Monday, April 14, 2014

Need More Time? File for an Extension -- Deadline is October 15



Need More Time? File for an Extension  -- Deadline is October 15

 
Tax returns are due TOMORROW!

Do you need more time to get your stuff together?  If that’s the case, you can request an automatic six-month extension. This year’s extension due date will be October 15. Go to www.irs.gov and find Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.” It’s a very short form -- only a third of a page. On the left side, you identify yourself and on the right side, you provide an estimate of how much, if anything, you’ll owe when you do file your return. You can file your Form 4868 electronically or on paper. Follow the instructions.

• If you send a payment with Form 4868, you should include that amount on Line 68 when you eventually file your return.

• If you miss the April 15 deadline without applying for an extension (or miss the October extension deadline), there will be penalties, which can be stiff. However, if you can show “reasonable cause” for your failure to file on time, such as serious illness, natural disaster, and the like, the IRS will consider those reasons and may waive the penalty.

This is very important: the extension gives you more time to file your return, but any taxes you owe are still due by April 15! If you delay paying your taxes, you’ll owe interest and may be charged a penalty.

The Actor’s Tax Guide offers last-minute help.  Go to www.ActorsTaxGuide.com.

Monday, April 7, 2014

Eight Tax-Time Errors to Avoid



Eight Tax-Time Errors to Avoid

Tax Day is just over a week away.  As you enter the home stretch, here are some errors to look out for.  If you make a mistake on your tax return, it usually takes the IRS longer to process it. The IRS may have to contact you about that mistake before your return is processed, which will delay the receipt of your tax refund.

The IRS says that e-filing greatly lowers the chance of errors. In fact, you’re about twenty times more likely to make a mistake on your return if you file a paper return instead of e-filing!
Here are eight common errors to avoid.

1. Wrong or missing Social Security numbers.  Be sure you enter SS#s for yourself and others on your tax return exactly as they are on the Social Security cards.

2. Names wrong or misspelled.  Be sure you enter names of all individuals on your tax return exactly as they are on their Social Security cards.

3. Filing status errors.  There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) With Dependent Child. Most people know their status, but if you’re unsure, IRS Publication 501, Exemptions, Standard Deduction and Filing Information, can help you choose the right one. Electronic tax prep programs will also help you choose the correct filing status.

4. Math mistakes.  If you file a paper tax return, double and triple check your math. If you e-file, the software does the math for you, but check it yourself, anyway. 

5. Errors in figuring credits, deductions.  Take your time and read the instructions carefully. Many people make mistakes figuring their Earned Income Tax Credit, Child and Dependent Care Credit and their standard or itemized deductions. 

6. Wrong bank account numbers.  Direct deposit is the best way to receive your tax refund. It’s fast, easy, and safe.  But make sure you enter your bank routing and account numbers correctly.

7. Paper forms not signed, dated.  An unsigned tax return is like an unsigned check – it’s invalid. Remember both spouses must sign a joint return.

8. Electronic signature errors.  If you e-file your tax return, you will “sign” the return electronically using a Personal Identification Number. For security purposes, the software will ask you to enter the Adjusted Gross Income from your originally-filed 2012 federal tax return. (Don’t use the AGI amount from an amended or corrected 2012 return.) You may also use last year's PIN if you e-filed last year and remember your PIN.

Get tax advice from The Actor’s Tax Guide at www.ActorsTaxGuide.com.

Monday, March 31, 2014

Nine Tips from the IRS on Deducting Charitable Contributions



Nine Tips from the IRS on Deducting Charitable Contributions

Donating to charity makes you feel good and can help you lower your tax bill. The IRS offers nine tips to help ensure your contributions pay off on your tax return.

1. You must donate to a qualified charitable organization. You can’t deduct contributions you make to an individual, a political organization, or a political candidate.

2. You have to file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all non-cash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.

3. If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you received. Examples of benefits you may receive in return for your contribution include merchandise, tickets to an event, a dinner, or other goods and services.

4. Donations of stock or other non-cash property are usually valued at their fair market value. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.

5. Fair market value is generally the price at which someone can sell the property.  For household items and clothing, think of what they would fetch at a garage sale. 

6. You must have a written record about your donation in order to deduct any cash gift, regardless of the amount. Cash contributions include those made by check or other monetary methods. That written record can be a written statement from the organization, a bank record or a payroll deduction record that substantiates your donation. That documentation should include the name of the organization, the date and amount of the contribution.

7. To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.

8. You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.

9. If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.

Bonus tip from yours truly:  Report only those contributions you actually made in 2013. If you pledged $100 to an organization in December, but didn’t actually pay until January, your deduction will be for 2014, not 2013. However, if you paid by credit card in December but didn’t actually pay your credit card bill until January, you can still deduct the $100 for 2013. Same goes for a check mailed in December that didn’t clear your bank until January: you can deduct it for 2013. 

For more information on charitable contributions, see Publication 526, Charitable Contributions, available at www.irs.gov.  For information about noncash contributions, see Publication 561, Determining the Value of Donated Property.

A CPA told me, “Your explanation of the charitable gifts [in The Actor’s Tax Guide] is probably the clearest, most concise explanation I have ever read.”  Get the book at www.ActorsTaxGuide.com.

Monday, March 24, 2014

Business Gifts & Entertainment: Use Limits to Your Advantage



Business Gifts & Entertainment: Use Limits to Your Advantage

If you sent gifts of any kind to your clients, agents, casting directors, etc., including holiday greetings, birthday cards, and so forth, you can deduct them as business expenses. There’s a limit of $25.00 per person (not including shipping) per year, so if you sent your agent a $50.00 basket of flowers, you can’t write off the whole thing. However, if you sent the flowers to the agency (several non-related people as co-recipients and one person would not personally benefit from the gift), the individual limit wouldn't apply. If you sent out inexpensive items that were of an obviously promotional nature, such as mugs or pens with your name on them, those aren’t gifts, they’re advertising, and not subject to the gift rules.

Business entertainment refers to anytime you host a client or potential client, your agent, a casting director, or anyone else who might advance your career, provided that it’s not “lavish or extravagant under the circumstances” (the IRS’s words). It can include things like theatre tickets or taking someone to dinner. A dinner must have a clear, specific business purpose and can't be essentially social in nature. If you treat someone to dinner, you can deduct your own meal (food, drink, tax & tip) as well as your guest’s, and you must have been present at the meal for it to be deductible as entertainment – you can’t discuss business if you aren’t there!

The limit on business entertainment is 50% instead of a dollar amount, so you can use the limits to your advantage. Let's say you bought a ticket for a director to see you in a show. If the ticket was $30, call it a gift and deduct $25. If it was $60, call it entertainment and deduct $30.00.

Chapter 8 of The Actor’s Tax Guide is devoted to travel, transportation, entertainment, and vehicle expenses.  Info at www.ActorsTaxGuide.com

Wednesday, March 19, 2014

Must a child performer file a tax return?



Must a child performer file a tax return?

If you have dependent child who has worked in the business (or if you ARE a dependent child working in the business), the question often arises about whether or not the child has to file a tax return at all. The IRS says that a dependent must file a tax return if any of the following apply:

• Their unearned income was more than $1000.
• Their earned income was more than $6100
• Their gross income was more than the larger of $1000 OR their earned income (up to $57650) plus $350.

Unearned income includes taxable interest, ordinary dividends, and capital gain distributions. (It also includes unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust.) Earned income includes salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants. Gross income is the total of unearned and earned income.

Clear as mud? Here's an easy way to figure it out. Take a piece of scratch paper and enter the following:

1. Enter dependent’s earned income, plus $350
2. Enter the minimum amount, $ 1000
3. Compare Lines 1 & 2. Enter the LARGER amount
4. Enter the maximum amount, $ 6100
5. Compare Lines 3 & 4. Enter the SMALLER amount
6. Enter the dependent’s gross income

If Line 6 is more than Line 5, the dependent must file a return.

Chapter Six of The Actor’s Tax Guide is for parents of child performers.  Get the book at www.ActorsTaxGuide.com.

Monday, March 10, 2014

Deducting your internet service costs



Deducting your internet service costs

We all pay a substantial amount every month for internet service, and actors use the Internet for lots of business purposes. I subscribe to a couple of online casting services; I get theatre audition postings from a local website; I get my radio audition copy by email and submit my voice auditions by MP3; I submit my pic and résumé to producers and directors electronically; I even use online maps to figure out where an audition is! So it's legitimate to claim part of your internet bill as a business expense.

Now -- your internet access is basically a communication device, right? So I would tend to think of it somewhat like your telephone service. In the Instructions for Schedule C, it says that you can’t deduct the base rate of your first phone land line. But you can deduct costs over and above the base rate of the first line, such as call waiting, voice mail, and other service enhancements, or the business use of a second line, including its base rate. Therefore, it’s reasonable to look at your internet service as a "second line."  Alternatively, you could think of it like your cell phone -- a separate communication device.  So you should be able to claim a reasonable portion of your internet bill as a business expense. 

The trick is, what's reasonable?  You also use your internet service for personal emails, playing games, wasting time on social media sites, etc.  It would be impossible to figure the amount of time you spend in personal vs. business activity.  In terms of time spent, I'd bet it's more personal, but in terms of individual internet searches and log-ons, I would think the business percentage would rise substantially.  I suppose you could look at your email records and figure out the percentage of personal vs. business and extrapolate from that.  But let's just go half and half, which is what I advise for deducting the cost of telephone service enhancements. 

Start with half of your 2013 internet bill.  Deduct the portion of that expense that’s attributable to your self-employment (1099) work on Line 25 (Utilities) of Schedule C, and include the W-2 portion with “Other” expenses on Line 4 of Form 2106. 

There’s a complete discussion of other allowable deductions (and my unique system for allocating this type of expense between 1099 and W-2 work) in Chapter Seven of The Actor’s Tax Guide, available at www.ActorsTaxGuide.com.

Monday, March 3, 2014

What Sorts of Wardrobe & Makeup Expenses are Deductible?



What Sorts of Wardrobe & Makeup Expenses are Deductible?

The general rule about wardrobe and makeup is that if you CAN use something for general street wear, even if you never do, then it’s NOT deductible as a business expense. If you bought a business suit to do a commercial and never wore it for anything else, it’s still not deductible, because you COULD wear it in public. A sequined, gold-lamé business suit would be a different story – it’s obviously a costume and not normal attire, and it’s deductible. Dance wear and shoes ARE deductible, even though you could wear them to the gym or even some places out in public, because they’re considered specialized work clothing -- like a nurse’s scrubs.  (Cleaning, repairs and maintenance of your clothes used on the job are deductible.)

The same rules apply to hair and makeup expenses. Here, men have it easier, because we generally don’t wear makeup on the street, so guys can probably write off all their makeup expenses. Ladies do wear makeup on the street, so you’re probably limited to deducting only those items of makeup that aren’t suitable for street wear. Hair is much the same: even if a director or designer required you to get a specific haircut or dye job for a role, if the hairstyle is suitable for street wear, it’s not deductible. One exception might be for hand models, who have to get more frequent manicures and take other precautions beyond normal grooming to keep their hands camera-ready.

Chapter 7 of The Actor’s Tax Guide discusses more than 25 kinds of expenses actors might incur.  Order your copy at www.ActorsTaxGuide.com