In Actor Speak
These deductions are a particularly contentious issue between the IRS and the performer.
From our perspective as performers, there is no way that an actor can maintain an understanding of the projects being cast on Network TV, Cable TV, The Internet, Films and/or live Theatre without taking on the costs of viewing the productions.
The problem is that the IRS views these items as entertainment, which in fact they are for everyone including the performer who has the obvious additional requirement to stay current with the market. The argument that we are not looking at these productions from the same perspective as the normal audience does little to change the minds of the IRS alone.
Where then do the actor and the IRS reach any agreement? The highlighted portions in the opposite column, drawn directly from the IRS regulations, offer you an understanding of what you must be able to prove to receive any amount of deduction for these items.
The primary requirement is written documentation of what was learned by watching each event or how the event DIRECTLY related to a particular need generated either by a class or an audition.
Obviously this causes two problems--documenting in writing what you learned may be like proving a negative plus how do we relate that understanding to future auditions?
Few performers know what lies ahead in terms of future auditions. In fact we usually don't learn what auditions we may have until the day before the actual opportunity and by then it is far too late to suddenly rent all of Steven Speilberg's films (let alone less familiar directors) because he may be directing the project for which you will be auditioning.
As every casting director will tell you, it is your responsibility to have watched every program on television at least once so that you are aware of the major recurring characters and the style of the piece. How do you watch television almost anywhere in today's market without paying for cable. Then add the fact that most of the premium channels (Showtime, HBO, etc) are producing many of the projects for which you will be auditioning? When AMC, Lifetime and even the Animal Channel are producing original programming today, you MUST be paying for cable to know the marketplace.
Now that we have made the argument to the IRS for you, the bottom line is that you must keep ALL of your receipts or checks for the payment of this instruction PLUS be able to "identify how the movie or play directly applied to his or her career at the time through the appropriate documentation."
What's the solution? It will vary from auditor to auditor but we urge all of our clients to keep complete records of what the costs of their viewing expenses were and then expect to be able to write off less than half of what those records indicate. This allows for the entertainment value of the productions you viewed and some auditors may accept this premise.
The most effective method is to keep some sort of "Viewing Log."
Never forget the responsibility to tie the lessons you learned from a program, film or play to written records of the specific educational benefits you derived from the experience.
Just take notes whenever you view TV productions (especially new TV series) and the films you see and keep them as your "Viewing Log." The notes don't have to be extensive (you aren't writing a review), just indicate what genre the project was (comedy, drama, etc) and how it may apply to your career (was the project something you would get hired for?).
For live productions some clients just write their notes in the program and then keep the programs with their receipts.
Noting who the director and the casting people were in your notes proves your concern was to watch the production for your career rather than for simple entertainment purposes. If you get audited this "viewing log" will generally (it varies from auditor to auditor) validate your entire viewing expense.
In the Words of the IRS:
"Entertainers have been known to make a convincing argument about how much they have to spend to "stay on top" or keep current; nevertheless, most of these items typically overlap too much with personal expenses to constitute business deductions."
Taxpayers in the entertainment industry often try to deduct amounts paid for cable TV. They must be able to show how cable TV, as a whole, specifically benefits their employment. There are strict limits on deductions for items, which are "generally considered to constitute amusement, entertainment, or recreation." Such items are thus deductible only where there is a clear tie to particular work.
Cable TV may also be deducted as an educational tool. To qualify as an educational tool, it must directly benefit the taxpayer's trade or business. This must be shown through written documentation. In addition to the record keeping requirements, there should be some note-taking showing exactly what educational benefit was achieved. This may take any form that is reasonable for the particular event. The easier it is to trace the expense to a particular event or class, the better the chances of an allowable deduction.
If the taxpayer has a spouse or children in the household, their personal use of the cable TV should also be considered in determining any allowable deduction.
Movies and Theatre
The same situation exists for movies and theatre. Movies and theatre are deducted as entertainment or education. Either way, the same documentation requirements exist.
THE TAXPAYER must specifically identify how the movie or play directly applied to his or her career at the time through the appropriate documentation. Even where a deduction for a particular event is allowed, such as a theatre ticket to a certain play to research an upcoming film role, only one ticket would generally be deductible.
S.A.G., the Writers Guild, and various professional groups offer regular screenings of new releases to members; thus, membership fees paid by the taxpayer may already cover at least some of these "necessary" expenses. Members of the American Film Institute (AFI) and various other organizations receive free passes to the cinemas. Thus, it cannot be assumed that all tickets represent an actual cash outlay.