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Tax Tips: Show IRS You’re A Biz,
To Claim These Tax Deductions ...
 
By Robert Sciglimpaglia Jr
Voice Actor & Attorney
 
Are you operating your voice-over business as a business, and not a hobby?
 
The quicker you treat voice-over as a money-making venture, the better off you’ll be for tax purposes (and also for obtaining more clients and boosting your income).
 
Tax-wise, if the IRS determines that an activity is a hobby and not a legitimate business, it will not allow any deductions for any expenses of the “business.”
 
So – how to do you ensure being treated as a business? There are several major ways.
 
CREATE LLC OR CORP
 
Forming an LLC or Corporation to operate your business not only helps protect your personal assets due to your voice-over activities, but it also legitimizes your venture to the IRS.
 
Most people undertaking a hobby, such as stamp collecting, do not do so under a corporate structure, but rather, operate as a sole proprietor. If you do not form a business entity in the voice-over business, you operate as a sole proprietor by default.
 
The costs of setting up your corporate entity are known as “Start up costs” and are generally deductible. (For details, see Should You Incorporate? an article about why and how to form an LLC or Corporation.)
 
KEEP RECORDS
 
Once you've set up your business:
  • Keep detailed records for all voice-over related income as well as expenses, including all receipts.
  • Create a separate checking account for your voice-over activities.
  • NEVER commingle fees received from voice-over with your personal funds.
  • Log automobile travel in a book that records the trip, total mileage, and the business reason for the trip, i.e., audition or recording session.
WHAT TO DEDUCT
 
In general, you are allowed to deduct “ordinary and necessary” expenses related to your voice-over business. For instance, this can include expenses for:
  • advertising and marketing,
  • travel and meals,
  • education, and 
  • home studio equipment, and your
  • "home office" studio
ADS & MARKETING
 
Deductible advertising and marketing expenses can include such items as:
  • costs to create and maintain your web site,
  • memberships to online audition/casting web sites,
  • the printing of business cards,
  • production of your demos,
  • replication of your demo CDs, etc. 
TRAVEL DEDUCTIONS
 
Travel, meals and entertainment associated with your voice-over business are eligible for deductions, too, if they are “ordinary and necessary expenses incurred while carrying on your trade or business,” says the IRS.
 
Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business.
 
EDUCATION, TOO?
 
What about deducting the cost of attending a seminar, workshop or conference? There are very complicated regulations in this area.
 
In general, you CANNOT deduct, as a business expense, the costs of education to LEARN a new trade or business. But you MAY deduct the costs of education to maintain or improve your skills in the voice-over profession.
 
Here again, note the importance of documenting voice-overs as a business.

EDUCATION TRAVEL

What about the costs of traveling to a seminar that maintains or improves your skills in the voice-over profession? Are they deductible as well?
 
The IRS says: “You can deduct expenses for travel, 50% of meals and lodging if you travel overnight mainly to obtain qualifying work-related education.”
 
But: “You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining.”
 
There are also special restrictions set by the IRS if your education is on a luxury cruise or done at a convention outside of North America.
 
HOME STUDIO GEAR

Of course, equipment purchased for your home studio can be deducted.
 
For this, you have the option of:
  • depreciating the equipment over time, or of
  • taking a “Section 179” depreciation deduction, which allows deduction of up to $125,000 in equipment purchases in the year of purchase. (Hmm …. $125,000 can certainly build a really nice home studio!)
HOME OFFICE RED FLAG
 
However, be aware of IRS concerns about the so-called “home office” deduction, which raises a red flag at the IRS due to past abuses by taxpayers.
 
In order to take the home office deduction, the home office must be used exclusively for business.
 
For instance, if a home studio is set up in the living room where the family also gathers to watch television, then the IRS will generally not allow a taxpayer to deduct the use of the living room as a “home office.”
 
If, on the other hand, the studio is located in a segregated area of the house, such as a basement or attic, which has a sound booth, etc, then a home office deduction will most certainly be allowed, since clearly the studio is being used exclusively for the voice-over business. 
 
Please note that this article is intended to provide general advice. Since everyone’s situation is different, please seek the specific advice of a tax attorney or accountant before applying any information in this to your specific scenario.
 
Robert J. Sciglimpaglia Jr. is the owner of All In One Voice, a voice-over instruction and business/legal services firm. He is also a voice talent, actor, and an attorney with the firm of Kerin & Canty, in Norwalk, Conn.
 
Internet Movie Database: http://imdb.com/name/nm2215197
 
 
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