Tax Tips for Dancers
Well folks. It's that time of year again. The time when Uncle Sam checks your pockets to ensure he got his share of your earnings. Just one of the many luxuries of adulthood (sense the sarcasm). One of the trickiest yet seldom discussed issues of professional dance careers are those of financial matters. Unless you have an agent or are a member of a trade union, no one really informs you of pay rates, suggested minimums, or how to prepare yourself for tax season. Again, like so many other aspects of my career, I had to figure that stuff out on my own.
Fortunately for me, my mother is a tax expert. She's been a corporate tax specialist in the oil and gas industry for nearly 30 years, and she's run her own personal tax business for many of those years as well. Her expertise has made way for her to save millions of dollars for the companies she has worked for, making her an incredible asset and, in my humble opinion, a tax guru. While I would love for you to get the information that follows directly from the source, it is obviously her busy season, and now is SO not a good time for her to stop preparing her clients' taxes to write a blog post on my behalf.
Not to worry. A bit of poor planning on my part presents a great opportunity for me to show-n-tell all the knowledge mom dukes has taught me over the years. Just to be clear, I did not approach my mother as an eager student anxiously waiting for her to impart her wisdom to me. The truth is, she sort of "Mr. Miyagi-ed" me into learning what I know. (For the youngens who don't know who Mr. Miyagi is, kindly get yourselves in front of a copy the The Karate Kid quickly, please and thank you.)
For as long as I've earned an income, I would simply hand off my income statements to my mom, she'd do her magic, and I'd go on my merry way. But when I started making money solely from my work as a professional dancer, tax time got so much more complicated. I could no longer get a few statements, submit them, and await a refund.
First of all, accessing a W-2 online became a thing of the past. I now had to wait for organizations to send me a 1099. Then, once you see the big picture of how you didn't quite earn as much as all of the long days, blood, sweat, and passion warrants, you must then pay the taxes that weren't already deducted from your modest earnings.
Tax season can be a bit of an emotional rollercoaster if you allow it. Or you can be proactive and get all your ducks in a row well before next year's tax season. Here are a few tips to help you do that.
My first tip is to start keeping a detailed record of your earnings. I used to create a simple spreadsheet that included the name of the organization who hired me, how much they were paying, and in what method they paid. For example, XYZ Production Company --> $XXX.XX --> Check. I would keep a running total so I could be aware of my tentative total gross income for tax time. Keeping a spreadsheet also helps you keep track of who will be sending you a 1099, and what that total should be.
Side note: As far as I know, an organization is only required to send you a 1099 if they paid you $600 or more. I would definitely double check this info with your tax specialist.
I would also suggest you reporting the income regardless of the amount. Not only is withholding info on your taxes illegal, but it could also cost you in the long run. When it's time for you to buy that new car, home, or any other item where you'll need credit, you'll need to have proof of income. If you've been low-balling your taxes in an attempt to save during tax season, you could be cheating yourself out of your future. Lenders will want to see at least two years of income at a certain amount before they'll consider financing your purchase.
My second tip is keep track of your receipts for deductions. Many of our purchases can be written off as business expenses. We can write off the classes we take, costume purchases (including hair and makeup), meals where business is conducted (maybe even the cast dinner after a show), hosting fees for your website, etc. Also keep track of the mileage you use traveling back and forth between rehearsals, classes, and shows. Again, check with your tax specialist for a complete list of potential deductions.
Once upon a time, I collected all of my receipts in a large envelope throughout the year. When tax time came around, I would sort my receipts and tally totals by category in another spreadsheet. It was a tedious, but necessary task. These days, technology makes things much easier. I simply keep track of my spending through my online banking and use those totals for my taxes. I also check my mileage at the top of the year, and use Maquest or something similar to calculate my mileage usage for the year.
There are also other resources available to help you keep organized and detailed records of your spending. There are printers that scan your receipts and keep your totals. And I'm sure there are number of apps that help with the same thing. Take some time to do a bit of research to find the solutions that work for you.
My third tip is to save for tax season throughout the year. Take it from ole' Ben Franky who said "In this world, nothing is certain but death and taxes." Meaning, we all know we'll have to hand over a portion of our income to the government at some point. Might as well make it easier on yourself and prepare ahead of time. Otherwise, you'll get your bill at tax season, possibly experience a bit of sticker shock, and then be forced to figure out how to pay that fee.
Take the drama out of the equation, and set aside a percentage of each check to pay your taxes. I would suggest starting with 5-10%, but you'll have to figure out what works best for you. No matter what you decide to save, the mere fact that you're saving for your taxes ahead of time is half the battle.
My final tip is just a suggestion to keep you sane and in the game. Because we're artists, we may get caught up in the fact that we're living a creative and artistic life. Maybe you'll be like me and just be so excited that dance is finally supporting you financially. Whatever the case may be, many of us tend to get snatched back to reality during tax season.
That raw data showing you what you've earned throughout the course of the previous year can be disheartening and may even tempt you to change careers. Trust me. Been there, done that, could write a book-conduct a tour-and sell a t-shirt.
Yes, be smart about your future, but don't let the slow but steady process of building a career make you second guess your calling. There is no such thing as an overnight success. Building a successful and profitable career takes time in any industry, especially in the arts.
So change your focus, and take a moment to celebrate where you are. Acknowledge the fact that you're better off this year than you were last year. Keep your eyes on the prize, and dance on my friends.
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