Tax Planning for Entertainers: Advice for Actors, Musicians and Writers

Tax Planning for Entertainers: Advice for Actors, Musicians and Writers

As a Woodland Hills accountant, I frequently provide entertainers with Los Angeles tax services. Tax planning for entertainers involves the complexities of multiple income sources and numerous possible deductions, but an experienced entertainment accountant or business manager will be able to navigate these intricacies so that your best interests are preserved.

Whether you’re an actor, musician, or comedian, it’s crucial to speak with an entertainment CPA early in your career. The celebrities you see in the news who’ve been charged with tax evasion often end up in these positions due to improper planning early on in their careers. Even before you anticipate receiving a regular paycheck, you may want to at least attend a seminar on tax planning for your discipline. After all, even within the entertainment industry, filing taxes for actors is very different from filing taxes for musicians.

No matter whether you’re an actor, singer, or comedian, most entertainers have a variety of income streams. For example, a film actor might receive a salary for filming a movie, payments dependent on the sales of the film (participations), plus payments for future airings of the film on television (residuals). If an actor films 3 movies in a year, that’s already 9 income sources. Plus he may also receive compensation for endorsements of products, filming commercials, event appearances, and more. With so many different income sources, it’s crucial to keep careful records of payments made and received.

Given the scope of activities of an entertainer, figuring out which deductions can be appropriately taken can also be a challenge. For example, regular hair styling appointments are generally not deductible unless they can be tied to a particular job. And, of course, all of these connections have to be documented. There are many other unconventional items (clothing, spa treatments, gym memberships) that may deductible, but only if they can be tied directly (not generally) to your work. Entertainers regularly try to manipulate these rules, and thus claiming large numbers of deductions will often trigger an audit. An experienced accountant will make sure you have all the proper documentation to prevent triggering an audit or prove the validity of your claim when you claim these deductions.

In general, tax planning for entertainers will involve some deferral of income and careful preparation to maximize allowable deductions. Other common considerations include whether to set up a separate corporation for tax and liability purposes (often advisable), taxation of intellectual property (such as songs and scripts), international tax planning, wealth management, and estate planning. Every artist has his or her own set of business management goals. Our Woodland Hills accounting firm specializes in entertainment, and can tailor our services to suit your individual or business needs. If you’re looking for an entertainment CPA or business manager in Los Angeles, we’d be happy to help you. Please call us at 818-593-6777 to set up an initial consultation.