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question: What about taxes, deductions, business type, and other accounting things?

answer:


VOICE-OVER TAX INFORMATION

Wondering if you can deduct voice-over Training and Marketing expenses?
We asked an accountant to give us a sound report.

BY SPEAKING ABOUT DIFFERENT BUSINESS TYPES, this article will help you decide how
you can deduct business expenses against your income. Please read the disclaimer at the
end of this article.

This article will address two points:

* Which voice-over expenses can you deduct?
* Should you incorporate yourself?

What is the right entity for my voice-over business and what about taxes?

There are a myriad of ways a voice over artist can conduct his or her business. The three that
make the most sense for most voice over artists are:

a sole proprietorship
a limited liability company (LLC)
an S corporation

Other possibilities include, and are not limited to, partnerships and c corporations.
The sole proprietorship has the virtue that it is simple to form, and INCOME TAX is ONLY TAXED once, at the owner’s individual tax rate. Gross Income less costs of generating the income and operating expenses for the year are reported on Schedule C (or schedule C-EZ if certain tests are met) of your Form 1040. The resultant net income or loss becomes part of your adjusted gross income.

A word about ordinary and necessary expenses - at the start of your voice over career, the
largest expenses you probably will incur is the production of your demo (training, workshops, demo production, etc.) and the marketing of your demo (demo copies, mailers, postage, phone bills, etc). These should be deductible on Schedule C as promotional or marketing/advertising expense. If such costs are incurred before you actually start your trade of business, section 195 of the internal revenue code would permit an immediate deduction of the lesser of the start-up costs or $5000 assuming the start-up costs don’t exceed $50,000. any start-up costs not deductible initially are eligible to be amortized over a period not less than 180 months.

Of course, other expenses such as telephone, postage, professional publications, travel, and printing of business cards are also deductible.

Another potential deductible item is home office space. While office space used primarily for
business is not deductible, office space used exclusively for business purposes is.

Some items are not deductible, such as clothing purchased for voice over sessions. Even
buying a nice suit to meet new clients is not deductible, because clothing is adaptable to
general wear.

You will, in addition to owing income tax, usually be liable for self-employment tax and will generally have to make quarterly estimated tax payments as well. The sole proprietorship is not a separate legal or taxable entity from its owner, does not require a separate transfer of assets and does not limit your personal liability for the debts of the business- your individual assets remain at risk.

An LLC is formed under the applicable state’s limited liability company statute. A one owner
LLC is generally taxed as a sole proprietorship. Although the tax consequences of a
single-member LLC and sole proprietorship are the same, an LLC provides its owner liability
protection not available to a sole proprietorship – your assets are not at risk.

An S corporation is a business entity which has the same advantage of limited liability as a
shareholder in a regular or C corporation. Unlike an LLC there are restrictions on an S
corporation’s capital structure and on who may be a member. An S corporation’s income,
gain, loss and deductions pass through to its shareholders and are reported on individual tax
returns. Income is generally taxed at the individual level, but in certain states S corporations
are subject to state and/or local jurisdiction taxes as well.

Important information:

If you are not incorporated, and earned $600 or more from a payor, that payor is required to send
you a 1099misc form by January 31, 2007 if you are unincorporated such as a sole proprietor or partnership. If your entity is incorporated, a payor is not required to issue you a form 1099. If you should have received one, but did not, call that payor. Note that the payor should also send a copy of the form to the IRS.

Personal incomeTaxes must be mailed out on or before April 17, 2007 unless an extension is requested.

IRS tax help-line = 800-829-1040
IRS tax forms and distribution center = 800-829-3676
IRS on-line tax order form = www.irs.gov
disclaimer:

This article is intended to provide general guidelines on matters of interest to voice over artists. It is not intended to be all inclusive. The application and impact of tax laws can be very complex and vary widely from case to case. Readers are encouraged to seek professional advice concerning specific matters before making any decisions. The author and publisher disclaim any responsibility for positions taken
by taxpayers in their individual situations. This article was updated February 22, 2007.

IRS Circular 230 Disclosure: Any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding tax-related penalties or (ii) promoting, marketing or recommending to another party any investment plan, transaction or matter.


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