David Rogers, owner of ActorsTaxPrep, Inc., is also a longtime actor in voiceovers. A native Kentuckian, he moved to Hollywood from New York in the mid-1990s. He is certified as a tax preparer by the California Tax Education Council and is a member of the National Society of Accountants. As you can probably deduce from the name of his company, ActorsTaxPrep offers a unique specialty: Tax preparation for actors.
David agreed to “speak” to those of you who either already are or are planning to become actors:
When I first came west to our little L.A. village of 15 million or so people, I got two pieces of great advice from a successful actor who had been here for a while, and I pass them on to all acting newbies who are here or thinking about coming here. The first is: Always read street signs wherever you park. It is not uncommon for there to be different regulations every ten yards or so and all the cities in Los Angeles County use parking tickets as major sources of revenue.
The second can save you even more money and grief. My friend said, “Actors love to help, and to be thought of as knowledgeable, so they are very free in giving other actors advice. The problem is…the great majority of that advice is wrong.”
I own and operate a tax preparation firm called ActorsTaxPrep, Inc. It specializes in the entertainment business, with a client list of just about a thousand. Every year, I am staggered by the amount of misinformation about taxes and acting that many of my new clients have accumulated, and have accepted as gospel.
So my message to you is: Be sure the person who gives you advice knows what he’s talking about. When in doubt, check with someone you’re sure knows. Let me share with you some major myths about actors’ taxes, so that you can avoid the pitfalls of accepting erroneous tax information. And please know that ignorance about actors’ taxes is not the sole province of actors. Some mainstream accountants are also blissfully unaware of the special needs and special accommodations that the tax code requires and provides to actors.
What follows is some basic information about taxes for actors, models and others in the entertainment business. There’s a lot more info at our website, including a very comprehensive list of potential business deductions. Check out www.actorstaxprep.com
THE CLOTHES OFF YOUR BACK
I hear it over and over again–I’m an actor (or a model). So all my clothes I buy to wear to auditions are tax deductible. Right? Wrong. Ever so wrong. Here’s why.
The Internal Revenue Code is a daunting document, some 45,000 pages long, and it is often contradictory and ambiguous. But the section of the code that deals with clothing is clean, clear and devoid of double meaning. It says, simply, that clothing that is suitable for street wear is a personal expenditure. Therefore not deductible.
Note that the Code does not say if YOU think it is suitable for street wear–just suitable. The courts interpret that to mean by prevailing standards for the locale in question.
And does it matter if you only wear your clothing to auditions or on gigs? Not at all. The IRS says that if it is suitable for street wear, you can wear it even if you choose not to. So the twenty-something actress who buys a Brooks Brothers gray pin stripe suit for attorney or banker auditions, but never wears it socially in laid-back Hollywood, thinks it unfair that she can’t deduct it. But fairness is not what the IRS strives for–only compliance with tax laws, and the law says no to Brooks Brothers.
There are articles of clothing you can deduct. For women, just as examples, a nurse’s uniform, a dancer’s tutu. For gentlemen, a policeman’s uniform, a tuxedo, something similar. Period pieces for either sex. I strongly suggest that you take a digital photo in case of an audit—that, along with an appropriate receipt, should satisfy even a demanding auditor.
Here’s another myth. All hair care is deductible, right? Because we have to look like our pictures?! Sorry, boys and girls. Just ain’t so. Details follow:
Let’s say you’re a brunette, and you’re called in to audition for a great role. The audition and the following callback go well. The director calls you in, and says: “We want to hire you, but the role calls for a blonde. Become a blonde, and the job is yours.”
And you do, and the cost of becoming a blonde is a deductible expense–because it is for a specific job requirement. But after the job is over, you look into the mirror and find yourself entranced by the blonde tresses cascading over your shoulders. “Damn, I look good,” you say. “I’m staying a blonde.”
Are your monthly safaris to the salon for dyes and touch-ups deductible now and forevermore? Nah. Now we are down to routine hair care, and the IRS doesn’t care if blondes have more fun.
The same circumstances pretty much apply to mannies and peddies.
Here’s another great myth I hear all the time. All business gifts are deductible. They’re business, right? Sure they are, and there’s a kernel of truth to the statement, but like most tax matters, there are strict and sharp limitations.
Business gifts are deductible up to $25.00 per person (recipient), per year. You can spend more than that, but you can’t deduct it. And you need to show a clear business reason for the gift. There’s no limit to the number of people to whom you give business gifts–so long as the criteria listed here are met.
RECORDS AND RECEIPTS
When I lecture around the country to groups of actors, whether through SAG, or state or local organizations, I usually try to begin by asking what one tax “thing” audience members think is the most important.
Some day I need to catalogue those diverse responses, because there are some extremely interesting submissions. But I don’t think I have ever had an audience member say “Good records and receipts.” That is, though, probably the best advice I can give you.
Let’s start by defining what receipts you need to keep. There is one very important distinction. Any individual business expenditure that is $75.00 or more requires a written receipt.
For expenditures under $75.00, a written receipt is not required, if (and this is important) a notation of the purchase was made in your business log or diary. What exactly does that mean?
Simply that you need to keep a business log, and list your business expenditures. What is a business log? Any device in which you regularly record your business matters. It can be a daybook or a monthly calendar. It can be more informal–a steno notebook or a loose-leaf binder. It can be a great software program, such as ActorTrack, which contains a marvelous tax section.
But it has to be written, and it has to show what the object was, where and when it was purchased, the price, and the business purpose.
Now, actors buy a lot of really small items. Books, trade magazines, office supplies, postage–all come to mind. Suppose you get a receipt–should you keep it?
Absolutely. The IRS in an audit will be favorably impressed the more receipts you have and the better they are kept. So even if you do not legally need a receipt because of a log notation, if you have it, keep it.
Keep it where? one might legitimately ask. Here’s a recommendation that works for most people: Go to Staples or OfficeMax and buy a large accordion file–the box kind with 31 slots, one for each day. Make labels for the category of purchases most common to your business–for example: Acting Lessons, Office Supplies, Postage and Freight, etc.
Then, on a regular basis, ideally weekly, enter the expenses in a ledger by category. Put the receipts in a corresponding category slot in the file. Then you have good records and good receipts.
Remember, this is show BUSINESS. Every business needs a good tax department. Form a partnership with a company that knows actors taxes, keep good records and receipts, and the tax part of your business will run well.
There’s a whole lot more information, needless to say, that actors need to be aware of before, during and after filing their taxes. It’s never too early to start taking care of business!
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