It's Tax Day!

This past March, I spoke to students at the Annual USITT Conference in St. Louis, Missouri, about money matters, along with Charlene Gross from Ohio Light Opera. Since it's tax day, I thought I'd share the handout we gave the students here.

Be aware, I am NOT a tax professional. I do have a tax professional, which is a bit of the advice I give here. Also, consider this a "be prepared for next year" bit of advice. Taxes are due three days from now; if you're not ready today, you're screwed.

Here's an "America" bedazzled suit jackt I created for a show. Happy Tax Day!

Is There Life After Graduation? – Money Matters

You’ve graduated! Great! Now get a job and pay your bills! Here’s what you need to know about your expenses and paying your taxes.

Living Expenses

Household Expenses

These are the basic expenses that you’ll need to pay. Starting out, you’ll likely have roommates to share these expenses. Depending on where you live, this can vary greatly. Do a little research to find out what you can expect to pay by city, or ask your friends and family what they pay.

Shared Expenses might include:

·      Rent

·      Utilities – gas and electricity are common for renters

·      TV & Internet

·      Other household expenses – pool your money for cleaning supplies and TP

Individual expenses might include:

·      Renter’s Insurance – trust me, get it. It’s usually inexpensive.

Travel Expenses

Depending on where you end up living, you’ll have to travel to and from work. If you decide to go to a big city like New York City, you won’t even want to have a car. Other areas will require a car. Here’s some expenses to expect.

·      Mass Transit – a monthly MetroCard in NYC is $116; research the rates in your city

·      Car Payments – if you get a new car, or even a used car, you’ll have monthly payments

·      Car Insurance

·      Gas

·      Car Repairs – depending on your car’s age, this can be once a year or once a month!

Personal Expenses

Here’s where you get a mix of required expenses (food) and optional expenses (Netflix). You may want to share some with your roommates or reevaluate what’s important to you. Ordering takeout for lunch every day is expensive; you’ll save money by bringing your lunch to work.

·      Mobile Phone – shop around for plans if your parents have decided to take you off their family plan! Consider national coverage if you travel for work.

·      Student Loans – 6 months after you graduate they come knocking on your door! Consolidate your loans for a better rate.

·      Health Insurance – even under the new proposed Heath Care legislation, coverage on your parents’ insurance ends at 26.

·      Medical Expenses – copays, contact lenses, prescriptions. Will your parents continue to pay for these or will you be on the hook?

·      Entertainment – you deserve some fun! Do you have a Netflix or Hulu account? Will you share this with roommates as well? What else do you do for fun? Consider those things and enter them as an expense.

·      Groceries – Make sure you have food on hand, it far less expensive to make your own food that to eat take out every day.

·      Eating Out – But allow for a little fun. Budget for your Friday (or Sunday in the theater world) nights out.

·      Weekly Cash – How much do you pay with cash? Have a set amount of money you take out weekly for incidental expenses and those times when plastic just won’t work.

·      Other Expenses – new clothes or shoes, sheets and towels, there’s lots of little expenses that show up monthly. Plan for these as well.

Business Expenses

As a Theater Artist, you’ll have business expenses most other people won’t have. If you have a lot of freelance jobs, you’ll have to pay your taxes quarterly or risk a penalty from the IRS and your state. Remember, you may owe the state you live in for income made during your summer stock job in another state!

How will you know if you’re paid as a regular employee or a contract employee? It depends on the form your employer gives you on your first day of work. If you fill out a W-9 then you’re considered a contract employee and you will not have taxes withheld from your paycheck. If you fill out a W-2 then you’re a regular employee and you don’t have to worry about it. If you fill out nothing, that’s still self-employment income on which you need to report and pay taxes!

For business purposes, you’re a Sole-Proprietorship.  This is the easiest business to establish. There are no special forms to file; just declare yourself as a business using your name. If you want to use another name other than your legal name for your business, you’ll need to file a DBA (Doing Business As) form with your state.

Self Employment Tax

If you have freelance income, you’ll have to pay Self Employment Tax. When you have a regular job with a company, they pay 50% of your Social Security Tax. When self-employed, you need to pay the whole thing. The IRS makes it easy to calculate and pay them. Be aware, you’ll need to pay in 4 installments or risk paying a fine when you file your taxes in April. Plan to save at least 25% of your self-employment income to pay estimated taxes.

Go to https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes for information about when and how to pay your Estimated Taxes.

You’ll have to pay self-employment taxes in your state as well. Go to your state’s Department of Finance website for information on how to file quarterly. The deadlines are the same as for the IRS and the total payment is usually much smaller.

Self-Employment Deductions

The good news is that as a freelancer you’ve got lots of things that are deductions! You’ll need to fill out a Schedule C with your taxes when you file. Keep good records and KEEP ALL YOUR RECEIPTS. Get an app like Expense Tracker for your smartphone or tablet, or a computer program like Quicken to help keep track of your business expenses.

Looking at your Schedule C, here are what is deductible for your costume business expenses:

·      Advertising – business cards, web hosting, domain name

·      Car and Truck expenses – If you have to use your car during the day in order to do your job, then a portion is deductible. Regular commuting is not. Keep a notebook or clipboard in your car to track your work mileage. No matter how small, it adds up. 4 runs to JoAnn Fabrics today? A trip to Lowes or Wal-Mart at midnight twice last week for that missing hammer? Track those miles. 

·      Depletion & Depreciation – this is for large expenses like your laptop, a new sewing machine, or furniture you use exclusively for business reasons.

·      Legal and professional services – do you get your taxes done?

·      Office Expenses – paper, printer ink, pencils, if you need it to do your business, it goes here.

·      Rent or lease on business property or vehicles – did you need to rent a car for work? How about office space? Sometimes you can rent table space in a shop. Those expenses go here.

·      Repairs and maintenance – scissor sharpening, sewing machine repair

·      Supplies – paints, paintbrushes, scissors, sewing tools, any small items that you need to do your work.

·      Travel, meals, and entertainment – You can write off meals if they are a meeting or related to the show or company. Be sure to write the names of all in attendance on the receipt. Those Starbucks meetings add up! Save all your receipts from this conference, too! It’s all deductible!

·      Per Diem- When you are out of town for a show, you are entitled to per diem. If the company doesn't pay you a per diem, then you can write off the per diem on your taxes. Each city has a different rate assigned to it. It is all on the IRS site.

·      Business use of your home – you can deduct rent as well as a percentage of utilities if you have a room that is DEDICATED to business use. You cannot deduct if you sometimes use your bedroom as a workspace. Example: If you rent a 2 Bedroom and use one of those bedrooms as an office, that percentage of space can be written off as business use. 

·      Other expenses – Here’s where you list things that are not included above but are deductible for your work. This includes:

o   Research – show tickets, books, museum exhibits, travel to do show research, magazines (like American Theater or TD&T)

o   Memberships and Dues – USITT, Costume Society of America, USA, IATSE

I am not a tax professional – this advice is ONLY what I have experienced. I highly suggest hiring an accountant or at the very least using a tax program like Turbo Tax. I discourage the use of “free” programs since you can owe thousands of dollars to the government if you make a mistake. You can often find an accountant who specializes in entertainment professionals and may provide a discount as well. The cost of paying a professional will pay off as they can find a large refund for you. By the time you have to pay your bill, you’ve already received more than that as a refund! You may also pay per filing, so if you are working in multiple states, accountants may charge you per state filing.  ASK ahead of time. 

For more information on freelance taxes, check out https://www.cpaforfreelancers.com/