The COVID-19 pandemic made 2020 a rough year for everyone, and entertainers are among the hardest-hit groups. The shutdown of entertainment venues and production facilities across the country cut off a primary source of entertainers’ incomes. But it did not cut off their creativity, as they moved online to showcase their talent.

None of this changes the fact that 2020 taxes still will be due on April 15, 2021.

Self-employed entertainers (those who receive form 1099)

On the positive side, there are some deductions self-employed entertainers, that is, those who receive Form 1099s and report their business expenses on Schedule C to Form 1040, can take. Expenses that may be applicable even during the pandemic include:

  1. Computer and other equipment. Equipment purchased to move online is deductible, including computers, cameras, audio equipment, green screens, telephones and office equipment.
  2. Educational expenses. Expenses for training are deductible. This includes, among other things, coaching expenses, acting lessons, voice lessons and dance lessons. The fact that the sessions are done virtually does not change this.
  3. Dues and publications. Dues for memberships in professional organizations and subscriptions or purchases of professional publications are deductible.
  4. Other expenses. The home office deduction and promotional expenses such as audition tapes and website development costs are deductible.
  5. Travel expenses. While most travel has been restricted, there are some exceptions — for instance, if a bubble has been created or where international travel is permitted for certain entertainers. The usual travel expense deductions for out-of-town travel (transportation, meals, lodging, etc.) apply in these instances.
  6. Salaries and commissions. Salaries and commissions paid to others, including personal assistants, agents and managers, generally are deductible.
  7. Pre-pandemic expenses. Expenses incurred in early 2020, before the pandemic hit, are deductible. This means an entire range of allowable expenses, including costume cleaning and alterations, hair care, manicures, and personal fitness training, are deductible for entertainers who were working prior to the lockdowns.

Employed entertainers (those who receive a W-2)

By substantially increasing the standard deduction and suspending or limiting many itemized deductions and dependent exemptions, the Tax Cuts and Jobs Act of 2017 (TCJA) essentially changed how individual taxes are calculated. Most taxpayers now take the standard deduction — you need to have substantial deductions to make itemization worthwhile.

For entertainers who receive W-2s from their employers, the result of the TCJA is that they can no longer claim unreimbursed employee expenses on their tax returns.

Other than the deductions listed above, some entertainers whose adjusted gross income is $16,000 or less may qualify to deduct these expenses as a dollar-for-dollar adjustment to income rather than as miscellaneous itemized deductions. You must meet other requirements as well.

Other considerations

  • Unemployment compensation is taxable and must be reported as income.
  • Entertainers working abroad and nonresident alien entertainers working in the United States should work with a tax advisor to address tax issues specifically related to that income.
  • Entertainers who formed online businesses during the pandemic need to consider additional tax issues.

These guidelines only consider federal taxes. Entertainers must also file state taxes, sometimes in more than one state. This can make filing especially complex for those who may have worked in multiple states.

Questions? Consult an MCB Advisor at 703-218-3600 or click here. To review our tax news articles, click here. To learn more about MCB’s tax practice and our tax experts, click here. 

©2020

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