except you’ll receive a 1099 Misc. One thing to note: Employers are only required to send you these forms if they paid you more than $600 in the calendar year, but you still have to report that income.
5. Look back to last year’s taxes.
Did you make any estimated tax payments on your own? Did you make any additional payments when you filed your return? If the answer to either question is yes, make a list of the dates paid, the amounts, and the method of payment as the amount could be deductible.
If you think you’ll owe taxes, you may want to consider making any large planned purchases in December. For example, if you plan to buy a new computer in the near future, doing so in December will help reduce the taxes owed, and you’ll have the usage of the new gear throughout the new year.
Of course, doing your taxes as an actor is more complicated than just what we’ve talked about here, but this information should be a great start on the path of a successful tax year.
*This post was originally published on Jan. 2, 2017. It has since been updated.