8 Great Tax Tips for Filmmakers
Guys, it’s tax season. Freelancers already have to collect an unholy amount information just to begin, and figuring out what to do with that information can be even more of a chore. As filmmakers and creatives, ShareGrid shares your pain. Here is a collection of tax tips all in one place to reduce the tax-season headache.
1. When are taxes due?
Tuesday, April 18th. Maybe you already know that, but it’s a good jumping off point. Here’s the 2017 Federal Income Tax Calendar for more information.
2. Are my ShareGrid earnings taxable?
ShareGrid cannot and does not offer tax-related advice to any members. Please consult your tax consultant to determine tax treatment for your rental activities and retain all relevant documentation. However, income earned by renting out your gear is generally taxable. If your earnings exceed $20K in a calendar year, you will receive a Form 1099-K for that year from Braintree, our merchant account provider. A 1099-K is necessary when "a reportable payment transaction is defined as a payment card transaction or a third party network transaction." There may be deductions you might be able to take against this income, i.e, some vehicle expenses, depreciation, etc. Please refer to your tax consultant to determine tax treatment for your rental activities and retain all relevant documentation. Also, it’s important to know when a 1099 is applicable, which you can find out about here.
3. Things you shouldn’t forget.
There are a ton of things filmmakers pay for to enhance their careers. Some, like equipment purchases, car miles, and meals are more obvious than others. Here are some things you shouldn’t forget. For a whole bunch more, here’s a super useful filmmaker-specific deductible list.
- Rent: If you use your place for business, home office, TV for viewing, or storage for gear, estimate square footage used for business and write that off. If half your house is used for business, 50% of your rent theoretically can be written off as such. You can find more info about deducting your rent here.
- Research/Entertainment: If you make video, then the money you spend watching videos (or engaging art at all) is research, making it tax-deductible! Yay! Don’t forget about museum time, movie theaters, concerts, iTunes, etc.
- Promotion: Your Vimeo Pro account, website fees, business cards, and anything else you pay for to promote your work shouldn’t be forgotten! Keep track!
4. What to do if you have both W-2 and 1099 work.
1099 work (when your employer doesn’t take taxes out) simply means you owe taxes. W-2 employment will take taxes as each paycheck is cut. However, these rates can sometimes be higher that what they should be because your Adjusted Gross Income has not been properly calculated yet. This is why you’re usually owed taxes back once your income is adjusted from your W-2 work. However, 1099 allows for more write-offs because you’re an independent contractor. If you’re like me this year and have both, balancing the two can be tough. Luckily, there’s a pretty great article on the subject from FreelanceTaxation.com.
5. Consider incorporating into a business, or at least separating bank accounts.
There are a lot of advantages to being taxed as a business. Your personal assets can’t be touched legally and you can have a safer, business-friendly banking account. Plus you get to build up credit for your business which can provide easier loans and opportunities down the line. If the fees associated with becoming a business are too prohibitive, you can at least create a separate bank account. That way, your income and expenses can all be in one place. This great post from The Black and Blue details the benefits of incorporating in greater detail.
6. Consider these apps for personal finances.
Simple organization can be the difference between an easy tax experience and a nightmare. The earlier you start in the year, the more you’ll be thanking yourself come tax-season. Plus, organization usually equates to a better tax return. Here are a few apps that will help you stay organized year-round.
- Invoicing: Wave is a completely free app that allows you to send invoices and receive payments, all while keeping organized and prepared.
- Organizing: Mint is an all-in-one app that allows you to organize your finances and look for savings along the way.
- Accounting: FreshBooks is a cloud accounting service that provides comprehensive reports, contractor collaboration, and more.
- Business: Quicken Home & Business will actually help you simplify your taxes throughout the year, among other cool features.
7. Find a good accountant.
Ultimately, if you’re making a living as a freelancer in the arts and you aren’t very familiar with the tax system already, you’re probably going to want a good accountant. You’ll still need to be organized and it’s going to cost you some money. However, finding a local accountant with experience helping artists will almost certainly be worth the expense. For more info on finding an accountant, check out this post from Self-Reliant Film.
8. Be careful. Don’t be greedy.
This kind of goes with #7, but it bears emphasizing. There are a ton of great write-offs to include with your taxes, but there are also nasty penalties if you overreach or put in information that you can’t prove should the IRS flag it. That’s why it’s important to be both knowledgeable and methodical in your tax preparation. Don’t let these penalties happen to you!
9. Please make better videos!
Have you ever tried to watch tax-tip videos online? They're awful! Webcams, bad lighting, and awkwardness abound. Having watched plenty of them as part of research for this article, I'm convinced that there's an untapped market for any ambitious filmmaker looking for new clients. Raise the quality of these videos and you'll not only make extra bucks and learn more about taxes, but you'll be doing a much needed public service as well.
Good luck, filmmakers!