Its tax season again, a time most of us dread- especially those of us who travel the globe for a living. Some people swear that they have the “best entertainment tax account in the biz” while others are always on the hunt for someone who really understands their “uncommon” tax situation. Every year I hear people ask around for that awesome tax accountant who can work their “magic” with your tax liability. Let me just say that an accountant is NOT a magician!
Doing your own taxes may seem like a confusing and daunting task but, I assure you, in many cases it is simply just plugging the right numbers into tax software.
DIY
Doing your own taxes makes you much more aware of your money, and we all know knowledge is power! There is no one out there who cares more about your money than yourself. Tax software is very sophisticated and can help you get your taxes filed quickly and accurately. Tax software has eliminated the headache that came with finding the proper tax forms AND filling them out by hand (one little box at a time for what seemed to be hours). Tax software also allows you to learn all about your tax liability and how different scenarios affect what you owe. You don’t pay for the software usually until you file, so even if you plan on going to an accountant you can try this first just to see what to expect and to educate yourself. This also allows you to try inputting different information in different places to see what works best for you.
You have everything you need as long as you have received all of your tax documents and have kept good records of spending that can be deducted from your total gross income. Just follow the instructions, enter the numbers and don’t forget to input things like your mortgage interest, travel expenses and charitable donations. It’s data entry. There is not anything more a tax account or CPA can do for you. If you like privacy, like I do, then doing your own taxes decreases the number of people with knowledge of your personal information.
If you still are not sure about doing them yourself…
When you go to do your taxes with a professional, ask questions and take notes. You will probably be surprised at how simple it is for most people to do their taxes. Your taxes are not as complicated as you may think, especially if you
-don’t own a home
-don’t have kids
-don’t own your own business
If all of the above apply to you, you most likely don’t need an accountant. Of course, if you own a complicated corporate structure or are loaded with money then use a high-end CPA (Certified Public Accountant).
Hiring a tax professional may not have the effect you think in terms of audit protection or liability. Doing your own taxes does not make you more likely to be audited. Also, having a tax professional do your taxes does not necessarily make your audit risk any lower. The IRS has a series of triggers that flag returns for further review. If your return has any of these red flags it will not matter if you used the highest priced accountant or not.
What can you deduct?
Don’t avoid itemizing if you have the requisite expenses. Just keep in mind, you cannot deduct expenses that are lavish or extravagant.
Travel and Meals
As professional traveling crew, we are allowed to deduct all expenses associated with overnight travel. This includes expenses such as
-meals (50% deductible)
-hotel & lodging ( if out of pocket)
-tips
-laundry
-phone calls home
-hotel wifi
Keeping receipts on the road can be difficult so you may want to consider using the IRS “meal allowance”. The IRS “meal allowance” ranges from $46 to $71 per day depending on location. Check out www.gsa.gov for more information on per diem rates.Using this means that receipts for meals are not required as long as the travel itself can be substantiated. This “allowance” includes all three meals and incidental expenses for the day.
Separate (non-travel) deductions
are allowed when they meet the criteria of “ordinary, necessary and business related”. In other words, meals that include direct business discussions. If you document these meals with who was present and the nature of the discussion, you can deduct them.
Unreimbursed employee business expenses
Expenses such as Mileage, equipment, education and supplies may all be deductible. Equipment and tools can be written off if they are unreimbursed expenses that are needed to do your job. Yes, this also includes “stage clothing”. Clothes can be written off if they are required for your work environment. Keep in mind that if you can wear your “stage clothes” outside of work for personal use they don’t count as a deduction.
Home office expenses
Home office can be a powerful deduction. If you use a room in your home exclusively for your work needs you may qualify for this. This room can be used for storing equipment (i.e. Large workbox), advancing shows, record keeping for your tours etc…
Unique deductions
Includes purchases such as concert tickets, music (i.e. CDs or digital downloads) and trade magazines. These types of purchases are categorized under “research” but they need to be justified. Not all purchases of this nature should be used this way as some may be for personal pleasure alone.
Since most of us have smartphones now,
a fairly easy way to track business expenses is to use an app. For example, with the app Shoeboxed you take a picture of your receipt and it extracts the important information automatically. Not only is this useful when it comes to taxes, you can also create and send expense reports right from your phone (seems easier than digging around your wallet and backpack and suitcase and bunk trying to find the taxi receipt you forgot to turn in at the beginning of the tour).
Please remember that…
WE ARE NOT TAX PROFESIONALS. JUST PEOPLE WHO HAVE DONE SOME RESEARCH ON TAXES.
