Tax season may be the most dreaded time of the year for dancers - but I promise it doesn’t have to be. When I first started working in Los Angeles as a freelance dancer (and Pilates instructor, writer, and social media manager - because you know how it is!) I didn’t have a clue how much to save from my self-employed earnings and wound up with a huge tax bill that I wasn’t prepared to pay at the end of the year. Having to go on a payment plan with the IRS that year was a wake up call that I needed to put on my adulting hat and learn how it all worked.
After that experience, I feel much more relaxed when tax season comes around now because of two major things: I took the time to create systems that keep me organized throughout the year, and I utilized free resources like The Actor’s Fund to learn more about taxes for performing artists specifically. If you’re a freelance dancer or performer, you most likely earn some to most of your income as a self-employed individual, meaning you are your own business. As such, you have to understand how taxes apply to that business - we don’t have an accounting department to do it for us! The more clear you are about the process, the less chance of being audited or hit with a bill you’re not prepared for at tax time.
To help you approach your taxes with more clarity, I spoke with The Actor’s Fund (which serves anyone in entertainment - not just actors!) and Dominic Comperatore of Empire Tax Prep, which offers tax preparation services for artists, to compile a list of tips every freelance dancer needs to know this coming tax season:
1. Figure out the best way to file for you.
Probably the best kept secret about filing your taxes is this: If you feel confident doing your taxes on your own and you make less than $72,000 a year, you don’t need to pay to file your taxes. With the IRS free file program, you can do your federal taxes (and many state taxes) on one of their partner sites to file for free online - seriously.
If doing your taxes yourself feels daunting, it might be best for you to get professional help. Companies who specialize or focus on artists, like Comperatore’s Empire Tax Prep service, will be your best resource for tax preparation, because they will be most familiar with our specific types of expenses and multiple income sources as a performer.
You may also qualify for professional help for free! The Actor’s Fund offers many financial wellness programs, including free webinars, workshops, and advice about taxes for artists. Their Los Angeles office also offers the IRS’s Volunteer Income Tax Assistance (VITA) program, which pairs you with a tax advisor for basic tax prep for free if you make $57,000 or less. You can find a VITA program site locator near you here.
If you’re a freelance dancer or performer, you most likely [...] are your own business.
2. Report ALL of your income as a performer - no matter how small.
You may have heard the common advice that if you didn’t get a W-2 or 1099 from a gig because it was less than $600, you won’t be taxed and don’t have to report it to the IRS. Comperatore knows this is a big source of confusion for artists, but as he says, “We are required to report every dollar of income we receive. The $600 threshold refers to the reporting requirements of the payer. And yes, we’re still required to report it even if we didn’t get a tax form for it.”
You may wonder what the point is in reporting only small amounts of income, but it’s especially important if you have more than one type of self-employed income. For example, as a Pilates Instructor, I report my self-employed income and expenses related to that work separately from my ‘Professional Dance’ income and expenses. Some years (hello 2020), I might not make as much income from my work as a Professional Dancer, but if I report even the small amounts of income, I can still report my expenses (professional classes, etc.) related to that profession. It helps with clarity for both the IRS and yourself!
3. Don’t forget to report your unemployment benefits.
“If you received any unemployment, whether it was the standard unemployment or the supplemental pandemic assistance, you should record it on your tax return,” Comperatore says, “Whether it’s taxable will depend. For 2020, most taxpayers were eligible for an exemption of the first $10,200 of unemployment on their federal return. The $10,200 exemption applied only for the 2020 tax year, so don't count on it for 2021/2022.” Moral of the story: report ALL sources of income, including unemployment benefits!
4. Be sure to understand the requirements for a tax credit before you claim any.
You may have heard of the ‘Qualifying Performing Artist Tax Credit’ and want to know if it applies to you. Comperatore says, “This was a once-upon-a-time wunderkind of a deduction for performers. However, it hasn’t been updated in decades and as a result, very few performers meet the requirements nowadays - for starters, your adjusted gross income can’t exceed $16,000.” To qualify for this credit, you also have to have made money as an employee (where you get a W-2) from at least two separate performing arts employers making over $200. Comperatore suggests that if you think you qualify for this credit, to speak with a tax advisor who specializes in performers. “We frequently see new clients whose former preparers improperly gave them this deduction in the past, and a subsequent headache from the IRS,” he says.
5. Get clear on what expenses you can deduct on your return.
As we all know, it costs a lot to be a performing artist - from classes, to haircuts, to travel expenses to auditions - but what of those things can we actually deduct on our self-employed tax return? Start with this handy expenses checklist from the Actor’s Fund! If you have more questions about specific deductions, Chuck Sloan & Associates have an exceptional amount of information on their website related to the various expenses a performing artist might have, and if it is seen as ‘ordinary and necessary’ to the IRS to be considered an allowable deduction. For example, it’s a no to that monthly gym fee, but a yes to professional dance classes and workshops! Once you’re clear on what expenses you can deduct, keep your receipts so you’re sure to take advantage of them come tax time, which brings us to our final tip:
6. Set up a record-keeping system that works for you.
Once you know what you can deduct on your return, set up a system to track expenses so they help you come tax season. After my surprise bill a few years ago, I invested in Quickbooks Self-Employed, which works for me because it has an app that makes it easy for me to categorize expenses between personal or business, send invoices, and track travel for my self-employed jobs all in one. I also set up a little ‘money date’ with myself at the end of each week to swipe through the app and categorize everything, taking notes as detailed as I can about what each expense or trip was for. As an LA resident, car travel is a big expense, so tracking my mileage has really helped me come tax time!
“The best system is the one that you’ll be consistent with, and the simpler the system, the more consistent people tend to be,” Competore says, “The system I've seen the most success with? A notebook and a shoebox. Not kidding. These clients often turn into budgeting champs and super-savers, as well.” So whether it’s a shoebox or an app, find whatever system you will stick to so you’re not scrambling to organize months of expenses come tax season!
While it may not seem like a fun use of your time spending a few hours setting up a record keeping system to track expenses or watching a webinar about taxes, this type of work is essential for a freelance dancer if they want to have a sustainable career. As I learned after my surprise bill a few years ago, not understanding how taxes work as a freelance or self-employed performing artist can create an even greater financial burden come tax season - and even set you back in your performance career. Preparation and clarity is really key in making sure your dance career - and as the IRS sees it, your business - is set up for financial success.
Resource list recap: