VO-BB - 19 YEARS OLD!

[Karen]

Happy New Year all!

I am just starting out in the VO world and am poised to begin marketing my demo at the end of this month As tax season is soon to kick into high gear soon, I am wondering about what my tax implications will be as a voice over artist (i.e. what can I deduct, should I incorporate myself, what's the right entity for my voice over business, etc.) The only VO expense I've really had in 2005 is paying for my demo production and travel time.


How do you guys handle this? Is there literature out there I can read before consulting (and paying for) an accountant?


Thanks for any advice and suggestions!

Karen

[Deirdre]

I don't think you need to incorporate.

I found a tax accountant who handles artists' taxes. My VO biz is quite similar in terms of numerous income sources and studio expenses.

My deduction breakdown is extensive-- I file a long form. If you're planning to make deductions, you'd better get an accountant. You will be happy to fork over the fee and forget about the agony.

Didn't we have a conversation about this last year?
I wonder, if we did, if those postings got lost in the Great Hack of 2005.

I can't find anything from early last year with the word "accountant" in it.

Oh, well. Chime in again...what the hell.
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DBCooperVO.com

[anthonyVO]

A good accountant is worth every penny - just make sure to get references from another freelancing individual.

Just a note - in terms of credit, putting yourself down as "self-employed" or "freelance" is usually not a very good idea. Unless, of course, you've established a relationship with a certain bank. Once you can make enough money to sustain yourself, consider incorporating - it's alot more taxes, but your accountant will take away this headache from you. I'm not suggesting you do or you don't, I'm simply saying not to dismiss the option. It really does have an impact on credit rating.

OT: If you're just "starting out" you might want to consider holding off on "marketing" your demo too early. First impression is huge - consider more training if you haven't done so already. There's no rush.

[Hart]

I've learned a lot and gotten a lot of help from my state's Small Business and Technology Development Center on this kind of stuff. From the little work I have at the moment, just putting it on my personal tax return seems to be the way to go for now. Especially since I have lots of write-offs for equipment ect. to offset the 1099's.

From what I've read, I don't think incorporating is right for me, but your mileage may vary. I think if and when the time comes, forming a limited liability company is the way to go in my state. Check your state's small business resources. I've also learned a lot at http://www.sba.gov

I don't understand a lot of this tax stuff, but my wife is an accountant. So, I do know a little. This is all from memory so it may not be entirely accurate, but I'll try:

In addition to your travel and demo expenses, you may able to write off the depreciation on your equipment. Obviously, any new equipment you bought is deductible, but the depreciation thing is nice for the old stuff. Seems like I recall two ways to go about that. One was a one time thing, and one was a recurring year to year deal.

Don't forget about office supplies either, that stuff adds up and is deductible. You DO save your receipts don't you

Also, if you work from home you can deduct utilities, and maybe part of your rent or mortgage. This works one of two ways: If you have 7 rooms, and one is used solely for business, then you figure out what a 7th of these costs are and that's deductible. OR you figure out how many square feet you have versus how many are used solely for business. Divide that out and you can deduct that percentage. Same idea, just two different ways to go about it, and sometimes with fairly big differences.

There are lots of little things I'm sure I'm forgetting, and I'm sure many on this board have much more experience with it than I. I definitely agree with DB though. A good tax accountant is well worth it. My wife says this is the last year she's doing our taxes because they are gettting too complicated.

[Bailey]

All of these replies have caused me to scratch my head with a question. If you're not in the "mega bucks" category yet, or you are just starting out, at what point ($) do you even start considering claiming the income and getting an accountant?

_________________
"Bailey"
a.k.a. Jim Sutton
Retired... Every day is Saturday, except Sunday.
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"Be a Voice, not an Echo."

[VO-Guy]

[Bruce]

From my experience, and again your accountant should be consulted, here are things to note:

First, you have to have a lot of really good reasons to be incorporated, so put that question off for a while.

Second, you'll be filling out a Schedule C (Self Employment) tax form on which you will list all of your income and most of your expenses. Look at the categories on the Schedule C and start deciding which of your VO related expenses can be catogorized into those "pigeon holes". Now many of your modern technology expenses can't, so think of other categories: Internet expense (both your provider and your website designer and host expenses for example), Software, Studio (sound proofing, mic stands, cables).

Third, depreciation means you take a major expense item ($500 or more, good mics, computers, etc.) and insted of deducting it all in one year, you spread out the deduction over 3 or 5 or some other number of years. That can help or hurt your situation depending on how high or low you want your taxes to be that year. Have no fear. Apparently you have the option in many cases of filling out the depreciation form and then taking the entire deduction all in the first year. See why you need an accountant?

Fourth, and most important in some ways, when you are self employed no one else is paying for half of your Social Security and Medicare taxes. Normally you have 7 and a half percent deducted from a paycheck and the employer kicks in another 7 and a half. Now that you're self employed you have to come up with all 15 per cent. These are known as the SE (self employment) taxes and are based on your NET income...that's everything left over after expenses are deducted. Also know that no-one is taking Federal and State income taxes out of your pay check either. So if the net taxes you pay to the US and your state have been about 15 per cent, think about this...for every $100 you earn, as much as 30% needs to be socked away to pay your tax obligations. The wise person takes every freelance paycheck and after depositing it immediately transfers 20 to 25% to a savings account to pay for these taxes when they're due. But how many of us really do that all the time?

By the way, your SE tax amount actually comes out to be about 13 and a half per cent because you can deduct IT from your gross income...now you REALLY need an accountant.

Fifth, you can deduct for home office expenses, but it is based on the percentage of square footage of your home or apartment, not number of rooms, and if you get audited you may have to prove that that room was totally devoted to your business (slim chance of that happening, but it can happen). Once you have that percentage you can apply it to basic home expenses such as gas, electric, trash collection, insurance and home repairs and deduct that amount. You put this down on the "Home Office Expense" form.

There's more to consider, but this is a start.

Bruce

[VO-Guy]

I got a headache just reading that. That's why you hire an accountant. It's the best $$$ you'll spend. But like mentioned by someone in an earlier post, don't just grab one out of the phone book. Ask around and get references.

[Hart]

[Deirdre]

It's the percent of the overall square footage.

I've got 12% or some darned thing, so 12% of all the utility bills count as a deduction, etc.
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[Hart]

I knew I wasn't crazy. You can...or could maybe if "all the rooms are the same size you may base your home office tax deduction on a comparison of the rooms used for home office space versus the total number of rooms. (i.e. Your home has 10 rooms and 2 rooms are used for your home office. You can deduct 20% of your total expenses on your tax return.)"

Full article here:

http://www.wwwebtax.com/deductions_z_other/home_offices.htm

But, having read some other articles. Seems it raised a bit of a flag with the IRS to claim a home office so make sure your ducks are in a row.

[Deirdre]

Yeh-- it has to be space COMPLETELY devoted to the work.

No videogame consoles or fun stuff like that unless you're in the business of making or testing 'em.
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