In Actor Speak
JOB SEARCH EXPENSES
Perhaps the single most important piece of information we can offer you on this website is the understanding that all of your expenses as an actor or performer are essentially job search related. That’s important because under IRS rules when your taxes are filled out the deductions are usually placed on an IRS Form 2106 entitled “Unreimbursed Employee Expenses”. Unfortunately for us, that causes a great deal of problems for us when the IRS decides your tax return should be audited.
All too often, especially when the audit is handled through the Correspondence process (a "mail in" audit versus a personal audit) you start having immediate problems. In a Correspondence audit they ask that you to copy all of your receipts and send them some far away IRS office; perhaps a community such as Holtsville, New York or Ogden, Utah; one of the locations so very familiar with the entertainment business. these people don't know what they are doing. (We have heard of similar problems when actors have been audited in person in areas of the country also not normally known as major production centers).
Inevitably the first thing the letter inviting you to participate in the examination asks for is a letter from your employer outlining the reimbursement policy you work under. Unfortunately you won’t be able to get such a letter from, oh, Warner Bros., Paramount Pictures, 20th Century Fox, or one of the other major producers because it would generally be a violation of the collective bargaining agreement they have signed with the unions (you know it better as the contract you work under.) It is the contracts themselves that outline the reimbursement policy of the producers but that really is neither here nor there because again, almost all of the expenses you incur are, again, Job Search related.
Classes, headshots, showcases, audition travel; even agent commissions, are directly related to your search for employment. When you pay your agent and/or manager for the work you receive you are not paying them for the actual job you got, but for the services they performed to procure all of your auditions.
Bear this in mind if you ever have your expenses denied as a result of the auditor turning down your deductions because you were unable to provide them with such a letter from your employer. Job Search expenses do NOT require a letter outlining the reimbursement policy because there isn’t such a policy other than the IRS documents themselves that specify what is and isn’t allowed.
That all said, we don’t go into too much detail on this page other than to remind you to pay attention throughout the year as you spend your money pursuing your career. All too often actors forget an expense here and there that may seem minor at the time. these expenses all add up.
Pay Attention to Details
Let’s take a look at many of the ways those of us in the business market ourselves in order to secure work.
The need for headshots and resumes, as well as driving to auditions is obviously no different from preparing a resume and seeking a job interview.
While you may write off the cost of larger ticket services such as headshot sessions, space rentals for showcases and fees for editing; remember all the incidental expenses as well. The duplication of headshots, demo reels, and flyers are all legitimate write-offs. So are mailing expenses and office supplies used to distribute and create those elements.
Don’t forget those casting director or agent workshops. They add up and are part of your marketing strategy. Some may consider these educational expenses, and that’s fine. Whether you put them under education or marketing, the most important point is that that they are not forgotten, they are documented and that they are not duplicated on your return.
Memberships to various websites have become key to making the entertainment professional visible. If you are using these websites to market yourself make sure you are keeping track of the fees.
Fees paid to an agent (artist's representative) are allowable business expenses.
Agent commissions are usually 10 % of gross for any jobs secured by the agent. These fees are generally limited to 10 % by SAG-AFTRA, AEA, etc. Some foreign productions and/or managers may receive up to 15 % 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 % 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 year-end 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% 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.
For these items though you may be asked to provide evidence of payment. This can be an issue with Agent's and/or Manager commissions because of how they are often paid (merely subtracted from the check before a second payment is forwarded). Regardless, you had better make sure you can validate how your representation was compensated.
As a union member you are required to pay dues to maintain active status. This allows you to work and be protected under that union’s contract. Other benefits include, health insurance, unemployment insurance, and standardized salaries and voting rights within that union. As these dues are integral to securing union work, they are absolutely deductible.
Make sure you keep a copy of your checks or credit card records when you make these payments to the union. The bill alone is not proof of payment.
In the Words of the IRS:
Photo and Video Resumes
Photo and video resumes are generally composites of other work the taxpayer has done. They are used to show potential employers the taxpayers' skills and versatility. These resumes generally include a reasonable expense for taping, editing, and copying. It is generally expected that they would be reasonable expenses incurred every year.
In contrast, we have the "demo." Unlike a demo which is shopped to sell a "production" (song, video, etc.), this demo is used to promote the talents of the taxpayer to potential employers. Some of these demos are like full productions in cost and expended effort, except they are not made for sale. When a major expense is incurred to produce "demos," it must be determined if these assets have a useful life of more than one year.
These tapes (video or audio) are used for job seeking or marketing the taxpayer and are, therefore, not subject to IRC section 263A. They are, however, IRC section 1231 assets; used in a trade or business, with a useful life of over one year, and of a character which is subject to depreciation under IRC section 167. It is, therefore, necessary to determine the useful life of these demos. This can be done by checking when a replacement demo was produced. By verifying that the demo was actually submitted (or shopped), it may be determined that the demo is still being submitted and has no determinable useful life. Generally audiotapes are used from 1-4 years and videos from 2-5 years. This may vary with the nature and subject matter recorded.
Another way performers try to obtain employment is by "showcasing." This involves staging performances without compensation, or even at a cost to the performer.
Actors, Directors, Producers
Many showcase opportunities exist for actors, directors, and producers to exhibit their skills. Frequently, a producer or other entrepreneur will arrange a production consisting of unrelated one scene performances. The individuals who wish to demonstrate their skills can pay the producer to perform one of the scenes. Depending on the location, expected attendance, and history of success, the cost to the individual actor can run from $35 to $200.
A director may pay for the entire scene and recruit his or her own actors. This generally costs the director up to $1,000. The director may recover some of his or her expenses from the actors or he or she may absorb the cost.
Many acting coaches or teachers highlight each series of workshops with a public performance. The coaches invite directors and producers to attend the performance. These performances are considered another opportunity for the actors to demonstrate their skills.
Similar showcasing opportunities exist in the area of stand-up comedy. Many comedy clubs offer 20 minute to one hour segments for a little or no fee. This usually runs from $50 to $500 depending on the reputation of the club.
Showcasing opportunities for musicians can create another source of income. Commonly, musicians are provided an opportunity to perform in a club with only a moderate fee or without a fee. In exchange for performing, the musician is expected to encourage his or her fans to attend the performance. The musician is then entitled to a percentage of the door.
Some agents are now charging a fee for a performer to audition. These fees are generally around $35. If the performer is successful, the agent will then represent that performer. This is a new development in the entertainment industry and not all agents believe it to be ethical. It is, however, acceptable for the performer to pay these fees to acquire representation or employment.
Showcasing expenses can be verified by canceled checks along with contracts, letters of agreement, or other documentary evidence of the arrangement between the performer and the producer or club. In the absence of documentary evidence, a third party contact can verify the nature of the expense and any income received by the performer.
When a performer pays an exceptionally high fee to perform, the probability of the performer receiving a percentage of the door must be considered.