Surviving Tax Season as an Artist

Time For Taxes Message Showing Taxation DueWhen you work as an artist, tax season blows.  With a slough of 1099s and income that is often earned from various states, artist taxes are some of the most complex.  While it would be great to have Leo Bloom on your side to give you personalized tax help, we unfortunately earn gross incomes small enough that often we can’t afford accountants.  Instead, artists are left to struggle through seas of forms, cross our fingers that we’ll avoid an audit, and hope against hope that we can eek out a refund.  Before panic sets in, take a moment to relish in the fact that YOU MADE A LIVING AS AN ARTIST.

Now, get smart, submit your paperwork, and get that refund.

A disclaimer before we go any further:  I AM NOT AN ACCOUNTANT.  I am, however, a geek, who has spent quite a few years dealing with a heap of 1099s.  So, here are some tips for survival during April – so aptly called the “cruelest month.”

Types of Income:

The trouble with the freelance lifestyle is income is paid to independent contractors, tax free.  Meaning, come April, you owe Uncle Sam the taxes he didn’t collect when you were initially paid.  Now, if you’re a regular freelancer, you should save a portion of every check you collect to pay out come tax season.  If you combine W-2 and 1099 income, make sure your W-4 claim is 0 or 1 (if you are single and childless).  More money is withheld initially, meaning you may earn a smaller paycheck now, but will also owe the IRS less later. Cash income is the trickiest—if you’re sure your employer isn’t going to report the income, then you’re probably safe not to report it.  But at the end of the day if the money you grossed doesn’t add up to the money you spent, the IRS will figure it out.  And, who knows?  Maybe someday you’ll want to run for office with a platform to get more funding for the National Endowment of the Arts – in which case, you want to make sure you actually have reported everything you earn.

What to Write Off:

Now that you’ve settled on types of income and how your income affects your taxes, it’s time for the best part: write-offs.

Thank yourself for those long nights spent binging on The Unbreakable Kimmy Schmidt, because entertainment expenses count as industry research.  Subscriptions like Netflix, Hulu, HBO Go, and Amazon Prime are all tax deductible.  So are movie tickets.  If you’re one of the lucky ones who spent a month’s worth of rent on a Broadway ticket to Hamilton, rest easy—you can write off up to 50% of your entertainment expenses.

Keep track of all your theatre tickets!  They're tax deductible.
Keep track of all your theatre tickets!  As a professional theatre artist, you can write off up to 50% of your entertainment expenses.

Travel is the most time consuming write-off to calculate.  If you’re a type-A personality, you keep a mileage log in your car for every job you book, shopping trip, train ticket, and flight.  If you’re like the rest of us, you just need a few hours to sit down, and create a log of distances and dates you traveled for work.  Luckily. rehearsal calendars serve as the perfect starting place for an after-the-fact travel log.  The dollar amount per mile driven changes annually, so check the IRS website to know how many cents you can deduct per mile.

Food is one of the trickiest write-offs.  Technically, any business meeting meal is tax-deductible.  However, the higher the amount you claim, the more likely you’ll get flagged for an audit.  So be choosey—don’t write off elaborate meals that include bar tabs.  Keep it simple.  Pick concept meetings, production meetings, and simple coffee outings with prospective creative partners.  Remember, in an audit, you have to convince the government the meal was a business expense, so make sure it was.

Other write-offs include supplies and home office deductions.  Keep receipts for books, shipping costs, union fees, and the previous year’s tax prep fees.  If you bought new equipment, like a phone or computer, choose the option to claim a large portion this year as opposed to a small percentage over the next few years.  You’re more likely to get a refund now, and it causes less tax trouble in future seasons.  Never claim you have a home office, unless you have a dedicated space as your primary workstation that you’re willing to show the IRS — it’s always a red flag, and not usually worth it.

Filing:

Online filing through programs like Turbo Tax really is as easy as it sounds.  If you’re filing with 1099s, you have to pay more to file, but it is a lot less than an accountant.  Finding the accountant to handle freelance taxes is tricky, so ask around if you’re not comfortable filing on your own.  While generally discussing money with friends and colleagues is frowned upon, discussing tax tips with other artists is one of the best ways to smartly navigate the IRS.  Equity also has some resources available to you, if you are an Equity actor or stage manager.

If you find yourself owing the state or Feds this year, don’t panic; there’s always next year.  Set up these best practices now, so that you don’t run in to the same challenges in April 2017.  Open a Roth IRA and stock a grand or two a year — it will reduce taxable income and benefit the future you, when you decide to retire.  Give back to the arts by making tax-deductible donations — every dollar helps your taxes and the organizations survival.  Take the opportunity to boost your career by joining professional groups or unions.  Dues are expensive, but the deduction is worth it.

If you’re really panicked, file for an extension.  This isn’t college — the IRS won’t mind, just as long as you ask before the due date.

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Amy is the Associate Costume Director and Hair and Makeup Supervisor at Berkeley Repertory Theatre. A licensed cosmetologist, she spends her off hours writing about beauty and theatre on the internet at http://behindthescenes-beauty.com


One thought on “Surviving Tax Season as an Artist”

  1. Excellent article!

    Just a few small corrections from an accountant and “just community theater” actor–

    1. Putting money in a Roth IRA does not reduce your taxes. Putting money in a REGULAR or “traditional” IRA does.

    2. Donating to charity helps only if your overall itemized deductions exceed the standard deduction. Yes, that’s gobbledygook to most people. Let’s just say that if you don’t have large unreimbursed medical expenses, mortgage interest, real estate taxes, or charitable donations, you’re probably better off with the standard deduction. However, each year stands on its own, so always keep track.

    3. Extensions cover only the time to FILE, not the time to PAY. If you think you will owe, you need to pay with the extension.

    4. Even if you’re not much of a record-keeper, you can set up simple Excel sheets to track your expenses. If you haven’t done this in the past, NOW is a good time to set them up for this year. Keep your receipts (good advice on your part there) and log them each week–date, method of payment, type of expense, location, person(s) involved, etc. This is especially important when documenting meals and entertainment or “research”.

    5. Also log your income by location. This is very important if you work in multiple states or cities, and/or if you work in high-tax states like California or New York..

    5. Tax accountants will gladly help you out if you’re organized and keep good records. We’re not so eager if you show up with a shoebox or shopping bag, and we will charge you if WE have to do the sorting and categorizing. You’re paying for our ability to put the numbers in the right places, and to provide that all-important commodity, peace of mind. Given how fragile the self-esteem of most actors is, having someone who’ll say, “You’re doing fine, just fine, just keep your records like we agreed” is worth the price. And if you do wind up under the microscope of the IRS or other taxing authorities, let your accountant handle it. Showing how much you can talk is really good way to get in hotter water with a tax auditor.

    6. Good advice on the W-4. Always claim 0 exemptions or 1 exemption if you have both W-2 and self-employment income. However, if it looks like that won’t cover your taxes, you should make quarterly estimated tax payments, usually due in April, June, September, and January. Yes, they stink, but large balances due and penalties stink more.

    Again, a great article!

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