It's getting close to tax time again. As I prep stuff to send off to my accountant I thought I would re-post (with a few revisions) some tax tips that I shared four years ago. As I wrote in '06, I know hardly anything about taxes, but I find that the little I know is still more than many of my filmmaker friends. That said, as should be painfully clear, I'm not a professional tax advisor. I'm not even an amateur tax advisor. These are just "bare minimum" tips, and all the standard legal disclaimers apply. If you end up getting audited or, worse, sharing a cell in the slammer with Bernie Madoff 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. No matter how much this blog concern self-reliance, there are some things, I think, that you should leave to others. If, like me, you believe that accounting is one of those things, skip down to Step 2. If "choice 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.
Here's 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 start with someone that lives in the same state since you want someone that understands your state's tax code (if your state collects income tax). That said, I've lived in three different states and kept the same accountant the entire time, so it really depends on how comfortable your accountant is with different state codes.
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 less. The amount you pay is going to be somewhat proportionate to how well organized you've kept your records throughout the year. The bottom line with expenses, though, is that you should not be paying equal-to-or-more than the accountant can secure for you in the form of a refund. The idea here, after all, is that you're paying someone to save you money.
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.
Of course, what these tips don't take into account is where the money for your taxes go. Warning: Following the previous link may make you want to join these folks. I suppose it could also make you want to join these folks. Or maybe not.