What are the tax filing deadlines?
There are two tax filing deadlines in the United States, depending on whether you are filing as an individual or a corporation. The deadline for individuals filing taxes this year was Monday, April 15th, 2024. The deadline for corporations was Friday, March 15th, 2024. Both individuals and corporations are required to (a) file their federal income tax return and (b) pay any taxes owed to the Internal Revenue Service (IRS) by these listed dates.
What should I do if I cannot file my return on time?
If you are not ready to file your return before the deadline, you may still be able to file for an automatic extension that will allow you six additional months to file (extending your personal deadline to October 15, 2024; the corporate deadline for extended returns is September 15). Individuals: To file for an extension as an individual, you will need to file Form 4868 by the original tax filing deadline of April 15, 2024. Form 4868 is the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, and only extends to people filing as individuals. It is important to note that this extension will grant you more time to file the tax return, but does NOT grant any extension for taxes owed. If you do not file your return or extension request by the deadline, you may face late filing fees; typically, these fees are 5% of the unpaid taxes for each month of the return that is late, up to a maximum of 25%.
Corporations: To file for an extension as a corporation, your corporation would need to fill out Form 7004 (Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Records). Similar to Form 4868 for individuals, Form 7004 extends the filing deadline by six months. If your corporation does not file by the deadline, you are liable to face the same late filing fees as individuals.
My tax rates are too high! How do I navigate these rates as an entertainer?
Entertainers can decide to register as a Personal Service Corporation (PCS), also known as a loan-out corporation.
Loan-out corporations allow you to maximize your pre-tax withholdings by treating your talent as your own company that enables you to ‘loan out’ your services to the network. All of your earnings and expenses flow through this corporation and its shareholders (but remember, you are the only shareholder).For example, say you book a recurring role on a television show. If you make $10,000 an episode for a 10 episode season, you would make $100,000 gross profit.
Individuals: As an individual, you would have approximately $5,000 per episode deducted in federal and local taxes, as if you are making $10,000 for 52 weeks (instead of 10). This would leave you with approximately $50,000 after tax withholdings. Additionally, assuming your personal manager and agent charge around 10% of your earnings, you would be left with $30,000 of income. This does not take into account additional charges related to the cost of being an actor, like headshots, travel, etc., nor does it leave room for retirement contributions. Additionally, as an individual, your commission payments are not deductible.
Corporations: On the other hand, as a loan-out corporation, the same $10,000 an episode for 10 episodes (totaling $100,000) would be looked at as a gross profit of $100,000 for the corporation. You will face the same manager and agent charge of 10% of your earnings, but this leaves you with $80,000 pre-tax withholdings. Additionally you can deduct legitimate business expenses (studio fees, headshots and demo recordings, mileage, etc.). If we assume even $5,000 worth of deductions, your net corporate income before taxes is $75,000 rather than $100,000 like in the above example. In this example, if the corporate tax rate is 20%, you’d be left with a net income of $60,000 – much more substantial than the $30,000 left after filing as an individual.
How do I start a loan-out corporation?
Starting a loan-out corporation is similar to starting any business. You should first consult with professionals, such as the lawyers and accountants at Artists Financial Management, to determine the most suitable business structure for your tax implications.Then, you will register the corporation as a business, obtain an Employer Identification Number, and draft corporate documents, such as the articles of incorporation and corporate bylaws. Doing so will help maintain a clear financial separation between personal and business funds.
Ultimately, loan-out corporations allow for more flexibility in managing your income, taking advantage of tax deductions, and potentially optimizing taxes.
This blog is intended for informational purposes only, and should not be construed as tax, legal, or accounting advice. Please consult with your tax, legal, or accounting professionals for any advice and guidance.