To be considered a "Qualified Performing Artist" by
the Internal Revenue Service is not as glorious as
it may at first sound, nor is it a title that you
should aspire to achieve.
To the IRS the term "Qualified Performing Artist" has nothing to do with acting experience, training, degrees, or awards. We would genuinely hope that no one who has ever won an Emmy, Tony or an Oscar could ever qualify for this tax break as the IRS permits it.
In 1986 Congress passed new tax legislation which created a specific provision for performing artists. It allowed those who fit within a certain parameter based upon their total income and the form of their income to write off their expenses in a very favorable manner. When several of our staff first started helping out at the VITA program in Los Angeles (VITA is an acronym for Volunteers for Income Tax Assistance) over 20 years ago it seemed like at least 20 percent of the people we helped managed to fit into the tax break the IRS allows for performers called “Qualified Performing Artist.”
Today it is very rare for that to happen at all.
To make use of the QPA deduction you must have an Adjusted Gross Income (AGI) of no more than $16,000 plus pass the additional qualifications. You must also have performed services in the performing arts as an employee (meaning you will receive a W-2) for at least two employers during the tax year and received from at least two of those employers wages of $200 or more per employer. Again, these employers must be involved in the performing arts field. You can always work for MORE than two employers and earn MORE than $200 from them, but you must earn at least $200 from at least 2 of them. Finally you must have spent at least 10% of your adjusted gross income on expenses to pursue your career in the performing arts (i.e classes, pictures, etc.), although that usually isn’t a problem for anyone even slightly active in their career.
To make the issue even more difficult, if you are married and living in a community property state such as California that means that the total income of BOTH partners must be $16,000 or less.
If you fit into this criteria you are allowed to write off all of your performing expenses as "an adjustment to your income" and be able to receive the standard deduction as well. For most performers this adds about $5,000 or more to their total deductions and that can be a pretty penny when your overall income is relatively low.
It is the $16,000 cap that has become the limiting factor over the years since 1986. If the cap had been tied to the cost of living the limit in 2012 dollars would now be $33,609. Obviously at that level it would be of far greater value to performers and continue to accomplish the purpose that was intended when it was passed by Congress originally. There have been some minor attempts to move new bills along that would achieve this goal through the years but inevitable they have become stalled, only to subsequently die a slow death in the halls of Congress.
That all said, it is not at all infrequent that we get new clients who tell us that their former preparer wouldn’t allow them to use their acting deductions because they “hadn’t made enough money as a performer.” To be honest I have no idea how much money the preparer thought they should be making in order to use their expenses.
It is possible that these preparers were confusing the tax break for performers entitled “Qualified Performing Artist” (QPA) with some standard that all actors have to achieve before they are allowed to itemize.
Assuming this is the criteria the preparers are using; then apparently they believe you must have earned at least $400 in the year to be able to use your deductions. That just isn’t so. As we all know we may have made a significant amount of money in commercials or on stage one year only to have zero earnings the following year. Except for no longer having to pay an agent or manager, your costs to have a career not only didn’t fall, you probably spent more money trying to seek work than in the prior year. You undoubtedly found that your union dues increased (because of the money you made the year before) even as you earned less income.
So how much money do you have to earn to be able to use your acting expenses? It depends on many factors. One, it helps to have made some significant money in the past. That proves you have been working and presumably have greater expectations in the future. Sure, you can continue to make at least four hundred dollars each year and, if your total income is less than $16,000, continue as a “Qualified Performing Artist.” But it really isn’t much fun trying to get by each year on that little amount of money; in fact it is a virtual threat to your well-being in today’s world.
You may not have worked a union or other W-2 job at all but that doesn’t mean you didn’t do some modeling or trade show for cash. Perhaps you did a small film for a couple of hundred dollars that you thought it might be smart to hide from the IRS. Truthfully, that could be a big mistake, not because the IRS would get angry if they found out, but because it may open the door to using your expenses on a Schedule C. In general, if you make your money through W-2’s you are supposed to file your expenses through a Schedule A, as itemized deductions. But those same costs can be used on a Schedule C if your entire income was paid in cash (check or 1099-MISC) as a performer. And if you are able to use the deductions on a Schedule C, then you probably get to make use of the standard deduction as well.
We don’t have any misgivings about allowing our clients to use their deductions if they have made money before, if they are members of the union, have agents and/or can prove they are being submitted for work and hopefully, can prove they are going on auditions. You can’t be held accountable for not getting the work in this business, but you do have to be able to prove you are involved in the process of trying to get yourself work. As always though, that means keeping notes and records to prove your submissions and the auditions you are able to get from them.
It is too easy to be able to make some money doing something in this industry regardless of where you are and it’s your job to find out how. We're not saying you have to earn enough to make a living, but at least something to prove to the IRS you are actually part of the process. And when you are doing that, write off every legitimate cost.