Tax deductions, sometimes referred to as “write-offs,” reduce the amount of income that you will be taxed on. In other words, it’s like getting a discount on the amount of money you owe taxes on. For example, if you spend $100 on a dance workshop and the government allows this as a deductible expense, you will be taxed on your gross income minus this $100.
It is important to note that a tax deduction is not a tax credit. Whereas a tax deduction subtracts certain expenses from your total income before calculating how much tax is owed, a tax credit directly reduces the amount of tax you owe.
Entertainers must keep detailed records of their expenses and consult with our tax professionals to determine exactly what eligible expenses can be subtracted from their total income.
A few examples of deductible expenses may include:
- Professional development: Expenses related to workshops, classing or coaching.
- Audition expenses: Costs incurred that are associated with auditions, like travel expenses, mileage, and accommodations.
- Marketing and promotion: Include expenses such as headshots, printing resumes, or website development.
- Union dues and guild fees: Membership fees and dues paid to professional organizations, such as Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) or Actors’ Equity Association (AEA)..
- Professional fees: Legal and accounting fees related to your acting career.
How can paying taxes quarterly vs. annually benefit me?
The decision between paying taxes annually versus quarterly depends on individual circumstances and cash flow considerations but is worth exploring on a case-by-case basis.
For some, paying taxes annually through withholding is most efficient. Tax payment through your salary check is easier to manage and plan. It can also stabilize cash flow throughout the year if your income is irregular. Lastly, it would limit the frequency of interactions with the IRS and minimize the number of administrative tasks throughout the year.
Filing taxes on a quarterly basis, on the other hand, could eliminate underpayment penalties for some individuals. Additionally, filing quarterly would allow you to anticipate and allocate funds regularly. For actors without withholding and with fluctuating incomes, this would hopefully eliminate a singular large financial burden each spring.
- For example, say you book a recurring role on a television show. If you make $10,000 an episode for a 10-episode season in 2023, you would make $100,000 gross profit. If you don’t receive these funds until March of 2023 (approximately 10 weeks from January 1) and it is your only job for the year, the likelihood that you would have the funds necessary to pay the required taxes in April 2024 may be slim.
In this case, we would likely recommend that you pay quarterly estimates towards your taxes, so that come the following April, all or some of the required taxes have been paid.
What documents should I bring to my tax professional?
- If filing as an individual, W-2 or 1099-MISC: Both forms report your income; the W-2 typically issued by employers, while the 1099-MISC are used for self-employed income.
- 1099-NEC: You may receive this form if you’ve received income as a non-employee or freelancer. This form reports income earned from services as an independent contractor.
- Income Statement/Pay Stubs: These documents come from your employer(s) and provide detailed breakdowns of your income.
- Expense Receipts: You should maintain records of all business-related expenses to use for potential deductions.
- Deductible Expenses
- Charitable Contributions
- Any retirement contributions made during the year (IRA, profit sharing plans, etc).
I’ve successfully filed my taxes – now what happens?
Once you’ve successfully filed your taxes, a few things should happen. You should receive a digital confirmation that the IRS has received your return. The tax authorities will process your return and issue a refund (if you are entitled to one). This will be sent either via direct deposit or check. If you owe taxes, you should make payment with the return.
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.