So if your new to LA, you have probably heard how we all have to file our own taxes here. It's true I'm afraid, even if you are employed full time. I just wanted to share a few things with you that might help you get prepared.
When you start any job unless it's freelance, you will fill out a form called a W-4 form. On this sheet it will ask you about how many dependents you are claiming etc... there is usually a chart on the back that will guide you through this, but basically the less dependents you claim, the more taxes will be taking out of your pay check and the less you will owe come tax time. And vice-versa, the most dependents you can claim, I believe is 9. which means they won't take a lot of taxes out at the time, however you will owe a lot more when it comes to filing.
1) Copy your receipts with your phone on this free app, Receipt catcher I like this because you can categorize them on the go. Keeping a clear receipt will prove valuable if ever you are ever audited, which I have been and trust me it's no fun. Also write on the back of your receipt what the purchase was for i.e. Parking for audition, Lunch with agent, Postage for headshot mail out, etc... (This will help you remember when it comes time to log your reports. (see video below for explanation)
2) Every month gather your receipts and spend half a day balancing your books. I find trying to use my credit card/ debit card for most purchases helps me be more organized.
3) There is also a great website and called mint.com that links up to your bank accounts and credit cards, that helps you budget money, but also categorizes your spending monthly.
4) Keep a mileage log book - You can't claim mileage from your home to your first work destination - But from their to your next destination you can.
5) In January you will be receiving reports called W-2 forms from your employers, pretty easy if you have only one employer, but if you have multiple payroll companies, it can be hard to keep track, make sure you keep them all in one place and safe as you will need them all when it comes to filing your taxes. It is your responsibility to gather them all, so if you have moved or haven't received one from an employer... It's up to you to chase them.
6) If you have done any freelance work through out the year , you will receive a form called a 1099. This will be a report of earnings where taxes have not been taken out. This is where it's important to hold on to your receipts related to those freelance jobs. It should be noted that if you work freelance in the City of Los Angeles, you need to register for a business license. It's a pain but will save you large fines in the long run. go to http://finance.lacity.org/ to register.
7) Filing. There are a number of ways to do this. You can do it by downloading all the forms at irs.gov or by using software like Turbotax which easily guides you through through the process. Or if you are like me, because it's a little more complicated and time consuming you can hire a tax accountant, to prepare and file for you. This costs anywhere from $150 to $250 to depending on how many states you are filing in. Bear in mind that the cost of your Tax accountant is considered a a legitimate business expense, so there for you can write it off. (Make sure whomever you go with is licensed.) You will have to file both California State taxes and Federal Taxes. 2 different sets, or maybe more if you earned money in a different state. You will Have to file in that state too.
8) Your tax filing is usually due on April 15th of every year. If you feel you don't have everything ready in time, you can always file for an extension. This will give you up till Oct to file, bare in mind that you will encounter penalties if you end up owing the government money, so try to get it done by April if you can.
9) Once you have filled out the forms, you will know whether you owe the IRS money or whether you are entitled to a refund. Personally it always makes me happy come May time to get a little money back to help pay for my summer holidays. ;-)
10) If you have also earned money out of the country this also has to be declared around filing time with a form called the F-BAR. (THIS IS VERY IMPORTANT) You can land in a lot of hot water if you don't file this. Don't forget to file your taxes in that country also. I find it best to consult a UK tax accountant too.
11) If you find you are not in the states around tax time, don't forget to pay or file as it may prove problematic when you attempt to enter the US in the future. You can do this remotely using one of US tax websites like Turbotax.
---- I hope this information was helpful, My advice is not gospel and it's always best to consult a specialist and rules are always changing. So please don't take my word for it. Please feel free to contact me with any mistakes or any additions. Thanks.
-- Craig Young