In Actor Speak
Interestingly, although agent and manager commissions are one of the largest single deductions most actors have, it is frequently an amount that is missing from the list of expenses we are handed when clients come to have their taxes prepared.
Usually this is because the client can’t figure out exactly how much they have paid out and they have put off coming up with an answer until they have a better idea of their total income from performing, believing they can just take a percentage of the overall aggregate of that income from their tax forms.
The problem with this is the IRS is becoming pretty knowledgeable that most actors don’t pay commissions on all of their income. They are aware that the performer could have different agreements with their managers (if they have one) concerning their theatrical income versus their commercial income. They are also aware that actors don’t always pay a full ten percent to their agents on all of their income, especially residuals.
And because of the convoluted manner in which the actor is paid, usually through the agent where the original check from the Production Company (or payroll service) is first deposited and the agent takes their share and then writes a second check, less their commission, which is then mailed to the actor, or perhaps the management company, which may or may not then cash the second check and take out their percentage as well and write a third check to be sent on to the actor.
In both of the scenarios above it is hard for the actor to prove they paid out commissions to the agent and manager because usually all they have left is a final check stub that indicates how much they received, not how much the original check from the payroll company was made out for. They have little documentation that states the amount they paid out to both the agent and/or the manager.
Then there are the actors who are in such a hurry to get to the bank with their checks they rip off the important part and throw away the check stubs; in turn losing the gross amount, the net amount and the taxes paid.
Even if you get your check directly from your agent (eliminating the manager momentarily), deposit it and then write out a check directly to the management company for their commission, you still need to keep the check stub and a copy of the check you are writing to your manager to document the payment.
Just keep track of all of this. Really what else is there to say?
1. As soon as you receive a check, make two photocopies of the ENTIRE CHECK and CHECK-STUB (or you can scan the check into your computer and print the copy—same thing). Just save the scan.
2. As soon as the paycheck clears your bank account, write out a personal check to your agent and/or manager and mail that to them with a copy (or print out) of the check/stub.
3. If you write out checks to either your agent or a manager, go ahead and make a copy (again you can scan them too) before you mail them. Note on the checks what job you are paying them for so there can’t be any questions once they cash the checks.
Now you have a copy of the check(s) which includes the job and dollar amount for your records. Right? Of course right!
Yes it is redundant and it may seem like a waste of time—until you get audited and lose the money you are entitled to because you didn’t keep any records. Sure, if you simply keep your check stubs you could just look at the last paystub of the year and see what the ‘year to date commission’ is but that will probably only work for payments to your agent and not a manager who receives a separate commission check. You will need to be able to prove you paid them as well.
This is SUPER important because you’ve paid taxes on your gross pay, AND you’ve paid your agent and managers’ commission based on that gross pay also.
IT IS DOUBLY IMPORTANT BECAUSE THESE ARE YOUR INCOME RECORDS AS WELL.
As we have said all over this website, you should always keep records of who you have worked for and how much you have made so you know who you can expect tax information from at the start of the year. You don’t want to have your taxes prepared only to find out you didn’t get all of the tax information you should have received. That means you may have to file an amended return (that costs you more money) or it means the IRS will contact you a year later asking for money on income you didn’t report. And as we always say, you never want to give the IRS a reason to look over your tax return.
So there are a few ways to keep track of how much commission you’ve paid to your agents and managers. As we have stated above, keep copies and/or records of your income throughout the year. In the first place, don’t count on the employer’s tax forms to be accurate. You should always double check the tax forms you receive (W-2s, 1099's, etc) against the year to date figures on the check stubs you have kept.
If you have a Union Franchised Agent you can probably trust them to do two things;
1. Receive all of your paychecks and allow them to send you your portion after they’ve taken out their commission.
2. Trust them to actually have a computer to track how much commission they’ve made off of you during the year. Then call them in January and ask how much commission you paid them last year.
But all of this is assuming you have an agent with nothing better to do than stop making money (working on your behalf) and go into their computer system to seek the information you should already have at your disposal. After all, they have already provided it to you once before. It’s always a good idea to remind them how unthinking and unprofessional you are.
In the Words of the IRS:
Agent Fees and Commissions
Fees paid to an agent (artist's representative) are allowable business expenses.
Agent fees are usually 10 percent of gross for any jobs secured by the agent. These fees are generally limited to 10 percent by SAG, AFTRA, AEA, etc. Some foreign productions and/or managers may receive up to 15 percent commissions.
Most performing artists have contracts with their agent or representative, but this is not mandatory. An oral agreement is sometimes used since the rate is standard. Residuals are subject to the 10 percent commission only if they are "over scale." Therefore, minor amounts will not result in fees to agents. When the residuals are subject to agent fees, the commission is paid to the agent who obtained the work, not the agent at the time of the payment. The agent generally does not issue a yearend statement to the performer. This is to avoid any appearance of being the employer. Most payments (wages or fees) which are subject to commissions are paid by the employer directly to the agent. The agent keeps his/her fee and pays the difference to the performer.
Business management fees are not standard. They may vary from 5 to 15 percent of gross or they may be a flat monthly fee. Business management fees are allowable in proportion to the percentage of business use. Many actors have their manager pay all their personal bills and handle their personal business. Facts and circumstances will determine the percentage of business use.