Your tax return is not the place to practice your improv performances. And you should pay attention to what your preparer is doing with the numbers you give him/her.
The other day we got a call from a client wanting to postpone her appointment because she couldn’t find her tax return from last year. We asked if she was a returning client and was told she’d been with us several years. We said she didn’t need the return as we had it in our computer system. “No,” she said. “I need it to copy the numbers from. That’s what I do every year.”
Oops, wrong company to be saying that to.
She was told if she would just spend a little time to sit down and add up her receipts it could actually turn out to be the best payday of her year. We convinced her to spend the few hours necessary and by using real numbers she ended up with a greater refund of almost $2,000 than if she had used her standard estimates. (We checked.)
When you consider the time and money performers spend to train for and find a job, it is frustrating to watch them throw away their profits because they won’t take the time to add up a few receipts.
Stop “Guestimating” Instead of Using Real Numbers-- It's Costing You Real Money
Someone who had recently moved to LA was being audited and wanted some assistance in understanding the process. As we looked over his numbers we noticed a few “discrepancies.”
For his cell phone expenses he had written off $2000. We told him that seemed high for an actor. He said he thought he could write off 100% of the total amount.
He could, if he didn’t use it to talk to any of his friends or family -- ever. “Oh,” he replied, “Then it should be about 50%.”
We then asked what his monthly bill was. He said he usually paid about $125, which would have been a yearly total of only $1600, not the $2000 he claimed. We had to ask where the $2,000 figure came from in the first place. “I guess the preparer rounded up.”
Your tax return is not the place to practice your improv performances. And you should pay attention to what your preparer is doing with the numbers you give him/her. As this person found out, it can get you into trouble.
Here’s what our staff said they believe to be the most common problems with their clients:
Not being disciplined enough to retain a written diary or calendar. Keep a journal of their auditions and other appointments. Obviously you should know what roles and projects you auditioned for and where the auditions are held. That’s the same information you need for tax purposes.
Actors not remembering where they made their money or how much they made. As a result they can only trust that what is being reported for them is the truth. All too often it isn’t.
Actors missing residual checks (and the income that comes with them). Believe it or not we had one actor hunting down checks worth almost $20,000 this year!
Actors who allow themselves to be under withheld through the year or don’t have taxes withheld from their unemployment checks. As a result, they owe big time. No matter how much you think you need the money through the year, you somehow manage to get by. Owing one large lump sum at tax time is too difficult to overcome for most performers.
Not realizing that when people pay them “under the table” they may get a 1099-MISC at the end of the year despite what they are told. A 1099 reports income to the IRS and they will have to claim that revenue. That income comes with a hefty tax burden.
Learning that they are supposed to report all of their income. Clients have somehow come to believe that if they make less than $600 (the minimum for a 1099 to be legally demanded by Federal law) they don’t have any reason to report the earnings they may have collected.
Taxpayers don’t realize that they are 100% responsible for the information on their tax return when they sign their name. Understand what you are signing. Only you have to pay the additional taxes if the IRS comes knocking.