Ok, I was wrong about the 1099 part. It looks like Schedule A is where the impact is (and the elimination of Form 2106). [link]
Actors, Directors and Performers
The major change in the new tax bill is the elimination of the deduction for employee business expenses (Form 2106). This is going to have a devastating effect for many employed performers as Actors Equity, SAG-AFTRA and other organizations require that compensation be paid on a W-2. As of 2018, these performers lose all ability to take their professional, out of pocket expenses.
As most of you know the QPA (Qualifying Performing Artists) is, and has been, virtually worthless for many years as the qualifying threshold is unrealistically low. This has traditionally moved the deductions for the professional actor, actress, model and performer to Schedule A as miscellaneous itemized deductions, and these are what the new tax bill eliminates.
In planning for this change the performer has 2 options;
The simplest approach is asking the payor to lower compensation and reimburse the out of pocket expenses or Set up what is called a "loan out" corporation. The concept of a loan out corporation is that the buyer of the talent pays the artist's company instead of the performer directly. The performer then becomes an employee of their own corporation and takes all the associated deductions 100% directly on the corporate tax return. In that way, the performer gets the full value of all the associated business expenses, including the new 199A "business income deduction" if qualified, as well as obtaining the liability protection that the corporation gives them. In exchange for this, of course, the performer complicates their life substantially with the administrative hassles of the corporation so one must carefully weigh out the pros and cons before jumping in.
Remember actors and other performers are considered "specified service businesses" under Section 199A.
Musicians and Singers
One of the key changes in the new tax bill is the elimination of the deduction for employee business expenses. While many successful musicians receive W2 income from touring gigs, they generally also have substantial income from self-employment for teaching, session work or private gigs. There has been no significant change in deductions for self-employed taxpayers; Schedule C stays virtually untouched. All direct business expenses for the musicians' independent, free-lance (1099) work will keep all allowable deductions intact moving into 2018. Again, in 2018 the one change will be the inability to deduct expenses directly associated with W2 employment. In this case, the touring musician with significant out of pocket expenses related to W2 income would be better to receive lower compensation and have the touring company reimburse them their expenses.
Remember musicians, singers and other performers are considered "specified service businesses" under Section 199A.
Writers
In our opinion, writers will see little or no change in the deductibility of their direct writing expenses. A vast majority of independent writers are considered self-employed (remember, writer royalties are considered earned/self-employment income for the creator) and there has been no significant change in deductions for self-employed taxpayers; Schedule C stays virtually untouched. Current regulations indicate that writers (those not connected with the performing arts) will also enjoy the full benefit of the new 199A net income deduction under 2017 TCJA tax bill.
Many independent writers also teach. Their teaching income is reported on form W2 and, therefore, the deductions associated with the W2 income will be lost in 2018 but not their direct expenses for writing and research.
Remember writers that are not "integral to the creation of the performing arts" are not considered "specified service businesses" under Section 199A. If you have substantial income as a writer consider structuring your writing business as an "loan out" S corporation and (continued...)
( continues...) paying yourself payroll to leverage the new 199A deduction.
Visual Artists
In our opinion, visual artists will see little or no change in the deductibility of their direct art expenses. A clear majority of independent artists are considered self-employed (remember, an artist's income is considered earned/self-employment income for the creator) and there has been no significant change in deductions for self-employed visual artists; Schedule C stays virtually untouched. Current regulations indicate that visual artists not connected with the performing arts will also enjoy the full benefit of the new 199A net income deduction under 2017 TCJA tax bill.
Many independent visual artists also teach. If their teaching income is reported on form W2 then those teaching deductions, formally taken on Form 2106 as itemized deductions will be lost in 2018.
Remember, visual artists that are not creating art work "integral to the creation of the performing arts" are not considered "specified service businesses" under Section 199A. If you have substantial income as a visual artist, consider structuring your art business as an "loan out" S corporation and paying yourself payroll to leverage the new 199A deduction.
That sounds very complicated, aurelia!! I did my taxes a couple months ago, and got way less back than usual, but I did still get a refund—I did the numbers and I did technically pay less % in taxes this year, it was just the lower return. But still felt like a bummer!
I just had a meeting with my new manager. Cons: she's located in Scotland so there's very little overlap in our available schedules. Pros: she has a super cute Scottish accent so listening to her is extra fun!
I used TaxAct this year, weeks and weeks ago ... and it never came back. I'm assuming that means they actually got filed, but I wish there was some kind of confirmation email or something
Amy, if you didn't get an email confirmation of your efile being accepted or rejected, log back into your account to check there. Also, if you are expecting a tax refund, you can check the refund status tool at the IRS web site.
If your efile got rejected before April 15, there is a procedure you can use which will give you 3 extra days to get a paper return postmarked and in the mail.
If your efile was rejected due to a name/ssn/dob mismatch, consider that the IRS gets that info from the SSA, so you should find out from the SSA exactly how you are listed. It won't help for this year, but will for next.
(Disclosure: I work for H&R Block, doing systems QA and support. I am not a tax preparer.)
Well, it didn't take me long to how through H&R Block and filllout the forms but I am shocked at how much I have to pay. Somehow only $150 was witheld last year for my federal taxes so I owe a buttload. How can that be? Whatevs, I'll pay in installments, but I am strongly tempted to just not file at all and gamble that the understaffed IRS won't find me.
My condolences about your cat, Scrappy.
I have a lot extra withheld every paycheck because I don't miss the tiny bit extra every couple weeks but 26 paychecks' worth in the spring helps me with the big extra expenses that my parents inevitably run into. Now I'm wondering if the unexpectedly easy tax software messed up when filing, because I only got back about $300 less than usual. Maybe there's some "he's a middle-aged white dude from the South, unlikely to be a Liberal" algorithm that protected my refund.
That sounds very complicated, aurelia!!
Not for me so much since I've got a full time gig, but I'm seeing a lot of actors and directors who weren't aware of the changes until now.
I have to confess that I reported the wrong amount of income to Mass this year -- I did them at the same time, but then the Feds reminded me I hadn't added in my interest income, which is dozens of dollars. I didn't fix the MA filing, so I'm expecting them to come for their $1.50 any time now.
Thanks so much, dcp! I just logged in and it says, "Congratulations on filing individual 2018 tax return!" so I'm assuming I'm good.
(I also had to do it early so I could file it with the HealthMarketplace, and they usually start bleating if they don't get documents within the time frame, so.)
I'm so sorry about Squeaky, Scrappy.
