While everyone else was in Austin for the launch of South by Southwest last week, I was traveling through Delaware, Virginia, and North Carolina. You might call it South by Southeast. I have lots to report -- professional developments, an interview with the guy behind one of my new favorite films of the past couple of years, and other good stuff -- but I'm not letting myself write about this stuff until I do my taxes. Ugh. So, in the interests of procrastination, I have decided to share some tax tips.
Trust me, I know hardly anything about taxes, but I find that the little I know is still more than many of my filmmaker friends. In the interests of getting back a decently-sized (and entirely legal) refund from Uncle Sam, I stopped filing 1040's and started learning about hardcore X-treme tax filing in 1999. I've never looked back.
NOTE: As should be painfully clear, I'm not a professional tax advisor. This is just one idiot's piece of advice, so all the legal disclaimers apply. If you end up getting audited or, worse, sharing a cell in the slammer with Kenneth Lay it is not my fault.
The way I see it, the path towards filing taxes as an artist is either a) learn the US tax code intimately or b) find an accountant. If, like me, you choose "B", move to Step 2. If "A" is more appealing, you are even more self-reliantly inclined than I am. I encourage you to consider a career as a CPA.
Not just any accountant will do. You should hunt around for one that meets your specific needs. Start by asking your artist friends (filmmakers or otherwise) if they have an accountant. See who's happy with theirs, and what the accountant is charging. If you can get a few names, it makes sense to interview them. What you're looking for:
Honesty: This is priority one. You want this person to save you money, but not at the risk of going to jail. You don't even want to be audited. Repeat: This is priority one.
Experience with artists: You want someone who understands your expenses, your income, and your (potential) deductions. The accountant doesn't have to have experience with filmmakers. If they do work for painters, musicians, and so on, that's probably fine.
Local: You don't have to live in the same city as this person, but it probably makes sense to live in the same state since you want someone that understands your state tax code (if your state collects income tax) as well as the federal tax code.
Affordable: Some friends in New York have accountants that charge around $500. That might be the going rate in New York, but I can say that my Pennsylvania-based accountant -- who, it must be said, is a god among men -- charges quite a bit less.
First, you need to learn about what sorts of records s/he wants you to keep. Equipment and software purchases, for example, are an obvious filmmaking-related deduction. So is filmmaking-related travel. So get the full list from your accountant about what is and isn't kosher. I have a good idea of this stuff, but I'm not going to tell you because you should hear it from a professional.
Secondly, you should ask the accountant how he or she prefers you to keep those records. Basically, the idea here is that YOU keep the records and then THEY figure out how to organize those records into a tax filing. (If they're keeping your records for you, well, you can expect to pay a lot more.) Different accountants will ask you to do different things in terms of itemizing your expenses, your income, and so on. Some might want Quicken files, some might want an itemized list in Excel. You get the picture. Figure out the simplest solution that works for both of you, and make sure you ask about anything that confuses you.
Since you're now outsourcing the work to someone else, remember that you can't wait until April 15 to get your papers in order. Get all your stuff together in February, or early March at the latest so that your accountant can get everything done in time. Remember, if they're a good accountant, they're going to be SLAMMED in March and April because they're doing taxes for dozens if not hundreds of people. Keep the accountant happy: They're working for you, and they're working with your money.
A final tip: This tip was passed along by my accountant, and I'm passing it along to you.
One way to keep record-keeping fairly simple is to charge all of your film-related expenses to a single credit card. This serves a dual function as long as you pay off the bill at the end of each month. First, charging and paying off each month helps builds up your credit rating. Secondly, since your monthly credit card statements serve as an itemization of your film-related expeneses going through those records and elaborating on them at the end of the year could conceiveably constitute the bulk of your tax preparation. Cool!
Ok. Enough procrastinating. Time to dig out the files.