Working odd jobs, booking gigs and racking up so many necessary expenses… actors have a lot to figure out come tax season – so NYCastings is here to help you.
For example, did you know that you can deduct your yearly NYCastings membership! It’s true!
Acting is a business – hence why Walter Gowens, President and founder of Prudential Vanguard Financial Services, has a special focus on helping actors and artists.
Walter Gowens has more than 25 years of experience in accounting, finance, budgeting and investments. He is an Enrolled Agent, Certified Financial Planner, listed in Who’s Who In America and a member of the National Society of Accountants and National Society of Tax Professionals.
Most importantly – Walter Gowens has helpful tax answers.
An Actor Focused Q & A with Walter Gowens….
Q: What is better for an actor – a W2 or 1099?
There is no one right answer, it depends on your situation as an individual. For a W2, the withholdings are already taken out of your pay. As a 1099 person, you are responsible for paying the social security and Medicare that would normally come out of your pay as well as the amount the employer would normally pay. Yet, you can write off a lot more as a 1099 person. For example, if you have a desk in your apartment that you use as your home office space – then when you leave your house for an audition or performance you are doing business travel and that is deductible. However if you do not have this space, you are commuting and it is not deductable.
Q: What if you have a W2 and a 1099?
That means that whatever expenses you have for your classes, materials, etc – you can apportion them out between the 1099 and W2.
(Whatever expenses are from 1099 work, get apportioned to that job. The expenses from your W2 work get apportioned to that job.)
Q: Where do I file taxes if I have a different address on my driver’s license?
Your state of residency is where you intend to go to as your home. Even if you go out of town temporarily, as long as you intend to go to a place you call home that is still your place of residency. Only when you no longer intend to return, do you sever ties and have a new place of residency. If you lived in Ohio and intend to return there one day, then you file taxes as if you are an Ohio resident. If you moved out of Ohio and do not intend to return, then your place of residence is no longer Ohio -it is where you are now, New York.
Q: If you are a 1099 person, can you deduct train expenses for travel?
Yes. If you have a desk set up in your apartment then you are going from one business location to another and that is deductable.
Q: If you are in an academic setting and going to auditions, can you expense it?
No it is not, it is considered commuting.
Q: Can you deduct rent?
If you have a space in your apartment that is 100% used for business, a desk in a corner of your room that has to be for business, then you can claim it. Whatever percentage of your apartment that the desk takes up, you are able to claim. If your desk takes up 10% of your apartment, then you can claim 10% of your rent and utilities. (Not the total rent, your rent)
Q: Can you deduct your entire phone bill?
You cannot. You have to claim specific calls as business.
Q: Can you claim your computer?
It would be a portion of the computer cost that you use for business.
Q: If you have a W2, how do you know if they are withholding enough taxes?
If you have just one job, one W2, it will generally be enough because they will withhold taxes based on what you tell them (single, married, etc). However, in performing arts you don’t usually have one job – you have four, five, six different jobs a year and will earn different amounts at each. When you add it all up you will be at a higher tax bracket at the end of the year.
Each employer withholds as if that job is your only income. So the job where you earn $5000 is withholding as if you are only making $5000 a year. When you add together your total income, you are in a higher bracket and so it may not be enough.
Q: How do you make sure enough is withheld?
One way, is to change the way you withhold taxes on the W4 form your employer gives you. If you put single and 1 allowance and find it is not enough, put single and 0 allowances. If that is still not enough, you can ask them to withhold a specific amount more; whatever you need to make sure you will not end up owing money when you file your April 15th Tax return.
Another way to avoid owing money is to pay in installments. April 15, June 15, Sept 15 and Jan 15th are dates that the government have set up for you to send money in on untaxed income or situations where you want to pay additional amounts to cover yourself because you are not sure. This way you are paying in installments rather than waiting and finding out that you owe at the end of the year and ending up in a bind.
Q: If you are 1099 person, must you make those 4 installment dates?
Yes. If you have no W2 work – if you are just a 1099 person, then those dates are set in stone.
If you earn income between January and March you need to pay taxes for the income earned during that time on April 15th. The installment dates trigger penalties and interest. If you were supposed to make a payment on April 15th and you wait until June 15th, then you will be charged penalties. You have to make sure you pay by due dates. If you are going to incur a tax liability, then you need to make estimated payments unless your expenses are going to add up that you will not have a liability. If you are going to have a liability, then you must make the payments in order to avoid penalties.
However, If you have a W2 job and had no taxes withheld all year but tell your employer to withhold your last paycheck as taxes, it is still timely. W2 withholdings are considered timely no matter when they are paid. It is 1099 payments where you have to be cognizant of the dates.
Q: How do you keep track of 1099 income?
The best thing to do is for those four installment dates, total up your income for that time period. Then total up your expenses for that time period. If you have more income than expenses then you need to
make an estimated tax payment.
Q: What is tax liability?
The amount of tax you owe is your liability.
You have income that you have earned and are allowed certain deductions. If you have W2 income and earned $20,000 and you are single and you don’t have any write offs – you are allowed a standard deduction and a personal exemption without having to prove anything. You take your $20,000 and subtract $5,700 and $3,650 and are left with your taxable income. Out of the $20k you have made, you are going to pay taxes on less than that.
If you have a 1099 and have made $20,000 over the year and have kept track of $10,000 worth of expenses, then you have to pay taxes on $10,000 as well as social security and Medicare.
Q: How do you figure out how much to pay?
There are tables, a booklet from the government that has what you owe based on your income and marital status.
Q: What if you are on tour?
If you are on tour, you have to look at your pay stub to see what state they are taking taxes for. If you are a New York resident and working in Ohio, then you are responsible for paying taxes in New York. If they are withholding Ohio taxes, Ohio taxes are less than New York and you may need to make up that difference.
Q: Do you get taxed in both the tour state and your home state?
When you are working in another state, you do not get double taxed. The state where you live has the right to tax your income and the state where you work has the right to tax your income because that is where you are working. But the state where you live gives you credit for your Ohio tax on your New York tax form – that way you avoid double taxation.
Q: When on tour, how does a per diem work?
When you are on tour, instead of saving receipts each city has a per diem allowance. If you are a New York resident doing a show in Los Angeles, there is a per diem allowance allowed for Los Angles and you can claim that instead of saving receipts.
If you are given a per diem of $40 a day and you spend $70 a day, then you would want to save the receipts and claim the $70 instead of the per diem.
Since you do not know at the beginning of the year if you will itemize, you will need to keep all your expenses organized to avoid having to scramble through appointment book and shoe boxes.
Q: What about traveling comedians and per diems?
For comedians traveling to one club on one night and another on another night, you get to claim different per diems per night depending on what state you are in. There are tables that tell you what the per diems are for each locale.
Q: What if you are on tour and they do not give you a W2 or a 1099?
Then it is between you and your conscious what you report. Who is to tell the Internal Revenue Service? But you are responsible as a law abiding citizen to report it.
Q: Is clothing deductible?
Clothing that you cannot wear outside your craft are expenses. For example, if you have a police costume or a nurse costume you are not going to normally wear that on the streets of New York. Dry cleaning is deductible for audition / performance clothes.
Q: What is a Qualified Performing Artist?
It is a Government term. You have to earn less than $16,000 for the year. You have to have worked at least two performing jobs and earned at least $200 at each of those jobs. That allows you to call yourself a Qualified Performing Artist. This came about in 1987 and has not been risen since then. If you do qualify, there is a line on your tax form where you mark your qualification.
Q: If you are 1099, how do you claim your expenses?
You have to attach a separate schedule called a Schedule C where you will record your income and expenses. Once you determine your bottom line, you carry that over to your tax forms. And, keep in mind, you have to pay your own Social security and Medicare.
Q: If you get W2 and 1099 how do you file?
W2 goes on the form where it says W2 and your 1099 goes on Schedule C and is a separate form you attach.
Q: What about Health Insurance?
If you pay your own health insurance, you can use that to lower your overall liability. If you are 25 and under, you are allowed to remain on your parent’s health insurance.
Q: What about education / training?
If you have tuition, you can claim it. There is an American Opportunity Credit that applies to degree courses and the Lifetime Earning Credit that applies to any learning.
For more information please visit http://prudentialvanguard.net