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

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If you’re a working actor in the U.S., you’ll 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 runs from January to April each year. During this period, taxpayers must prepare their financial statements and reports for the previous year.

The 2023 season began Jan. 23 and will end April 18, meaning that taxes for 2022 can be filed no later than April 18, 2023.

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If you miss the April 18 deadline, you can file for an extension to avoid paying fines. 

Late filing penalties usually amount to 5% of your total tax due for each month past the tax return filing deadline, not to exceed 25% of unpaid taxes. However, if you’re late by more than 60 days without filing an extension, you either need to pay a minimum of 100% of the tax due with the return or $435, whichever is less. 

Requesting an extension allows you to avoid penalty fines—but keep in mind that it doesn’t give you an extension for paying your taxes, just for filing. The IRS Free File form allows you to electronically request an extension until Oct. 15.

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Most people earning any kind of livable income must file taxes. Here are the determining factors: 

Income and age: If, in 2022, your status, age, and income met the following criteria, you must file your taxes at the federal level.

• Single person
  Under 65: gross income of $12,950 or higher
  Over 65: $14,700 or higher
• Head of household
  Under 65: $19,400 or higher
  Over 65: $21,150 or higher
• Married, filing jointly
  Under 65: $25,900 (both spouses)
  Over 65: $27,300 (one spouse), or $28,700 (both spouses)
• Married, filing separately:
  $5, no matter your age
• Qualifying widow with a dependent child
  Under 65: $25,900
  Over 65: $27,300

Special circumstances: If you’re self-employed like many performers are, then you must file taxes if you earned more than $400 in self-employment income. You will also need to if you have special tax considerations, such as paying taxes on certain retirement plans or certain health-care programs. 

If you earn above the minimum income for your age and status, you must file federal taxes. From there, there are seven income brackets that require different levels of tax payments. 

If you’re still not sure if you need to file taxes, the IRS offers a tool to help you figure it out. 

State vs. federal taxes: If you meet the income and filing status criteria, you must pay federal income tax no matter what state you live in. Depending on your state, you might be charged a flat tax; be taxed based on your income bracket; or, if you’re in one of the eight states with no state income tax, not have to pay at all. (These states include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.)

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If you’re going to receive a refund instead of needing to pay the piper, you can track your refund online, with the IRS mobile app, or by phone. You’ll need your Social Security number, filing status, and the refund amount to track your status.

Online: The Where’s My Refund? tool allows you to check the status of your 2022 income tax refund 24 hours after you e-file or four weeks after you file a paper return. Refund statuses are updated daily. 

Mobile app: The IRS2Go app lets you track your refund and receive updates on its status. The app also offers payment options and free tax assistance.

Phone: Lean more old-school? Call the IRS toll-free number, 800-829-1954, to use the automated refund tracking system. If you’d prefer to speak with a representative, call 800-829-1040.

No matter how you choose to track your refund, it usually takes the IRS approximately 21 days to process your return and issue it. If you choose the direct deposit option, you should receive it within 21 days; if you choose to receive a paper check, it may take several weeks after the 21 days to arrive.

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Does paying one big tax bill each year hurt your soul—or at least your bank account? You can avoid making one large payment by making smaller estimated payments throughout the year. Here’s how you do it:

1. Take your best guess: Estimate your taxable income for the year, then calculate your estimated taxes based on your income estimate. You can use the IRS estimated tax calculator, Form 1040-ES, or a tax software program of your choice to come up with the estimate.

2. Schedule payments: Estimated tax payments usually occur beginning April 15, June 15, Sept. 15, and Jan. 15 of the following year. 

3. Pay up: Make your estimated tax payments using the form 1040-ES, by mail, or with the Electronic Federal Tax Payment System. 

4. Adjust as needed: Regularly review your taxable income and payments throughout the year, and adjust your payments accordingly. Keep an eye out for changes in income amount as well as tax deductions and credits.

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Yes, child actors are required to pay taxes if they earned more than 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 a W-2 or as a self-employed independent contractor and receive a 1099-MISC. You will need to file a tax return for them if they meet any of the following criteria:

• Total income (wages, salaries, taxable scholarships) of more than $12,950
• Unearned income (interest, dividends, capital gains) of more than $1,150  
• Earned and unearned income total more than $1,100 or total earned income plus $400, to a maximum of $12,950 (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. Even if your child actor made less than the standard deduction, you may still want to file a return for them. If any income tax was withheld from their paycheck, then you could receive a tax return from the IRS.

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You’ll pay the same way as any other employee who has earned money during the tax year: by filing a return with the IRS. Whether or not you need to do so depends on how much money you made during the year. The best place to start is by checking with the IRS’s interactive tax assistant. This tool will help you determine whether you need to file by asking a few questions about your annual income, exemptions, and deductions. If your income is less than or equal to the amount of your exemption and standard deduction, then the IRS doesn’t require you to file.

On your tax return, you’ll need to report any income you earned, whether from a survival job, full-time employment, or contract acting work. You’ll also need to include:

• Interest income
• Dividend income
• Alimony income
• Social Security income
• Distributions from retirement plans, pension, and annuity
• Income from other sources, such as real estate rental income

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You will need your Social Security number or tax ID number, dependent information (if applicable), the forms that document your sources of income (W-2, 1099, 1099-K, 1040, etc.), and receipts for any charitable donations and deductions.

Tax forms

W-2: If your employer considers you to be a full-time employee, you should receive a W-2 form.

1099: This form is a record of your income as an independent contractor, whether you’re self-employed or a freelancer. Each 1099 form documents the income you’ve received in a given year from a source that has sent this information to the IRS, as well as to you, for filling out your yearly tax return.

Related

How the New 1099-K Tax Law Impacts Freelancers

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1099-K: The IRS designed and implemented the 1099-K in order to monitor the taxable income that freelancers and independent contractors receive through digital payment platforms like Venmo, Stripe, Shopify, and PayPal.

The freelance world was buzzing when the IRS reported that, beginning in the 2023 filing season, the 1099-K reporting limit will drop to include those earning more than $600 via any number of transactions. Fortunately, the 1099-K will retain its much higher income threshold for this year’s 2022 filing season; the form will only be issued for those who earned more than $20,000 and received more than 200 transactions through payment-settlement entities (PSEs). 

1099-MISC: Probably the most well-known of the 1099s, the 1099 Miscellaneous Income form is used to report income from prize winnings, royalties, attorney payments, health-care and insurance payments, and rental income. After the business owner/payer files a 1099-MISC, the IRS sends this form to the payee to include in their personal tax return. As of 2020, the 1099-MISC covers business-related payments that aren’t subject to self-employment tax.

1099-NEC: The IRS reintroduced 1099 Non-Employee Compensation form in 2020 for use in reporting self-employment income, as a way to simplify 1099-MISC reporting. This document records income paid via cash or check (ACH, EFT, or direct deposit) higher than $600 to someone whom the payer contracted for projects, gigs, or other assignments. Businesses file a 1099-NEC if you’ve done freelance work for them; they then file this form with the IRS and send it to you. These filings show income that’s subject to self-employment tax, since payroll taxes weren’t withheld. It’s critical that freelancers who receive a 1099-NEC not include any W-2 payments. Even if you don’t receive a 1099-NEC, you must still report any income you earned as a freelancer on your tax return.

Employers are required to send W-2s and 1099s no later than Jan. 31. If you haven’t received the forms you were expecting by mid-February, you should contact the employer (W-2) or payer (1099-MISC); they may not have your most current address. If you still don’t receive any forms, call the IRS at 800-829-1040. Be prepared to provide your name, address, Social Security number, and phone number, and have the following information on hand:

• The employer’s name, address, city, and state, including their zip code and phone number
• Your dates of employment during the tax year
• An estimate of the wages you earned and federal income tax that was withheld. You should estimate based on the year-to-date information from your final pay stub.

If you’re not sure what income has been reported to the IRS and therefore which forms you should have received, you can request your wage and income transcript online, by phone (800-908-9946), or by completing 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: Let’s talk about how important it is to keep records of your receipts. If you’re ever been audited and were unable to substantiate a deduction, the IRS will deny that deduction. With that in mind, you should have access to receipts for any expense that relates to your career.

To keep track of all your records, start a filing system. Scan receipts into an electronic file program using your phone, computer, or tablet, or manually file paper receipts in folders. It doesn’t matter how you keep track of receipts—just keep track of them. Though the task can feel tedious, it’s well worth the effort.

Past tax returns: While you don’t necessarily need your previous year’s tax return to file your current one, it’s a good idea to have a copy available. This is particularly true if your return is being prepared by someone who didn’t prepare last year’s. If you itemize, you will need to refer back to it for information on your Schedule A—and to make sure you don’t forget to report anything.

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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 rather than simply a hobby. The same standards apply whether you’re a performer or a creator of tangible works of art that can be sold. The IRS uses Section 183 of the Internal Revenue Code to determine what deductions artists can take. 

The IRS allows artists four years (or three out of five years) to make a profit. If you don’t, your deductions may be limited to the amount of income earned from those activities.

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Yes, if you work for yourself as a sole proprietor, LLC, S corporation, or C corporation. 

According to entertainment accounting firm Lalea & Black, “Almost all actors are self-employed in the eyes of the Internal Revenue Service, at least as far as their acting work is concerned. If you work as a sole proprietor, or if you establish an LLC, S corp, or C corp to manage your financial affairs, you’re self-employed. This means that you’re solely in charge of managing your taxes.”

As a self-employed person, you can be considered a sole proprietor (filing a Schedule C) or a single-member limited liability company (LLC). The latter also files a Schedule C; however, be sure to check the box indicating that your business is an LLC. Otherwise, consider forming an S or C corporation.

Related

Should Actors Incorporate Themselves? A Guide to Becoming an LLC or S Corp

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A deduction, or write-off, lowers your taxable income, thereby decreasing your liability. These take two major forms: standard and itemized. The former refers to a fixed amount set by the IRS each year that doesn’t require calculations, receipts, or additional forms.

Itemized deductions, on the other hand, are eligible expenses that you can claim on your federal income tax returns that decrease your taxable income. You can claim these in place of a standard deduction. Per the IRS, as an actor, your deductions must meet the following criteria:

• Directly related to the acting activity
• Have an ordinary and necessary cost
• Don’t have a lavish or extravagant cost under the circumstances

Related

How to Save as Much as Possible With Tax Deductions as an Actor

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Whether you’re a seasoned actor or new to the industry, the write-offs the IRS allows you to claim are the same. Typical deductible expenses for performers include, but are not limited to:

• Business travel: Airfare or other transportation costs and hotel or other lodging expenses, plus 50% of the cost of meals
• Local travel: Trips to performances (both as player and observer), rehearsals, acting classes, auditions, and supply pickups
• Agent fees
• Manager fees
• Office expenses: Any outside or home office used exclusively for acting business
• Property and supplies: Video cameras, sound equipment, digital cameras, theater and film books, musical scores, computers, phones, etc.
• Union dues: Money paid to SAG-AFTRA, Actors’ Equity, or other entertainment unions
• Education: Acting classes and coaching sessions
• Promotional expenses: Photos, videos, websites, listings in professional registries, advertisements in trade publications, business cards, etc.
• Makeup and hair care: Deductible only when incurred in connection with a specific job
• Wardrobe: The cost of any clothing that isn’t suitable to be worn as 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 that are useful for your acting business; for example, a Backstage subscription and/or membership
• Legal and professional services: Fees paid to attorneys, accountants, consultants, and other professionals
• Tickets to films and plays, and TV streaming services: Actors need to attend plays and movie screenings to keep up with what’s going on in their industry. They may also subscribe to services like Netflix and HBO. These expenses are considered to be research.

Here are some concrete examples of deductible expenses:

• Travel to and from auditions, rehearsals, classes, and performances (e.g., subway fare, 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 (the 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; your primary phone is not deductible.
• Online submission costs
• Food you buy while an Equity or SAG-AFTRA actor is giving you career advice

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 vital if you’re ever audited. If your tax return shows too many deductions that can’t be substantiated, not only will they be denied, but the IRS could impose the accuracy-related penalty of 20% for purposely understating your income, which could be based on your deductions. So err on the side of caution: If you don’t have a receipt to substantiate a write-off, don’t claim it.

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An audit is a review of an organization’s or individual’s accounts and financial information to ensure that they reported correctly on their tax return. The IRS conducts audits by mail or via an in-person interview. 

By mail: The IRS will send you a letter requesting answers to specific questions or needed clarifications related to your tax returns. You’ll likely have to do a correction of your tax return that could 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 that can back up specific claims, now is the time to send them to the IRS. 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 any questions arise in the future.

In-person interview: If the IRS has questions about your return that extend beyond the normal correspondence letter, they’ll ask you to attend an in-person meeting at a local IRS office, your home or place of business, or your accountant’s office. This type of audit is more serious and time-consuming than one you receive by mail. 

The IRS may investigate the legitimacy of your workplace, employees, and business expenses. In the case of a field audit, it’s advisable to hire a professionally enrolled agent, tax professional, or CPA to advocate for you and your business. They’ll be able to answer questions on your behalf and ensure that you’re receiving fair processing.

In addition to traditional audits, you could also be subject to a random review of your tax situation. The IRS isn’t looking for anything in particular when it does this—they’re simply scanning your return for inaccuracies. These reviews are generally performed via letter, with a notice that your account is being looked over. You won’t receive a follow-up letter if the IRS doesn’t find any red flags.

The IRS usually audits tax returns soon after they’re filed, but the agency 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 a good idea to 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 it, plus three additional years.

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Always err on the side of caution, and don’t be overly aggressive when claiming deductions. If you can’t prove an 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 tax and business consultant Owen S. Arnoff, 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 return not matching 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
• Inaccurately claiming charitable donations
• Not understanding how IRS Discriminant Function System (DIF) scores work
• Not showing enough income on your return

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You could have your bank accounts levied, wages garnished, possessions seized, liens put on your property, face severe financial penalties, or even end up in prison. Being arrested for tax evasion is, of course, the worst outcome. While this isn’t common, it has happened to a few well-known actors and entertainers.

If you don’t pay your taxes on time, the penalties can also be quite severe. The longer you wait to resolve your debt, the more difficult and costly it will be. Penalties and interest will continue to accrue until your 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 plan.

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You may receive a refund or learn you owe money. In some cases, nothing will happen. If you realize that you forgot to file a form or report any information, you’ll need to file an amended tax return.

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

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

Bailie Slevin, the founder of Entertaining Finance, advises opening both a personal and professional account—and making sure you keep them separate. “This way, you don’t have to comb through every transaction you made during the year and try to remember if the coffee you had on March 7 was [for] a business meeting or just a caffeine fix,” she explains.

You should also put aside money throughout the year, particularly if you do most of your acting work as an independent contractor. 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.

Disclosure: This communication is on behalf of Backstage LLC and its affiliates (“Backstage”). This communication is for informational purposes only and contains general information only. Backstage is not, by means of this communication, rendering legal, financial, accounting, business, tax, or other professional advice or services. This communication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your interests. You should consult a qualified professional advisor. Backstage does not assume any liability for reliance on the information provided herein.