Actors And Tax Deductions

Actors, Generally, Hate Taxes

It’s not just the paying-money aspect, it’s the tedium…

It’s a different part of the brain, acting and record keeping, numbers. Personally, the thought of doing that kind of task gives me real chills. It’s like chalk on a blackboard; can’t stand the idea of it, let alone do it! But, we all have to.

I have some tips for ways to make it easier on actors. I’ll put that down at the bottom of the post.  First, I’ll put the itemized deductions allowed, and some dangerous areas to avoid.

 

IRS and Deadly Audits

Why is getting audited so bad?

Well, I know an actress-friend who got audited one year, for declaring too many deductions, or ones from the “red-flag” area… She’s such an organized person, and had kept meticulous records.  But once audited, she was filling out and writing down for weeks, it seemed, and looking for receipts from other people even!  (That’s how I found out about her audit: she was calling everyone she knew asking if they happened to have a blank date book from the prior year! And restaurant receipts that they don’t need! She was trying to avoid a very big bill and additional penalties from the IRS.  Also, she had to hire someone to go with her and defend her at the audit; and they made her come back, with more evidence that they requested.

Subsequently, year after year, she got audited again and again.  She was certain she was on a kind of IRS list…

So if you dread doing taxes and think they are bad now, it is an absolute nightmare to be audited.

There are some myths, and some ‘good’ deductions. (Meaning that the IRS doesn’t give them a second look.)

Then there are those that call attention to you, and you can get by with deducting them, if done correctly. It’s up to you to take the chance.  Most likely, when you really see how much your deductions amount to in this area…that amount that you will save or get returned, probably isn’t worth risking an audit.

 

Actors Allowable Deductions, and The Particulars of Certain Ones

Click here for a list. But, know these few things:

Absolute yes, total amounts, are all agent and manager fees. Rentals of studios. Supplies such as headshots, postcards, postage for mailings of them, reels, etc.

But, overall, if something seems like a deduction that is too good to be true, it is. I suggest that it is best NOT to take those types as deductions.  The IRS isn’t new to actors-doing-taxes, even if you are.

Clothes, as far as tailoring, and drycleaning; are deductions.  Buying clothes, not.

When I first started, I was told there was a category called “Beauty and Glamour Deductions”. NOT.

 

Absolute NO’s, Except In Special Circumstances:

Makeup, unless you hired a makeup artist for your headshots, or unless it is stage makeup and cannot be worn in the street.  (Example: Blasco.) Even then, don’t overdo.  Minimal expense, because declaring makeup is a “red flag”. Don’t even consider deducting hair gels, hair brushes, etc.

Certainly not mani-pedicures.  Not even haircuts or haircoloring.  That can only be in very special instances, such as for a character role that  you are hired for, and you can try to get away with it once for an audition that you changed your color for, but–uh why?  I think  it’s loopy to change your color for an audition, anyway.  And it can’t save you that much, in exchange for red-flagging yourself.)

Costumes. No: jeans that you pay $250 for and claim to wear only to auditions are not allowable. No regular-wear clothes are, altogether. Not even your business suit that you really don’t need nor wear, except for auditions, in truth. The IRS doesn’t care.  Clothes that are truly costumes do count, such as doctor scrubs, period clothing…

Gas mileage deducting is like saying “Hey Target me, IRS”.  Unless you want to keep records everyday, for an entire year.  That means you must check your mileage at the start of the year, and every time you do something for business, you need to write down the mileage.  You can’t go anywhere else, from that specific trip you are declaring,  because if you do, you need to make sure you don’t include that too. Now, this isn’t regular record-keeping, as I suggest below, which should take almost no-time, daily, at home.  This is record-keeping from the car; and it involves lots more records; and regular, specific details.

A group called ‘Actors Tax Prep’ thinks that it is a good idea, if you can keep the records.  Especially, in Los Angeles, because actors cover a lot of ground and use a lot of gas.  It appears to be almost fifty cents per mile that you can take off.  (I think they think it’s a good idea, because they are accountants.)

Here’s an excerpt from what they say.  (I, myself,  could never do this. For a few years I made a New Year’s Resolution that I would, and then I had a few auditions where I was obsessing about them on the way  home, and neglected to write them down and look at the mileage.  Gave up everytime, and then simply let myself off the hook. That doesn’t mean you can’t. I guess…)

 

For most actors, especially those based in LA, your car is a major source of expense and at the same time, a major source of tax deductions.

To qualify your mileage as a deduction, you MUST have good records. We have found, in almost every case, that the Mileage Method of determining your deduction works best.

You don’t have to have receipts for automotive expenditures, but you do have to have–you guessed it–good records.

This means keeping a mileage log–and although it’s a pain, it will dramatically increase your possible deduction, because you won’t overlook miles driven for business–and you will have all necessary records if required to produce them.

Let’s start with what is not deductible–commuting miles and personal miles. So driving back and forth to your day job is not deductible–but going from you day job to an audition is. So is almost any trip you take to get work. That includes auditions, call-backs, casting visits, trips to acting classes, to agents and managers, to the post office to mail submissions, etc., etc.

At this year’s rate of $0.485 a mile, that adds up quickly.

You will also need to know total mileage for the year. Make an odometer note in early January, and another in late December, or find a mechanic’s receipt that lists mileage from those two times.

Mileage is an important component of any actors deductions, and especially so in an area of such wide geography as LA.

 

Entertainment expenses count as another big “red flag”. If you think you can have a glamorous nightlife, on the IRS’s dime, then you’re high right now. You can take off taking out your agent, to lunch. (But if you are a worthy client, your agent will take you, and the agency will reimbuse him or her. I don’t remember a time where an agent ever let me pay.)

Maybe you have a manager, and you haven’t made money for them yet, and you want to keep up the relationship and/or talk about how you can play a certain type that he may not be aware of, or you just haven’t gotten any appointments, or similar.  You offer to take them out to lunch or dinner.  That is deductible, but only half. You can deduct 50% of the bill, not the entire bill. If you go overboard, you will get audited.

The Fifty-Percent Allowed Rule

  • Entertainment Expenses
  • Cable and Satellite Television
  • Movie and Theatre-going expenses

As a matter of fact, your deductions, in total,  shouldn’t be more than 50% of your total income. 

Receipts and Ledgers, A Quickie Lesson For Actors

It’s fairly easy to keep all that  you need, and to even do it in an organized fashion that can save you the end-of-year time and dread:

Go out to Staples and buy a box of white letter envelopes, in business size. (That’s just longer than a regular size). Keep them in the box. Label each envelope with a deduction item. Put a notebook in the box also, to denote each receipt that you put in the envelopes, as  you file them. And the reason for such. 

You will be doing this everyday that you have done an activity that involves an itemized deduction. When you come home at the end of the day, every day, you will put your receipts directly in their particular envelope. You will then write in the ledger the date, the deduction category, what it was for, etc.

Keep your receipts and a notebook of any kind, all together, in an easily-accessible  place in your home.  (Very easily accessible, I mean.  Because if you can’t get right to it, then you will put it off…)

Keep a ziplock in your bag or backpack, if you can, with some post-its.  That is, unless you have room to write them down, and you carry them in your datebook. If you don’t carry a bag or book everywhere you go, after work hours, then keep a designated pocket just for this stuff… It’s important that nothing gets lost; so if you forget one day, or sleep at your new love-interest’s , etc, you will be able to still come home and easily locate the receipt, and the post-it will remind you what it’s for, in case falling in love just obliterated your memory of everything else…etc.

The consistency and discipline of regular record keeping, was what I found the most challenging.  Actors lives are not routine, yet this is a routine that is required.  Every year, I found myself separating into bitty little piles that became big piles, and then toppled over into other piles. And every calculator total seemed to vary upon second add-up, of piles. Meticulously, I would do it again, and again.  It would take days, weeks. Stupidly, I would apply for “extensions”, which only meant more dread. Later dread.

But, I saw a friend do it, successfully, every year, with no dread. And tax time was a breeze for her. She just added up one envelope at a time, wrote it on her tax form, and on the outside of the envelope, and sealed them. Then sealed her tax forms in the main envelope, and she was done.

Look at it this way…when you get to be very successful, you can hand over all your receipts to a business manager, and they will do all this tedium for you.

…(Frankly, I don’t suggest that either.)

 

Best, 
;~Dana


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One Response to Actors And Tax Deductions
  1. Tim Markaity
    January 11, 2010 | 10:06 am

    Great post! Thanks for the information.

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