click UntitledEntertainment, Fashon and the Tax (Wo)man

By Rich Streitfeld, CPA

 

You are finally achieving some success in your chosen field.  The work is hard, your income spikes as a freelancer — and dives. Making ends meet is hard, and then there are taxes! What are some best practices to adopt in the New Year?

 

go to site PAY ATTENTION TO YOUR FINANCES

It’s not what you were born to do, but you do have a left brain. And I know it can be painful if you are just struggling to make ends meet.  You’re just winging it week to week, gig to gig.  But quantifying your activity will help you make intelligent decisions. There are tools to make this task easier.  Some people like an excel spreadsheet; I prefer accounting software or an online tool like mint.com — look for the ability to download your bank statements. How else will you know the amount of your bank fees, or insure that everything has been deposited correctly? Pick one, get a friend to help and get started.  Once the system is in place you just need to update it periodically – I suggest every couple of weeks but no less than monthly –or if you are able to afford bookkeeping help then avail yourself of those services.

 

At the minimum, make sure you do not bounce checks and that you can pay your essential personal and business bills on time.  If you have consistent problems despite your newfound organizational prowess then you might need to seriously rethink your approach – are you charging enough? Do you need a roommate? Or, maybe you really should have been an undertaker?

 

buy Proscalpin next day delivery KNOW YOUR DEDUCTIONS

If you are self-employed (freelancer-subcontractor -1099— these are all synonyms) then you can deduct “whatever is reasonable and necessary” in your profession. As a model, you can deduct items that the rest of us normally cannot!  Julia is a bank manager and buys lipstick to look her best. This is a personal grooming expense.  Julianna is a model – buying lipstick for a shoot is essential to success in her specific profession.  Glen loves the theatre and has season tickets to his local playhouse. That has nothing to do with business and is not deductible. Gwen is an actress who performs for various companies.  She can justify some of her theatre-going expense as professional development. – e.g. what are other actors doing, what is the trend in theatre? Do you freelance as a food critic? You probably will get to deduct more dinners than I do.

Remember, as with many things taxes, context matters.  If you earned $800 as an actor and want to deduct a $5,000 trip to Paris to see how the French perform, I might not sign your return.

 

Untitled 2And yes there are apps to organize and even scan your receipts, so no excuses! Some of the most popular ones are Expensify, Shoeboxed and Slice.

 

CONSIDER WHETHER INCORPRATION IS BENEFICIAL

There are varieties of legal frameworks available to self-employed individuals.  A popular one is the “LLC”, or “Limited Liability Company.”  The LLC shields your personal assets from your business in case the business is sued or cannot pay its debts. Don’t have much in the way of personal assets? Personally guaranteeing your debts anyway? Do you consider it unlikely that you’ll be sued (heckling does not count)? Then the LLC is probably not worth the expense (some states charge as much as $500 per year).  The LLC does not confer any tax advantages you cannot already access as a sole proprietor.

 

Are you a hypnotist who promises you can connect with a deceased aunt and locate her hidden treasure, or a yoga instructor that is afraid a client could end up in a pretzel pose and not be able to extricate herself?  Then you might need professional liability insurance and a separate legal entity.

 

Are you taking in more than $40,000 from self-employment, after expenses? Then an S-Corporation may be helpful in curbing your tax liability a bit.  It also confers the same legal protections as an LLC; however, there are more set-up and maintenance fees than with the LLC, such as a separate tax return. You might need to speak to an accountant! (Yes, I do that, and if you live in Rhode Island, my firm can handle the incorporation as well.)

 

NOTE: Federal and state tax laws are subject to change. This article is presented exclusively for informational purposes and is not intended to substitute for obtaining tax or financial advice from a tax or other business professional. Reference to business products does not constitute an endorsement.

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