Oscars Are Over – Time To Talk Taxes
The glitz and glamour of the Oscars is being shuttered, the red carpets are rolled up and stored for another movie premiere, and now it’s time to get back to the business of Hollywood. I’ve represented many of the behind the scenes, the “below the line” people in movie parlance, for the past twenty years in their divorces. As a result I’ve learned a fair amount of accounting, and the ways that expenses are handled by these sometimes employees and sometimes independent contractors. It’s a complex web of rules and procedures that thankfully I don’t have to know. The good news I know people who know the rules.
One of them is Kyle Amann. He reached out to me as we are both alums of St. John’s College. He’s a young man with a positive attitude and a great interest in helping businesses prepare and minimize their tax liability. Rather than me try to translate the IRS rules into something clear, I asked Kyle to prepare a short primer on what the new rules mean for people in the industry. He sent me the following:
Bad tax news for people in the entertainment industry.
Its 2019, and people filing their taxes this season are going to brush up against the changes to the tax laws Congress made last year for the first time. For a lot of people in the entertainment industry, this is not great news.
One of the less talked about changes to the tax law was the elimination of an entire category of unreimbursed employee expenses as itemized personal deductions. Traditionally, even if you were not an independent contractor, you could still deduct manager and agent fees, union dues, equipment rentals, travel expenses and the like that you incurred while working as a member of any of the major guilds or unions in the entertainment industry who receive a W-2 at the end of the year for their job.
That is no longer the case.
From now on, the only people eligible to deduct those expenses are the people receiving their income as freelancers or independent contractors. You’ll know you qualify if at the end of the year you receive a 1099-misc from your employer. Everyone else is out of luck.
I was speaking with a colleague of mine who consults with SAG, and he agreed: “This new tax law is a disaster for everyone in the entertainment industry.”(This also holds true for other people who regularly make use of this deduction as well, so nurses, police officers, anyone who pays for a uniform or specialized equipment, take note).
There is some good news. This was always a specialized deduction not everyone was taking advantage of. Those of you who were never itemizing your deductions are less likely to notice a difference. Plus, the tax brackets are lower this year and the standard deduction is higher. However, those of you who were aware of the deduction, and were saving copies of their expenses, their business miles, etc, should brace for a possible blow this season. And everyone who is getting a W-2 this year should make sure that every single dollar you spend on a job gets reimbursed by your employer, because there is no longer any other way to get it back.
Kyle Amann is an Enrolled Agent and Independent Tax Preparer living in
the Santa Monica area. If you have a tax question, you can reach him at https://kyleamanntax.com/.
One of the other major revisions that is coming in California is that the courts have revised who is and who is not, an independent contractor. This is going to have major implications for those who have been working as an independent contractor and for those who have been paying them. There’s a tsunami of litigation that is about to hit employers so I’d suggest speaking with your tax and legal counsel sooner rather than later.
Remember there’s only 48 days to tax day, be nice to your accountants, they’re not sleeping much…
David Pisarra is a Los Angeles Divorce and Child Custody Lawyer specializing in Father’s and Men’s Rights with the Santa Monica firm of Pisarra & Grist. He welcomes your questions and comments. He can be reached at firstname.lastname@example.org or 310/664-9969.You can follow him on Twitter @davidpisarra