Feature Story: Actor’s Guide to Tax and Finance
If you are being smart and living within your income, you’ll have money left over at year’s end. Money can’t buy happiness. But poverty can’t buy happiness either.Save enough to pay this year’s taxes. Nothing wrecks spring-time like having to find tax and GST, just when work is traditionally scarce. You may have other legitimate categories, and some of this list may not apply to you. What you call an expense is less important than the principle that you deduct anything you spent, in the year in question, on the business.For most people, putting aside fifteen or twenty percent of their fees works out well enough. If you’re in a long-running stage gig, ask the theatre to deduct tax out of each pay packet. Or, better, open an on-line account and set up a regular transfer from your chequing account. For shorter gigs, transfer the tax percentage when the cheque comes in. At tax time, you’ll have all your tax, and a bit of interest too. It’s very easy to bank your GST as you receive it, but the calculation is worth it for income tax, too.
Then save enough to live on for six months. It’s a rush to realise that you can choose your jobs. It’s not like being independently wealthy, but not having to earn the rent money does open up your options.
Average out your income. RRSPs are the best place to save your money from year to year. In an RRSP, you pay no tax on your contribution, and none on the investment return, so your real rate of return is half again as high.
Save in a good year, and and cut your tax bill. Withdraw in a poor year, and pay little or no tax. AC TRA Frat and especially Equity have plans that are easy to withdraw money from when a really cruel year comes along.
And save for the long haul. But don’t be too ready to cash in to avoid short-term problems: these savings will make you smile when you’re old and grey and ready to ease up.
Watch your deduction room. It’s on your Assessment from CRA. After this limit, you can contribute up to $2000 more without penalty. That extra amount is a tax-free investment, but you don’t get the deduction from your income.
After the contribution room and the extra $2000, you are penalised at 1% a month for any more contributions. If you send AC TRA Frat or Equity a copy of your current tax assessment, they will know your contribution limit and when to start diverting your RRSP contributions to an unregistered fund, which you can draw the money from at the end of the year.
If you’re earning well on both sides of the business, get professional advice.
Tax
You can do your own tax. You will have to keep your records through the year, and sort out the income and receipts at year-end, whether you hire a tax preparer or not, so why not try?
There is a form, T2124, for your business income and expenses, but you don’t have to use it.
Every tax program can handle your actor returns, many companies have cheap or free programs online, and they all have Wizards that will lead you by the hand through the tangled pathways of the tax forms. Check my list at the end for forms and programs.Preparers’ fees start at close to $200 even from H&RBlecchh. Even if you decide that saving the hassle is worth the preparer’s fee, you can’t sign “this is true” at the foot of your return if you don’t know the basics. So here are the basics:
GST woes this year
The GST rate changed from seven to six percent on July 1st.. This means that you’ll need to know what you made after the change-over, to be able to calculate the GST that was added to your fees, as you do your taxes this year. Your T4As will only show the year’s total, of course. Similarly, you’ll have to separate your receipts into two piles: those pre-change will have GST in them at seven percent, those after at six percent. If you’ve not been keeping them separated, this will increase your preparation time.
Actra PRS
These usage fees are a percentage of the producer’s gross, which PRS divides up among the cast. They tell me they calculate the GST payable to registered cast members, and bill the producer for that. If you are registered and your slip shows no GST paid, I suggest you declare the income less GST, save some income tax, and pay less GST on the fee.
Callback fees
Even if you’re not AC TRA you will get these fees for a long audition or a callback if you fill the form in at the audition. They are paid directly to the artist, because the agent is not supposed to take commission.
They are also described as ‘repayment of expenses’ and therefore not taxable. Sorry guys, they are taxable income, just like per diems. They would only be untaxed if you had to produce the receipts of your expenses to get them.
And speaking of expenses:
Expenses
Here’s the usual list of business expenses that you may be allowed to deduct.
You may have other legitimate categories, and some of this list may not apply to you. What you call an expense is less important than the principle that you deduct anything you spent, in the year in question, on the business.
Claim whatever you like, but remember that they can ask for proof. A full written receipt is best, but you can write more details on any receipt – what you bought, what the business use was, who you ate with, who the present was for.
If you don’t have a formal receipt, collect what evidence you can – this is where your work diary is useful. Get as much back-up as you can for everything. Even Visa slips and bills can be enough, but they are shaky (someone else could be claiming the same expense, using the real receipt).
- Accountant, Legal
- Advertising, Promotion
- Agent Commission (remember agent’s GST)
- Business Fees (Memberships, AC TRA, Equity dues, work-permits)
- Classes
- Dressing Room Supplies
- Hair / Make-up
- Office Supplies and Equipment, Postage and Stationery
- Professional Gifts
- Professional Tickets
Research
- Internet
- Local Transportation (Don’t include commuting trips to employment)
- Telephone (Don’t claim the basic line cost, unless you had more than one line – “everyone has a phone”)
- Travel (Set up your meetings before you leave, to show your intention for the trip)
- Business Use of Home – Rent or Property tax, Mortgage Interest (not principal), Hydro, Gas, Insurance, Cleaning, Security.
- Work out the percentage of your home that you use for the business. Start with the area that’s used up with desk, storage, etc., and add part of the areas you use occasionally.
- Car – Gas, Insurance, Repairs & Maintenance, Reg & License, Loan Interest, Lease payments, CAA , Cleaning, Parking Costs, Home Parking Fees.
Tickets aren’t deductible any more. Nor is towing, unless you broke down. - Keep a mileage log to show your Percentage Business Use. If you
don’t, you can lose the whole deduction. Keep a notebook in the
car, and write down the start mileage of every trip, and its purpose.
And some more with special problems:
- Medical Insurance – The premium for AC TRA Frat, Blue Cross, etc., not provincial premiums and not medical insurance, nor coverage against accident, etc.. You can only take it as a business expense if your business income after expenses is more than half your total income or if your non-business income is less than $10,000. If you don’t qualify, add it to your medical expenses.
- Business Meals – Claim half the amount, plus tip. Note why you had to eat out, or who you were eating with and why. To be safe, arrange the meal ahead of time as a business meeting.
- Out of Town Accommodation – Only if you had a home base available while you were renting elsewhere.
- Capital Cost is close to depreciation. It’s used for big-ticket items, typically over $200, that last past the end of the year. You take a given percentage of the expense over a number of years. T2124 has a table you should be able to work through patiently.
Contacts
The phone book has numbers for Canada Revenue’s General, Business & GST, Forms, and Problem Resolution, as well as TIPS services like your RRSP deduction limit and news on your refund.
