TAXES
- Withholding: When figuring your withholding, your employer follows a tax table that assumes you make what you're being paid for that acting job every week of the year. Chomp! There goes a substantial portion of your paycheck.
To avoid this bite, in past years some actors claimed 99 exemptions or wrote "exempt" on their tax forms. The employer then withheld nothing. No more. Oh, you can do it, but if you claim more than ten exemptions, or that you're exempt, your employer must immediately send that form to the IRS. The IRS can match it against your tax return, and if you don't qualify for what you've claimed, they'll send you a letter asking you to substantiate your claim. If you can't or don't respond to that letter, they'll tell your employer to withhold tax based on your being single, claiming zero exemptions. That will do for your paycheck what Bruce the Shark does for legs.
There is, however, one thing you can do:
- "Part-Year Employment Method of Withholding": That's the name of the form to request. On it, you're telling your employer that in that year you anticipate: working no more than 246 days; earning no more than $30,000; and you use a calendar-year method of accounting (January 1 to December 31). With that in hand, your employer will take less withholding.
- What's your line?: It's a bit of a gray area as to when you can call yourself an actor on your tax return. Certainly you can if acting is your chief source of income. But if the amount of money made in any given year were to be the sole criteria to putting "actor" on your return, we don't have to tell you most actors wouldn't quality. Therefore, the question seems to be: How much time did you spend trying to make money as an actor?
- Keeping track: Way back, we mentioned the importance of a daily diary in regard to filing your income tax. At least once a week, enter into your diary all the expenses you incurred as an actor. Did you "do" lunch with your agent on Thursday? Enter it. Did you buy Your Film Acting Career on Friday? Write it in. Not only will that diary serve you well if you're audited, but often it will remind you of forgotten expenses. And keep receipts - even for items purchased by check or credit card. Without receipts, your deductions, no matter how legitimate, can be disallowed. Try attaching receipts directly onto the daily diary next to the expense. "It gives the diary more substance," says CPA Mel Blank.
- Per diems: When on location, you get a per diem for expenses, which your employer reports to the IRS. You must report that expense money as income. If your expenses on location equal the per diem, they cancel each other out. If your expenses were greater, that's an additional deduction. If they were less, that's taxable income. So keep records.
- In case of an audit: Don't jump off a bridge. Nobody's going to reserve a room for you at San Quentin unless you're defrauding the government, which has nothing to do with this book. Your return will be checked and you'll be asked to substantiate deductions. When notified about an audit, call your CPA. He'll advise you what to do, perhaps even take a power of attorney and go to the audit with your records, all by himself. The IRS will then: declare a "no change" (return accepted as filed); disallow certain deductions (for which you have the right to be billed at a later time); or maybe even give you a refund.
Ever hear of the concept of "paying yourself first?" Each month you pay your bills saying, "Well, I'll just use whatever's left over on myself." Reverse that. Pay yourself first. Before you pay any bill, put a ten spot in a savings account. Drop a fiver in a piggy bank.
And, if you get a small or large windfall, extend the concept. Before you buy shares in a diamond mine in New Guinea, invest in yourself. New pictures, an ad in Variety, that class you've been putting off, a good presentation tape, etc., will pay more dividends than stock on the Big Board. A. Morgan Maree, business manager, suggests this order of investment:
- You;
- Insurance (especially if you have dependents);
- A place in which you'd be comfortable living;
- Other investments (and seek competent advice).
A WORD ABOUT INSURANCE
Achieve even a modicum of success and you may need more insurance on your car, house, etc. because actors are "target risks." See, it's a given that all actors are rich, so slam into someone with your car, have him recognize your face, and don't be surprised if he starts shouting, "Whiplash! Whiplash!" Ain't fame grand?
UNEMPLOYMENT COMPENSATION
We don't have the space to go into all the rules and regulations. Just don't view it as charity - you earned the money. As one actor put it, "I think of unemployment compensation as the national endowment for the arts."
To start, go down to any branch office of the State of California Employment Development Department. You'll be interviewed and notified of your "award" - how much money you'll be getting each week. It's computed like this: First, go back six months - you can't get unemployment on monies earned more recently. For the year prior to that time, your award will be based on the most money you earned in any quarter (January-March; April-June; July-September; October-December) of that 12-month period. Every two weeks you'll fill out another form and receive a check. You'll also occasionally be asked to go in person for a "work search review."
Bear in mind that, when you're receiving unemployment compensation, you must report any work and any income you get. That includes residuals, holding fees, etc. Don't fail to report a single dime. It can mean big trouble.
