Post by Lady Stardust ★ on Mar 10, 2020 13:40:49 GMT -8
Important Disclaimer: This post is informal advice from one actor to other actors, and was not reviewed or endorsed by a CPA or any other finance professionals. This is intended as a general guide only and individual circumstances will vary. You are highly advised to consult a tax professional regarding your specific situation.
Should I do my own taxes?
It can be tempting to try using one of those self-service programs to avoid having to pay for tax preparation. This can work out fine for someone who works for one single employer, takes the standard deduction only, and has a straightforward W2 form to turn in. However, if you are making significant freelance income from various sources, it’s not a great idea to attempt to do your own taxes as things can get complicated very quickly between multiple 1099s, deductions, etc. It is strongly recommended to spend the money for a tax pro to avoid costly mistakes later.
1099 vs W-2 (and what the heck is a W-9, anyway?)
When you work a “normal job” as a regular employee, chances are you get deductions taken out of every paycheck automatically for things like taxes, Social Security, Medicare, etc. At tax season, your employer will then send you a form called a W-2 which shows your total earnings and deductions for the year. You may even be able to get a tax refund!
However, things for actors get a little more complicated. While union jobs still pay as if you were an employee (tax deducted from paycheck, W-2 form, etc), for the grand majority of nonunion jobs, actors are considered independent contractors. You are not employed by any of the companies you work for; you are a self-employed actor who provides contract services to various clients. This means that taxes don’t get deducted from your paycheck as they would if you were an employee. Sounds great, right?
But not so fast! This certainly doesn’t mean you’re off the hook for taxes; in fact, self-employed people often end up paying more, as you’re responsible for both the “employer” and “employee” portions of the social security tax. Instead the W-2 mentioned above, clients and studios you work for will send you a form called a 1099 at the end of the year detailing exactly how much money you made with them, and then it will be your responsibility to pay back all the tax you owe on that income. If an actor is not prepared for this, it can be a very rude awakening to suddenly find out they owe thousands of dollars in taxes!
Any major client or studio you work with - especially if you make over $600 with them in the course of the year - will probably make you fill out what is called a Form W-9. This is for the purpose of accurate tax reporting on both sides. This is a standard IRS form that will be the same across the board, so you can save time by filling it out once and then just sending a digital copy whenever a new client requests it (but be sure your computer is password-protected as this form contains sensitive info.)
We will talk about self-employment taxes in more detail later in this guide—-including ways to minimize how much you owe all at once.
SSN vs EIN
If you’re primarily working with established studios and companies, you probably don’t have to worry too much about filling out W-9s with your social security number, especially as you’ll likely be filling these out in person. However, with smaller indie clients, it can be risky because you don’t always know what - if any - security measures they have in place to safeguard your personal information. If you work with a lot of online clients who need your tax ID for the purposes of complying with the IRS, you may wish to consider applying for an EIN (Employer Identification Number) instead. You can apply for one of these even if if you are an individual rather than a registered business, and it can help with peace of mind in regards to potential identity theft and compromised databases.
Even if a client doesn’t make you fill out a W-9, if you make a significant amount of income with them over the course of the year, you’re still responsible for reporting it independently or else it could be flagged during an audit. The spreadsheet link above provides an easy way to keep track of how much you made with each client. If you do a lot of business through PayPal, you may also wish to consider having a separate PayPal account for business to make tracking this income easier.
Deductions
One way to mitigate how much you owe in taxes is to keep records of how much you spend on expenses directly related to your business. Rather than keeping a box full of paper receipts which can easily get misplaced, it’s better to keep track of them digitally using a free app (such as Receipts by Wave). The app will let you take pictures of physical receipts as well as upload screenshots of digital receipts.
The following contains a list of items you might want to consider for write-offs (of course, you’ll want to double check with a tax professional to ensure your deductions are legitimate):
Beware of taking frivolous personal deductions such as clothes, hair/nail appointments, gym memberships, personal vacations, meals between sessions, etc. These likely would be rejected in an audit, and even if other actors try to claim they deduct these things, chances are they just haven’t been caught yet. If you’re not sure whether something counts, ask your tax pro.
Registering a Business
If you are making a substantial amount of money from voiceover and/or other freelance work, you may eventually wish to consider forming an S-corp or LLC to keep your business separate from your personal assets (and possibly save you a bit on taxes). However, there are annual fees and extra paperwork associated with having a company, so ask your accountant for advice on what income threshold would be needed to make this worthwhile. Fees vary from state to state—-for instance, the annual fee in California is around $800, but some states may be as low as $100. If you have a corporation, you will also have to pay for a payroll service, but one of the benefits is that you can essentially force yourself to get paid as a W2 employee rather than an independent contractor, and have the taxes automatically taken out of your checks for you.
Estimated Taxes
If you expect to owe $1,000 or more in taxes for the year, you are required to pay “estimated taxes” each quarter or else you may be hit with a penalty. This is a rude awakening for many people as no one ever tells you about this! Fortunately, you can at least register to pay them online. Read more about estimated taxes here.
Set aside money throughout the year
Taxes for American actors are complicated. If you're new to making significant income as an actor, you probably have a lot of questions as to how freelance taxes work - and we get questions about this quite frequently on our Discord server. While you'll want to consult with an accountant for any specifics, here are a few general notes that people don't always know about when starting out.
Should I do my own taxes?
It can be tempting to try using one of those self-service programs to avoid having to pay for tax preparation. This can work out fine for someone who works for one single employer, takes the standard deduction only, and has a straightforward W2 form to turn in. However, if you are making significant freelance income from various sources, it’s not a great idea to attempt to do your own taxes as things can get complicated very quickly between multiple 1099s, deductions, etc. It is strongly recommended to spend the money for a tax pro to avoid costly mistakes later.
1099 vs W-2 (and what the heck is a W-9, anyway?)
When you work a “normal job” as a regular employee, chances are you get deductions taken out of every paycheck automatically for things like taxes, Social Security, Medicare, etc. At tax season, your employer will then send you a form called a W-2 which shows your total earnings and deductions for the year. You may even be able to get a tax refund!
However, things for actors get a little more complicated. While union jobs still pay as if you were an employee (tax deducted from paycheck, W-2 form, etc), for the grand majority of nonunion jobs, actors are considered independent contractors. You are not employed by any of the companies you work for; you are a self-employed actor who provides contract services to various clients. This means that taxes don’t get deducted from your paycheck as they would if you were an employee. Sounds great, right?
But not so fast! This certainly doesn’t mean you’re off the hook for taxes; in fact, self-employed people often end up paying more, as you’re responsible for both the “employer” and “employee” portions of the social security tax. Instead the W-2 mentioned above, clients and studios you work for will send you a form called a 1099 at the end of the year detailing exactly how much money you made with them, and then it will be your responsibility to pay back all the tax you owe on that income. If an actor is not prepared for this, it can be a very rude awakening to suddenly find out they owe thousands of dollars in taxes!
Any major client or studio you work with - especially if you make over $600 with them in the course of the year - will probably make you fill out what is called a Form W-9. This is for the purpose of accurate tax reporting on both sides. This is a standard IRS form that will be the same across the board, so you can save time by filling it out once and then just sending a digital copy whenever a new client requests it (but be sure your computer is password-protected as this form contains sensitive info.)
We will talk about self-employment taxes in more detail later in this guide—-including ways to minimize how much you owe all at once.
SSN vs EIN
If you’re primarily working with established studios and companies, you probably don’t have to worry too much about filling out W-9s with your social security number, especially as you’ll likely be filling these out in person. However, with smaller indie clients, it can be risky because you don’t always know what - if any - security measures they have in place to safeguard your personal information. If you work with a lot of online clients who need your tax ID for the purposes of complying with the IRS, you may wish to consider applying for an EIN (Employer Identification Number) instead. You can apply for one of these even if if you are an individual rather than a registered business, and it can help with peace of mind in regards to potential identity theft and compromised databases.
Keep track of jobs, clients and income
Any time you fill out a W-9 for a client, make a note of it in your database so that at tax season the next year, you can make sure that they send you a 1099 and follow up with them if they didn’t. If they forget to send you one, you’re unfortunately still on the hook for paying taxes on that income—-if THEY report that they paid you to the IRS but you don’t, you’ll end up paying penalties.
Deductions
One way to mitigate how much you owe in taxes is to keep records of how much you spend on expenses directly related to your business. Rather than keeping a box full of paper receipts which can easily get misplaced, it’s better to keep track of them digitally using a free app (such as Receipts by Wave). The app will let you take pictures of physical receipts as well as upload screenshots of digital receipts.
The following contains a list of items you might want to consider for write-offs (of course, you’ll want to double check with a tax professional to ensure your deductions are legitimate):
- Classes, webinars and coaching sessions
- Home studio related expenses (microphones and other equipment, audio software/plugins, acoustic treatment, etc - anything new you bought during the year that you use for recording)
- Demo reel production costs
- Mileage for commuting to sessions
- Travel expenses for events directly related to your business, such as conventions and conferences
- Marketing materials (web design/hosting, domain renewal, business cards, headshots, prints, etc)
- Web subscriptions (IMDB Pro, casting sites, etc)
- Union dues
- Commissions paid to agents and/or managers
- Streaming services used to research industry trends (for example, if you work in dubbing, you might want to consider things like Crunchyroll, Funimation and Netflix subscriptions)
- Physical products related to your own work that you use for promotional purposes (such as purchasing a copy of a game you’re in so you can tweet about it with your fans)
- Phone and Internet services* (you can only deduct the portion used for business - ask your tax pro for their recommendation)
- Business meals* (for example, buying dinner for a client to discuss a job, or taking a mentor out to coffee to meet for work advice - there are specific restrictions for this, so do your research)
Beware of taking frivolous personal deductions such as clothes, hair/nail appointments, gym memberships, personal vacations, meals between sessions, etc. These likely would be rejected in an audit, and even if other actors try to claim they deduct these things, chances are they just haven’t been caught yet. If you’re not sure whether something counts, ask your tax pro.
Registering a Business
If you are making a substantial amount of money from voiceover and/or other freelance work, you may eventually wish to consider forming an S-corp or LLC to keep your business separate from your personal assets (and possibly save you a bit on taxes). However, there are annual fees and extra paperwork associated with having a company, so ask your accountant for advice on what income threshold would be needed to make this worthwhile. Fees vary from state to state—-for instance, the annual fee in California is around $800, but some states may be as low as $100. If you have a corporation, you will also have to pay for a payroll service, but one of the benefits is that you can essentially force yourself to get paid as a W2 employee rather than an independent contractor, and have the taxes automatically taken out of your checks for you.
Estimated Taxes
If you expect to owe $1,000 or more in taxes for the year, you are required to pay “estimated taxes” each quarter or else you may be hit with a penalty. This is a rude awakening for many people as no one ever tells you about this! Fortunately, you can at least register to pay them online. Read more about estimated taxes here.
Set aside money throughout the year
If you can, try to set aside about one-third of each paycheck into a savings account so that you won’t be blindsided by owing a huge amount of money at tax time. “Paying as you go” with estimated taxes, as mentioned above, can also help it not to be such a heavy hit.
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I’m a female voice actor with a High pitched, normal and robotic voice and I can also do British accents! I do murder drones and I could try any other and I can follow scripts! Send me an email if you need me! (Mahatareq09@yahoo.com)