Author Topic: ACTOR'S TAXES: The Great Hollywood Ripoff  (Read 1292 times)


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ACTOR'S TAXES: The Great Hollywood Ripoff
« on: April 26, 2015, 02:23:19 PM »

ACTOR'S TAXES: The Great Hollywood Ripoff - Getting paid "under the table" will end up putting...over a barrel.
Publication: Back Stage West
Date: Thursday, February 4 1999

By Frank Wynan

We've covered this scenario in last year's column, but people are still getting caught in the great Hollywood Ripoff, so here it is again.

Here's the deal. You answer an ad and this guy offers you this great job. The pay's not very good, but he's going to do you a favor. He's not going to take out any taxes. This is going to be a strictly cash deal. No one's going to know! Right?

Eventually January rolls along. You go to the mailbox and there's a Form 1099 that says you earned a couple thousand dollars for the Acme Ripoff Co. And guess what? He kept his word, he didn't take any taxes out. What you discover, however, is you get to pay them now. Not only that, you get to pay all the Social Security taxes, including the amount he was supposed to pay.

There's no such thing as "under the table" earnings. When you're offered these jobs, your employer is not doing you any favors. He's doing himself the favor. What he's doing is not paying his employer taxes. He's not matching your social security payments, he's not paying the worker's compensation insurance, and he's not paying into the unemployment insurance fund. In short, he's ripping off both the government and you.
But, he will argue that you were taken on as an independent contractor. Wrong again. Under California law, you are an employee and not an independent contractor if the employer fixes your rate of pay, sets the hours you work or the place of business.

OK, so now you're stuck with all these taxes and you want to do something about it. What do you do? You could report him to the state or you could complain to him face to face. And, yes, you guessed it. He fires you on the spot. Next day, you're back on unemployment again. Except, you discover that the money you just earned won't qualify you for unemployment because your employer didn't pay anything into the fund! The best answer to this dilemma is: If you're offered a job under the table, turn it down and report the guy to the State of California.

Really Tax Free

A couple of final final words. The employer doesn't have to issue a 1099 if the amount is less than $600, but that doesn't mean you're not obliged to report it. Just about everything you earn has to go on your tax return.

Speaking of unemployment pay, that's taxable, too. Some disability payments can be taxable and Social Security benefits can be taxable if your total income is too high. Gifts from the family are tax free, but if someone gives you more than $10,000 in one year, the giver may have to pay a gift tax.

Other items that should be reported are: bonuses, awards, gambling winnings, tips, gifts from employers and barter exchanges. Scholarships are not taxable if the money you receive is to be used for tuitions, fees, books or supplies. Amounts used for room and board are taxable. If you receive a payment for your services, they must also be included in your income even if they are a condition of the scholarship grant. Scholarship prizes are taxable whether you use them for your education or not. Earnings from a hobby are also taxable.

A word about barter exchange. You fix someone's car and he pays you by letting you sit in his acting class for a couple of months. Guess what? You should each report the fair market value of the services rendered on your individual tax returns.

And now a few things that aren't taxable: child support payments, damages awarded for injury or sickness, worker's compensation, meals and lodging at the employer's convenience, housing for the clergy, and special military payments for combat. Lottery winnings are taxable on the Federal, but aren't taxable on your California return. Most municipal bonds are tax-free on the Federal, but some may be taxable on the State return.

On location per diem payments aren't taxable providing you spend them for the purpose they're intended. If the production company gives you money for a hotel and you sleep in your motorhome, you're supposed to report the income on your return.

And finally, any and all earnings from illegal activities are also taxable. If you robbed a bank this year, you're supposed to report the loot as income. Unfortunately, they won't let you reduce the tax with deductions: guns, pantyhose, getaway cars, etc. Bummer!

Frank Wynan is a tax consultant for Amanda Tax and Financial Services.