These days, a tax professional operating in any region of the country may encounter clients in the entertainment industry. Production of movies and television programs as well as live performances in various cities results in tax work for entertainment people by practitioners other than just California Enrolled Agents. Entertainers usually have business expenses, which demand some interpretation of various factors when determining tax treatment.
Entertainment performers may have positions as employees or independent contractors. Some entertainers work for short periods of defined length – even just a single night. Part of Enrolled Agent jobs for entertainers is determining the process for booking their engagements. Self-employed independent contractors deduct expenses from fees received. Employees may deduct business expenses as miscellaneous itemized deductions.
Many performers as well as other employees in the entertainment industry must travel to filming locations. This usually triggers the complicated IRS rules from Enrolled Agent study materials regarding business usage of a personal vehicle. Trips to regular places of work are non-deductible commuting miles. But, travel from a main business location to various temporary assignments is tax deductible.
The key ingredient for deduction of a vehicle is maintaining a log book. Enrolled Agent tax professionals can provide entertainment workers with instructions about specific record keeping requirements. Substantiation is needed for all business miles that lists dates and purposes of trips.
Overnight travel away from home also occurs for entertainers. Records should document the dates and locations of each trip away from the general area of a principal place of employment. Receipts as well as an expense log assure capture of all out-of-town expenses, such as transportation, lodging, meals, tips, and even laundry. The log book is sufficient to substantiate any expense of less than $25 without retaining a receipt.
Most local entertainers are booked for performances by promoters. However, a few popular performers rent facilities and promote themselves as part of a tour. These individuals maintain expense records just like any business. Their tax deductible expenses include promotional costs, supplies, crew members, venue rental, and many other categories. Travel is also deductible, including advance travel to scout locations – as long as business is the primary purpose of those trips.
An important area where knowledge of a pro with EA training benefits entertainers is identification of depreciable assets. Equipment with more than nominal cost and useful life beyond one year is separately reported for tax purposes. Enrolled Agents are careful to educate entertainers about the special details required for equipment purchases used in their acts. The earlier in a tax relationship with an entertainer that a dialog about record keeping occurs, the better the results. Finding receipts and constructing documentation after the tax year has ended is never desirable.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.