As a freelance filmmaker or videographer, finances and taxes can get complicated. Even with a full time job, if you’ve got a side business, like occasional gigs or renting out gear on KitSplit, you need to stay on top of all the rules from the IRS. Yeah it’s a snooze, but preparing for taxes and knowing the rules can save you a lot of money and hassle.
I still clearly remember the first time I filed my taxes as a freelance filmmaker. My mom showed me how to file online with TurboTax and I cringed as I saw that I owed a whopping $4k to the government. It was pretty horrifying and overwhelming! I have since learned a thing or two to help avoid draining my savings account every spring.
Taxes in general are confusing, but you can at least feel comforted that when you rent gear on KitSplit we make it easy to stay IRS compliant. We take care of sales tax and automatically file a 1099 on your behalf. And we’ve compiled the tips below to help guide you through the not so fun world of taxes for freelance filmmakers and videographers.
These tips are not meant to take the place of professional advice from a CPA, which we recommend getting!
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Submit quarterly payments
The IRS expects us to pay taxes throughout the year as full-timers do through their paycheck deductions. Filing just once can subject you to a penalty. If you are working with an accountant, have them estimate your quarterly taxes based on your projected income so you can start paying them. You can estimate them on your own by first estimating your expected income, taxable income, deductions and credits for the year. A good way to do this is by using the amounts from the previous year. For guidance, use the IRS’s Form 1040-ES which takes you through the calculations.
Know your deductions
Deductions can add up and help you save a lot of money. Movie tickets, that new laptop, expendables, and even your Netflix subscription can be tax write offs as a freelance filmmaker. Another reason why it’s helpful to work with an accountant who understands your industry is so you know exactly what you can and can’t deduct.
If you own gear, you can write off the depreciating value for up for five years. Networking is also super important in this industry and you can write off those expenses, such as beers at a film screening or lunch with a collaborator. If you’re not on a health insurance plan through an employer or family member, be sure to deduct those monthly costs as well. The IRS has very clear rules about what qualifies as a business expense and it needs to be both reasonable and necessary. That corner of the living room where you do your editing probably can’t be considered an office. Check out this overview of tax deductions for filmmakers from Premium Beat for more info.
Save your receipts
It’s important to stay organized and keep clear records of all your deductions. There are many programs you can use to keep track digitally and some are even free, such as Wave, Shoeboxed, FreshBooks, and Expensify. At the very least, keep photos or scans of your receipts in a folder along with a spreadsheet with the vendor, amount and notes about what the purchase was for. You’ll also want to organize your receipts into categories so they’re easier to sift through. Categories we recommend using are transportation, office supplies, gear expenses, education, travel, meals, advertising and other. As a freelancer, you’re more likely to get audited, so it’s important to be prepared in case Uncle Sam comes knocking.
If you have a part-time job, increase your withholdings
As freelancers, we often work a variety of jobs, some of which may come with a W-2. When you are considered an employee rather than a freelancer, your employer withholds income tax from your paychecks which is then paid to the IRS in your name. The amount withheld depends on how much you earn and the information you provide on your W-4. When filling out your W-4 you must claim withholding allowances and each allowance reduces the amount of taxes deducted from your paycheck. If you normally claim 1 or more deductions when filling out your W-4, try claiming 0 to have more taxes taken out of your paycheck. This can help offset the amount you owe from your independent contractor jobs.
Make sure you report all your income
Don’t depend on your W-2’s and 1099’s to tell you how much you’ve made. Keep your own records so you can compare in case an employer makes an error. As a freelancer, it can be tough to keep track of all your tax forms, but if you’re missing a 1099 from a job it’s important that you contact the employer and track it down. It could be tempting to omit some income, but any mistakes you make in your reported wages could trigger an audit.
Depending on your line of work, it may make sense for you to form an LLC or corporation. Doing so can help protect your personal assets and keep your business funds separate. If you mostly work below-the-line as a camera assistant or grip this probably isn’t necessary, but could be beneficial for directors or producers. Plus, you’ll feel all official and stuff! Read more about the differences between a C-Corp, S-Corp and LLC here.
Work with an accountant
It can be helpful to work with a professional, especially one who understands freelancers and the film industry. Obviously, a good accountant doesn’t come free, but they can often help you save hundreds in the long run. A good way to find one is by asking other freelancers who’ve been in the business awhile. If you’ve messed up your taxes in the past filing on your own like I did, you can even have your accountant redo them for you.
Be aware of deadlines
It’s a good idea to get your taxes done early for peace of mind and to free up your schedule for those last minute gigs, but know that you have until April 17th to file. If you need more time to gather your information, you can submit a Form 4868 to extend until October 15th with no penalty. Note that the Form 4868 does not extend the deadline to actually pay your taxes, so you’ll still have to pay your taxes (or a close estimate), but can put off doing all of the detailed paperwork. If you’re unable to pay the full amount that you owe, the IRS offers some payment plan options such as an installment agreement.
Here are the dates you need to keep an eye on:
- April 17th – Deadline to file taxes, 1st Quarter Estimated Tax Payment Due
- June 15th – 2nd Quarter 2018 Estimated Tax Payment Due
- September 17th – 3rd Quarter 2018 Estimated Tax Payment Due
- October 15th – Deadline for extended filing, if you submit Form 4868
- January 15h – 4th Quarter 2018 Estimated Tax Payment Due
Remember that your gear rentals are taxable
Income earned from renting out your gear or space is taxable. If your earnings exceed $600 in a given calendar year, we will ask you for certain information and you will receive a 1099 form from KitSplit that year. There might be deductions you can take against this income, such as depreciation.
Did you know that sales tax is required on most rentals in New York and California? Yeah it’s a pain, but it’s important and will be way more painful if you get audited. KitSplit actually eliminates that pain by calculating and collecting sales tax on your behalf. So rest assured that when you’re renting gear with KitSplit you’ll always get a thumbs up from the IRS.
- Freelancers Union: Healthy Tax Habits Checklist — As direct as its title, this is a great checklist to you with tax organization.
- Freelancers Union: Tax Resources for Freelancers — This includes several in-depth categories with information to help answer all your tax questions.
- 50 Deductions Every Filmmaker Should Consider
We know taxes can be daunting, especially if you thrive in the creative side of this industry and not the business side. But it’s important to take control of your finances so you can support all of your future creative endeavors. Learning to manage your money should feel empowering, not scary. Congratulate yourself on adulting, and let us know if you have any tips not mentioned here!
These suggestions are based on the most common tax cases and are not legal advice. Please consult a CPA should you have any questions about your taxes.
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