Ernie Charles is an actor, writer, producer and business owner of Entertaining Taxes, where he is an enrolled agent who specializes in tax preparation specifically for performers. He has represented entertainment professionals in several IRS audits, appeals and collection cases and knows the tax world backward and forward. We sat down with him to ask him about some dos and don’ts for actors at tax time.
TN: What are five things actors are usually surprised to hear that they can write off at tax season?
EC: Usually, they are more surprised by what they can’t write off. But actors often miss some simple business expenses that are allowed. According to IRS code, the expense should be an ordinary and necessary business cost. I’m going to name six, but there are more.
- Business miles, which is driving your car to classes, auditions, picking up headshots, visiting your agent’s office, business meetings, etc. Anytime you’re driving somewhere to improve or help your craft and you’re not being paid for it, you should track these miles. Also, it’s important to get your beginning and ending odometer for the year so that you have your total miles.
- A percentage of your cell phone for business, plus the cost of your phone and its accessories. It’s usually best to total everything together and use a percentage of that total for business (something between 20 percent to 60 percent). It depends on how aggressively you are pursuing the business.
- Business meals, or as I call them, business meetings. In the business of acting, we are always looking for work, and you usually don’t know where the next job may come from, so it’s important to develop relationships. I always take my receipt from a meeting with someone for dinner or a drink, and I write on it the business associate’s name and the project we discussed (even if you’re just meeting for coffee to discuss a show or film project). You can’t do every meal, but it’s normal to have one or two per week.
- Research by watching TV, film and theatre. It’s important to keep notes on your research for proof. Many times, I will write down the name of the casting director, the director and the writer on the receipt or playbill. I will write down a character I relate to or something about the story, which I might be able to use in a future audition or project.
- Professional development, such as classes, workshops and seminars.
- Advertising and publicity, such as photoshoots, headshots and resumes, casting services and website fees.
TN: What are a few common things that actors try to write off that they aren’t supposed to? And why can’t they?
EC: The IRS has two codes that may disallow your business expenses because it’s either considered a personal expense or if it’s something “to maintain an image.”
- Clothing is the No. 1 thing most actors try to deduct, but it’s not allowed. Clothes that may be worn on the street are not an allowable business deduction.
- Haircuts, hair coloring and makeup are most often not allowed. No deduction is allowed for general makeup and hairstyles to “maintain an image.” If you don’t believe, me go to IRS.gov and type in, “Business Expenses – Entertainment Tax Tips” and read what it says about appearance and images.
- Commuting miles to and from work. Actors confuse business miles and commuting miles sometimes. Commuting miles to and from set are not deductable if you are getting paid.
- Gym membership fees are not deductable. Just because you want to look good does not make it a business deduction.
- Cosmetic surgery is neither a business expense nor a medical expense.
TN: What’s one of the most overlooked things actors can write off but tend to forget?
EC: I would say the No. 1 overlooked expense is business miles, because actors don’t like keeping a log of their business miles. But once you get used to it, it becomes a habit and becomes easier. It could mean a $1,000 to $4,000 write-off.
Sales tax on the purchase of a car or big-ticket item is often overlooked. Not always, but most often in the year you purchase a vehicle, you may write off the sales tax amount from that purchase.
TN: What’s the No. 1 piece of advice you would give to actors when filing their taxes this year?
EC: Educate yourself and find ways to track your expenses. If you want to work as a professional in this business, then act like a professional. Keeping track of your business expenses is one aspect of it. I have clients that have not made much money for several years, and then they suddenly start earning more money. If you can do it on a small level, then you will be able to handle it as you become more successful. I know the business is frustrating and very deflating at times, but find a way to develop a habit so that no matter how you feel, you are able to maintain your records.
TN: What are some tips and tricks actors can do between now and next tax season to better prepare for a healthy return?
EC: Find a system that works for you. As time passes, you may change your routine so that it works better for you. I try to get people to balance their checkbooks at least once a week. When you do that, please list the business expenses in a category with the date and amount written on a spreadsheet software, which will create a total for you at the end of the year. Also, I suggest looking back through your appointments for the week and logging your business miles on the spreadsheet, which will provide you with a year-end total. Some people use a cell phone app or take pictures of their receipts, which keeps a running total for different business categories at the end of the year. Just make sure you back it up so you don’t lose your receipts. There is always the choice of keeping no business expenses and paying the highest taxes possible. You are the president, secretary and treasurer of your own little business as an actor (in case you didn’t already know it). It’s your choice how you manage your business as a performer.
TN: You’re an actor and a tax preparer who specializes in actor’s tax preparation. What else can you tell us about yourself?
EC: I love acting and writing, or I wouldn’t still be doing it. I have booked several wonderful jobs, such as “Criminal Minds” and “The Last Ship,” as well as several national commercials. Writing has also become another creative outlet for me. I love sports, too, and I wrote a book called, “College Football Fanatics,” which is published on Amazon. I have even started to produce projects, too. I shot my own short film over a year ago called, “I Think I Need a Drink.” Producing and starring in my own project was a more enjoyable experience than I expected. It was a much smoother process than I thought, but then I believe my background in tax organization helped tremendously.