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Th e B u s i n es s
R O B E R T P.
GUSTAFSON
Whats the fastest way to ruin that high you got from selling your spec script? How about running out of money when it comes time to pay the man. ongratulations! You nally hit pay
percent, Beem says its always good to have a little extra savings. One thing to keep in mind is that the government likes to get paid throughout the year like you do. So even though taxes are due April 15th, when you do get paid in lump sums throughout the year, you have to pay estimated quarterly taxes. ese are due March 31st, May 30th, September 30th and December 31st. that spec script you had $30,000 worth of expenses. is means that instead of paying taxes on $100,000, youre only taxed on $70,000. In that example alone, if you were ling as a single person, you would pay over $10,000 less in taxes. So remember, almost anything in your immediate world that has to do with your writing can be deducted. For example: Research. You can deduct any movie you go to, your cable, or a screenwriting book you buy. Save those stubs. Equipment. Your computer, software, paper, pens, or any other oce supply can be deducted. Sometimes even your phone and DSL. Transportation. Parking for a meeting or local transportation can be deducted and,
dirt! You sold your rst spec script. You bought the car, the house, the toys, maybe paid o your debt, then comes the 1099 in the mail. Oh, crap. If you received some good advice, youve planned ahead and put away some of that money for taxes. Most scriptwriters prefer to get paid in one lump sum for their writing, as if theyre charging a at fee, and the life of a writer can be feast or famine. is means you have to make that money last and, based on your planning, April 15th can make life come to a screeching halt.
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Dont give a gift just for the deduction. Cash is still king.
although your commute to work is NOT deductible, a portion of your driving can be. If you are a script consultant, for example, and have to drive to an appointment, that trip can be deducted. To gure out how much you can deduct, you would gure out what percentage of your driving is for work. If 20 percent of the miles you drove this year were for work, then you can deduct 20 percent of the total amount you spend on gas, repairs, maintenance, insurance or on your lease. Meals and Entertainment. Fifty percent of business meals and entertainment are deductible. So if you sell an autobiographical script, this could mean every meal. Gifts. Twenty-ve dollars per gift is deductible. So you can write o the bottle of Dom that you gave your agent for helping you sell your script, but only $25 of it. And speaking of your agent ... Commission to your agent or manager is deductible. But dont give a gift just for the deduction, reminds Beem. Cash is still king. e deduction is just a bonus. Groceries and clothing are NOT deductible. If you were a nurse and needed to buy scrubs for work, they would be, but most writers write in jeans, pajamas ... or less. And your oce is not a lm set, so no getting away with deducting your peanut butter and jelly sandwiches as craft services. Be very careful if youre deducting part of your rent as a home oce. Although you can, it is a very scrutinized area and can raise red ags, and being audited is the last thing you want. In order to deduct a part of your rent, youd have to set up an oce in a spare room (not in a spare bedroom) and only use it for writing. So if youre checking Myspace or your fantasy football team on that computer in the home oce, rent cannot be deducted. is list of deductions is meant as an example, but you can see how a writer could easily come up with $30,000 worth of deductions. If you have any questions about what can and cannot be deducted, please consult an entertainment tax accountant. total income of $70,000. Here are the estimates of total taxes if you were to 1) take your income as a Fee, 2) as an S Corp, and 3) as a Wage.
Fee: Total Taxes (Fed and CA): $24,118 Remaining Cash after expenses and taxes: $45,882 S Corp: Total Taxes (Fed, CA and Payroll): $19,906 Remaining Cash after expenses and taxes: $47,594 Wage: Total Taxes (Fed, CA and Payroll): $29,426 Remaining Cash after expenses and taxes: $40,574
As you can see, the S Corp seems the best way to go, but requires more attention and more fees as you need someone to incorporate the business for you and an accountant to le the tax return and do the tax planning. ose costs will cut into the remaining cash. e Fee structure is the middle of the road as far as tax ling and planning because it requires less attention than incorporating but more attention than a simple wage. e Wage seems the least favorable way to go as you pay more taxes and have less cash at the end of the day, but it requires the least amount of work. With a little direction and advice, you can fund your writing dreams for a long time. You may have messed up the rst time around, but now that you know how the IRS thinks and how much you can deduct, April 15th wont seem so bad. So many people are intimidated by taxes because they dont understand them, says Beem, but just learning a little about them can really help you in the long run.
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