The Actor’s Guide to Filing Taxes in the U.S.

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Photo Source: Caitlin Watkins

Acting isn’t like other jobs—and that applies to paying taxes, too. Most full-time employees get a W-2, and that’s the end of it. But as an actor, you’re most likely earning money in a number of different ways: from your survival job, from acting gigs, maybe even from royalties. That means it’s much more complicated for you to file your taxes correctly when April rolls around each year. 

That’s why we put together this in-depth guide to filing taxes as an actor. We’ll cover everything from common tax deductions for actors to 2021 filing deadlines—and more.

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Do actors pay taxes?

If you’re a working actor who makes money in the U.S., you will have to pay taxes on your income. And if you’re an independent contractor (more on that later), you’ll also have to pay a “self-employment tax”—that is, the Medicare and Social Security taxes all working people pay, otherwise known as “FICA taxes.”

Tax season happens each year and runs from January to April 15. During this period, taxpayers must prepare their financial statements and reports for the previous year.

Taxes for 2020 can be filed no later than April 15, 2021. The Internal Revenue Service (IRS) will probably begin accepting electronic tax returns sometime between Jan. 15 and Feb. 1, 2021.

Do child actors pay taxes?

Yes, child actors are required to pay taxes if they earned over a certain amount during the year. (This is true of any actor, regardless of age.) Your child will either be paid as an employee and receive at W-2, or as a self-employed independent contractor and receive a 1099-MISC. They need to file a tax return if they have any of the following:

  • Total income (wages, salaries, taxable scholarships) of more than $12,200 
  • Unearned income (interest, dividends, capital gains) of more than $1,100 
  • Earned and unearned income total more than a) $1,100 or b) total earned income plus $350, to a maximum of $12,200 (whichever is larger)
  • Other self employment income over $400, whether it was paid in cash or reported on a 1099-MISC form

Keep in mind that the income limits for filing can change from year to year—these limits are from 2019. And even if your child actor made less than the standard deduction, you may still want to file a tax return for them. If any income tax was withheld from their paycheck, then you could receive a tax return from the IRS.

How do actors pay taxes?

Actors pay taxes in the same way as any other employee who has earned money during the 2020 tax year—by filing a tax return with the IRS. Whether or not you need to file a return depends on how much money you made during the year. The best place to start is by checking with the IRS’ interactive tax assistant. By answering a few questions about your annual income, exemptions, and deductions, the tool will help you figure out whether filing is required.

In short, if your income is less than or equal to the amount of your exemption and standard deduction, the IRS doesn’t require you to file.

So what do you report on your tax return? Any income you’ve earned, whether it’s from a survival job, full-time job, or acting work. You’re also required to report interest income, dividend income, alimony income, Social Security income, distributions from retirement plans, pension and annuity distributions, and income from other sources, such as real estate rental income.

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What documents do I need to file a tax return?

To file a tax return as an actor, you will need your Social Security number or tax ID number, dependent information (if applicable), the forms that reflect your sources of income (W-2, 1099, 1040, etc.), and deductions.

Tax Forms: If you’re considered an employee by an employer, you should receive a W-2 form. If you’re an independent contractor who’s paid more than $600 during the year, you should receive a Form 1099-MISC.

There are other types of income that a person can receive as well. For example, if you earned dividends of more than $10, you should receive a Form 1099-DIV; if you earned $10 or more in interest, you should receive a Form 1099-INT. If you withdrew money from a pension or retirement plan, you should receive a Form 1099-R. If you have canceled debt, you might receive a Form 1099-C. If you sold real estate, you should receive a Form 1099-S. These are just some of the income reporting documents you could receive that are required to file a tax return. For a comprehensive list and what each one is for, visit irs.gov/forms-instructions.

In general, documents needed to file a tax return depend on individual circumstances.

W-2s and Form 1099s are supposed to be mailed out no later than Jan. 31. Haven’t received the forms you were expecting by the first few weeks of February? Contact the employer (W-2) or payer (1099-MISC) and let them know. They may not have your most current address. Still no forms? Call the IRS at 1-800-829-1040. Be prepared to provide your name, address, Social Security number, and phone number, and have the following information:

  • Employer’s name, address, city, and state, including zip code and phone number
  • Dates of employment
  • An estimate of the wages you earned, the federal income tax withheld, and dates of employment with that employer during the tax year. The estimate should be based on year-to-date information from your final paystub

If you’re not sure what income has been reported to the IRS and therefore what forms you should have received, you can request your wage and income transcript online or by phone (1-800-908-9946), or by completing the Form 4506-T and mailing it to the IRS.

Keep in mind that unless you requested an extension—even if you haven’t received the W-2 or 1099-MISC forms—you’re still required to file your tax return by the due date. The same goes for paying the IRS if you owe money: You must make payment arrangements.

Receipts: Now let’s talk about receipts and how important record-keeping is. If you’re ever audited and unable to substantiate a deduction, the IRS will deny the deduction. So what receipts should you keep? Every receipt for every expense that relates to your career. Detailed record-keeping is vital to any business.

How do you keep up with all the receipts? Start a filing system. Scan receipts into an electronic file program using your phone, computer, or tablet. Manually file receipts in folders. It doesn’t matter how you keep track of receipts—just keep track of them. Though the task can be tedious, doing so is well worth the effort.

Past tax returns: While you don’t necessarily need your previous year’s tax return to file your current year’s tax return, sometimes it is a good idea to have a copy available, especially if someone else who didn’t prepare the previous year’s return is preparing the tax return for you. If you itemize, you will need to refer to the previous year’s tax return for some information on the Schedule A, and you may need to refer to the previous year’s return to make sure you don’t forget to report something. Basically, it doesn’t hurt to have it on hand. Better to have it and not need it than to need it and not have it. 

What if I didn't make a lot of money this year?

Even if you think you didn’t make a lot of money, if the income you earned meets the filing requirements, the IRS and state taxing agencies still want their share. Filing a tax return is not a choice that’s up to the individual: The IRS has strict rules in place to be followed when determining whether a tax return needs to be filed. If a person meets the requirements to file a tax return, he or she is required to file, regardless of whether they think they made a lot of money or not.

Do I qualify as a “performing artist”?

To qualify as a “performing artist” in the eyes of the IRS, you must be able to prove that your work is part of a legitimate business intended to make a profit, and not a hobby.

The IRS relies on Section 183 of the Internal Revenue Code when determining what deductions can be taken by an artist. The key question, according to the IRS, is whether the activity is a hobby or part of a legitimate business activity intended to make a profit. The same standards apply whether you’re a performer or create tangible works of art that can be sold. The IRS allows artists four years to earn a profit. If you don’t earn a profit on your artistic activities after the first four years, the IRS may decide that what you do is simply a hobby. Your deductions may be limited to the amount of your income from those activities.

Are actors considered self-employed?

An actor is considered self-employed if they work for themselves as a sole proprietor, an LLC, or an S corporation or C corporation.

Some actors are employees and some actors are self-employed. Self-employed people work for themselves and aren’t considered employees of anyone else. The term “self-employment” falls under various umbrellas. As a self-employed person, you can be considered a sole proprietor (filing the Schedule C), form a single-member limited liability company (an LLC, which also files the Schedule C; however, check the box indicating that your business is an LLC), or form an S corporation or C corporation.

In light of President Trump signing the Tax Cuts and Jobs Act (TCJA), you may be wondering if it makes more sense to register as an LLC, as the new tax protocols seem to be more business-friendly than artist-friendly. That’s something you’ll have to determine for yourself. For example, if you’re an employee and have unreimbursed employee expenses, you won’t be able to claim a deduction for these expenses—which fall under the category of miscellaneous itemized deductions—under the TCJA until at least the year 2025.

What’s a “deduction”?

A tax deduction lowers your taxable income, thereby lowering your tax liability. For tax purposes, “deductions” and “write-offs” are synonymous. Deductions take two major forms: the standard deduction and itemized deductions. The former is a standard amount set by the IRS each year that requires no calculations, no receipts, and no additional forms.

Itemized deductions are eligible expenses you can claim on federal income tax returns that decrease your taxable income and are claimable in place of a standard deduction, if available. Per the IRS, as an actor, you may deduct expenses that meet the following criteria:

  1. The cost is directly related to the acting activity;
  2. The cost is ordinary and necessary; and
  3. The cost is not lavish or extravagant under the circumstances.

What deductions can I claim as an actor?

Possible tax deductions for actors include business travel, agent fees, union dues, promotional expenses (headshot, demo reel, etc.), among other things.

In every trade or business, there are certain deductions that can be claimed relating to the job. As acting falls under the category of a trade or business, actors can claim certain deductions associated with their career. Whether you’re a seasoned actor or new to the industry, the deductions you get to claim are the same. Typical deductible expenses for actors include, but are not limited to:

  • Business travel: Airfare or other transportation costs and hotel or other lodging expenses, and 50 percent of the cost of meals
  • Local travel: Deductible local travel may include trips to performances (both as player and observer), rehearsals, acting classes, auditions, and to pick up supplies
  • Agent fees: All fees an actor pays to an agent
  • Manager fees: Talent manager fees
  • Office expenses: An outside or home office used exclusively for an acting business
  • Property and supplies used for acting: The cost of video cameras, sound equipment, digital cameras, theater and film books, musical scores, computers, phones, etc.
  • Union dues: Dues to belong to Actors’ Equity or other unions or organizations
  • Education: Acting classes and coaching lessons
  • Promotional expenses: Photos, videos, websites, listings in professional registries, advertisements in trade publications, business cards, and other promotional expenses
  • Makeup and hair care: Deductible only when incurred directly in connection with a specific job
  • Wardrobe: The cost of any clothing not suitable for streetwear. For example, the cost of a modern business suit isn’t deductible, but an ape costume is
  • Subscriptions: The cost of magazine, journal, newsletter, and other subscriptions useful for your acting business; for example, a Backstage subscription and membership
  • Legal and professional services: Fees paid to attorneys, accountants, consultants, and other professionals
  • Tickets for viewing films and plays: Actors need to attend plays and films to keep up with what’s going on in their industry. They may also subscribe to services like Netflix and HBO. These costs are deductible as research

Below are more defined examples of deductible expenses that may apply to you:

  • Travel expenses to and from auditions, rehearsals, classes, and performances (e.g., subway fares, plane tickets, car mileage, etc.)
  • Acting, voice, and dance classes
  • Workshops and seminars
  • Costumes used only for business (including dry-cleaning expenses)
  • Makeup, hair, and nails (initial charge is deductible, maintenance costs are not)
  • Theater company dues
  • Commissions paid to agents
  • Headshots (including photographer fees)
  • Résumé (printing costs)
  • Mailing expenses
  • Equipment
  • Business use of cellphone, internet, or cable (primary phone is not deductible)
  • Online submission costs
  • Food you buy while an Equity or SAG-AFTRA actor is giving you career advice

As you can see, actors can claim many deductions the average person cannot, and receipts are a vital part of those deductions. While you don’t need to send receipts when you file your return, they do come in handy when adding up your expenses, and they’re extremely vital if you’re ever audited. If your tax return shows too many deductions that can’t be substantiated, not only will those deductions be denied, but the IRS just might impose the accuracy-related penalty—a 20 percent penalty for purposefully understating your income, which can be in the form of overstating deductions.

As many have abused these deductions, the IRS scrutinizes returns from Schedule C filers, especially actors. Err on the side of caution: If you don’t have a receipt to substantiate a deduction, don’t claim it.

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What's an audit?

An audit is a review of an organization’s or individual’s accounts and financial information to ensure it is reported correctly. The IRS conducts four main types of audits, and each one is handled differently:

1. Correspondence Audit
The most common and simplest of the IRS audits. The IRS sends you a letter in the mail requesting answers to specific questions or needed clarifications related to your tax returns. You’ll likely have to perform a correction of your tax return that may result in paying more money or receiving a refund for an accounting error. Either way, the correspondence letter will state the reason for the inquiry and often offer a simple resolution via an exchange of papers.

If you have data or receipts to back up specific claims, this is the time to send them in to help make your case. This type of audit is usually solved quickly once all the information has been collected. Be sure to keep copies of all correspondence in case anything comes into question again in the future.

2. Office Audit
If the IRS has questions about your return that extend beyond the normal correspondence letter, you’ll receive an invitation for an in-person audit meeting at one of its local offices. This type of audit is a bit more serious than a correspondence audit and requires more of your time. However, an office audit is usually completed within one day, since most information will be supplied on demand, and you’ll have time to provide any additional information that’s requested.

3. Field Audit
A field audit is the most serious situation. The IRS will visit your place of business and may look around to verify the legitimacy of your workplace, employees, and other business expenses. In the case of a field audit, it’s strongly encouraged that you hire a professionally enrolled agent, tax professional, or CPA to be an advocate for you and your business. They will be able to answer questions on your behalf and ensure you’re getting fair processing.

4. Random Reviews
In addition to traditional audits, you may be subject to a random review of your tax situation. The IRS isn’t looking for anything in particular when it performs these random reviews and will simply look at your return for inaccuracies. These reviews are generally performed via a correspondence letter with notice that your account is being looked over. Usually you won’t receive a follow-up letter if the review of the return doesn’t result in any red flags.

The IRS tries to audit tax returns soon after they’re filed but can sometimes go as far back as the last three years. If there are additional errors or substantial mistakes, the IRS usually won’t go back more than the last six years. To back up any business deductions, credits, and other income information, it’s recommended that you keep all tax receipts and information for at least seven years. In the case of an asset, save the records for as long as you own the asset, plus three additional years.

How do I avoid getting audited as an actor?

The best way to avoid being audited as a working actor is to err on the side of caution. In other words, don’t be overly aggressive when claiming deductions. And if you can’t prove the expense, don’t claim it. While you may have gotten away with it in the past, one of these days the IRS just might catch up with you.

According to Owen S. Arnoff, a tax and business consultant and a Backstage Expert, the IRS doesn’t have enough personnel and resources to examine every tax return, so it relies on a variety of tools and systems to target returns that will generate the most revenue per hour for an auditor’s time. Some common miscues that may get you audited are:

  • Your tax return doesn’t match reports sent to the IRS
  • Ignoring IRS inquiry letters
  • Deducting “reimbursable” employee business expenses
  • Using round numbers on your tax return
  • Reporting cancellation of debt income incorrectly
  • Incorrectly claiming charitable donations
  • Not understanding how IRS “DIF” scores work
  • Not showing enough income on your return

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What happens if I don’t pay taxes?

If you don’t pay taxes, you could end up in jail, or have your bank accounts levied, wages garnished, possessions seized, and face severe financial penalties.

The worst that could happen is you can get thrown in jail for tax evasion. While this doesn’t happen a lot, it has happened to a few well-known actors and entertainers. If you don't pay your taxes, you can end up having your bank accounts levied, wages garnished, liens put on your property, and the IRS seizing all your possessions.

If you don’t pay your taxes on time, the penalties can also be quite severe. The longer you wait to resolve your tax debt, the more difficult and costly it will be. Penalties and interest continue to accrue on your unpaid tax debt until the debt is paid in full. As a taxpayer, it’s important to understand the IRS collection process, as well as your options for setting up a payment arrangement.

What happens after I file my taxes?

After you file your taxes, you may receive a refund, you may learn you owe money, or nothing will happen. If you realize you forgot to file a form or report some information, you’ll have to file an amended tax return.

How can I make filing taxes as an actor easier?

The easiest way to make filing taxes easier is to hire a professional or pay for a premium version of a tax prep software.

If you can afford it, the easiest way to make tax season less of a headache is to hire a professional. Ask your actor friends for recommendations—you’ll want to work with someone who has plenty of experience preparing tax returns for actors and others in the performing arts, as they’ll know the ins and outs of industry taxes. Before hiring someone, ask them questions about what their experience is in preparing tax returns for actors and how aggressive they are with claiming deductions.

If a tax professional is out of your budget, consider paying for the premium versions of a tax preparation service like TurboTax, H&R Block, etc. Opting for the premium version will allow you to take advantage of their allowance for itemized deductions, talk to their staff members if you have questions, and sometimes even audit services if it comes to that.

You should also be putting aside money throughout the year, particularly if most of your acting work is done as an independent contractor (meaning no taxes are withheld from those paychecks). Putting tax-specific money aside can seriously soften the blow if you end up owing money after filing. You may also want to consider making estimated tax payments throughout the year, which means you are prepaying your taxes.

Are you a U.K.-based actor or someone who works globally? Check out A London Actor’s Guide to Self-Employment for your U.K. tax questions!

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