Doing your taxes can be incredibly…taxing. Especially if you haven’t prepared properly. And for actors, they can be incredibly complex. I know you don’t need me to tell you that, I just want to reassure you that you don’t have to know everything about doing taxes, you just have to take it seriously and ask for help when needed. In fact, if I had to sum up my tax advice in one sentence it would be: Get a good accountant.
Now, I’m going to make a mass generalization and say that most accountants (good or bad) don’t know how to file an actor’s taxes correctly. So one of the first things on your to-do list is to find an accountant that specializes in working with artists.
Next, you want to have a chat with them about how “aggressive” their approach to deductions is, and make sure it is in line with how you want to run your business. Someone who is more aggressive may encourage you to take maximum deductions, re-categorize expenses, make some deductible purchases at the end of the year, contribute to a retirement plan, and account for all possible depreciation of assets. The benefit to this is a potentially much lower tax bill. The drawback is that with more paperwork comes more room for error—which could result in an audit. So you could go with a more “conservative” accountant. They will do a great job and still take everything listed above into account, but they won’t push the envelope, and will only take into account financial transactions you can prove. This can result in higher taxes paid or less of a return but is generally less likely to receive an audit.
Unfortunately, unless you keep your accountant on retainer all year, you have some prep to do too. Generally, the best place to start is by keeping all your receipts during the year and writing notes on the back or scanning all your receipts into one of the fancy phone apps.
Next or, ideally, in conjunction with, have a personal account and a business account and keep them completely 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 a business meeting or just a caffeine fix.
By this time of the year, you should have all your W-2s and 1099s. Are they all in one easily accessible place? Do you have one for every place you worked? If not, stop now, do not pass go, do not collect $200, and instead track down your tax documents for all employment and make sure they are accurate. If you were on tour or worked in a lot of states—I know, it’s rough—but, as with most things, better to do it once and correctly than have to talk to the IRS about anything.
Lastly, and here’s the truth, being an actor is one of the toughest jobs out there. You are not only the president of the company, but you are also the chief financial officer, marketing team, and product. That’s a lot of hats to wear and it can be overwhelming. However, it also gives you the right and the responsibility to run your business like a boss.
And part of that is handling your taxes.
*This post was originally published on Feb. 22, 2016. It has since been updated.
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