Spring 2018

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30 SAG-AFTRA | Spring 2018 | A Taxing Proposition New Tax Landscape Means Big Changes for Members C ongress passed tax legislation late last year that will have a profound impact on many SAG-AFTRA members. Subsequently signed into law by President Trump, the new rules will go into effect for the 2018 tax year, and now's the time to start planning. How the changes to federal taxes will affect you, as a professional in the entertainment and media industry, will depend on a lot of factors. Chief among them are your income and whether the IRS considers you an employee or a contractor. For actors, the crux of the issue is that itemized deductions have been eliminated from Schedule A – Miscellaneous Itemized Deductions. That's the form that includes employee business expenses, where actors list the costs of a career in show biz. It might include fees to agents; equipment they need to do their jobs, such as microphones or recording technology; travel expenses; and union dues. "This is a devastating blow to our pocketbooks," said Sandra Karas, a SAG-AFTRA New York Local Board member, working actor, tax attorney and director of the Volunteer Income Tax Assistance program, which provides tax assistance for members in New York and Los Angeles. "This affects every single person — especially the middle and the working classes." Karas estimates that for many actors, business expenses can eat up 10 to 30 percent of gross income, particularly if there are agents and managers in the picture, each taking their 10-percent cut. One option is for actors to consider forming a separate entity, such as a loan- out corporation to provide their services to an employer. For instance, if you do form a corporation, you can deduct your business expenses. However, you will have to consider the additional expenses you will incur, and whether they are worth it. There are a lot of compliance measures and associated costs to be aware of, such as the formation of the entity, hiring a payroll company, taking employee wages from your corporation, and the necessity of filing federal, state and, in some cases, city taxes. In addition, in most states, the Department of Labor has taken the position that if you are lending your services out through your own corporation and you are a full shareholder in it, you control the manner and amount you are paid. That means you are not eligible for unemployment compensation because you're not relieving yourself of employment. "When we're looking at people who make less than $100,000 [annually], they really have to think twice about it," she said. However — and here's where things get complicated — even though the miscellaneous itemized deductions are gone from Schedule A, that doesn't mean that all deductions are gone — it all depends on how a member earns income. If you have income from other sources, many of your expenses may still be deductible. Because of this, Karas advises members to save all of their receipts and records of their expenses, just as they did before. THINKSTOCK X2

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