As the kids have now become older, my wife has returned to working as an actress and doing voiceover work. She often travels for work and auditions. I have a pretty high salary.
How should we set up this business? Looking to maybe use her earnings to make another tax deferred account for her. Also looking to possibly write off the costs of travel and voiceover equipment as needed.
Currently, she has been getting paid and I just add it to the end of year gross income and pay the taxes as it works out.
TRAugust 8, 2019 at 7:44 am MST #237289spiritriderParticipantStatus: Small Business OwnerPosts: 1869Joined: 02/01/2016
What do you mean by: “I just add it to the end of year gross income and pay the taxes as it works out.”
If she is getting paid by W-2, then you report it just like any other wages. This would be on Line 1 2018+ or Line 7 2017-. This is not business income and can not be used to adopt an employer retirement plan and make contributions.
If she is getting paid by direct payment with or without it being reported on a 1099 it must be reported on Schedule C and Schedule SE subject to income taxes and SE taxes. If this is true and you did not report this properly and pay the appropriate taxes, this does not just work out. You need to amend your returns to correct these errors.
This is business income that would allow her to adopt an employer retirement plan and make contributions. If she adopts a one-participant 401k. She could contribute up to $19K (2019) in employee elective contributions and employer contributions up to 20% of self-employed earned income (business profit – 1/2 SE tax). However, those employer contributions are limited to the lesser of (self-employed earned income – employee elective contributions) / 2 or $56K (2019) – employee elective contributions.
Depending on your Roth MAGI she can also make direct Roth IRA or Backdoor Roth IRA effective contributions.
Sorry, I should have been more clear. She get’s paid by a W-2 usually through her agent, sometimes from a production company. With the voiceover component she can continue to get paid through the agent, but I was wondering if it would be helpful for her agent to pay a “business”. If she made herself a “business” and the agent paid the “business”(instead of her personally) and then she got voiceover payments directly to her “company” is that a way to do it?
If not, it may be simpler to just keep getting the W2’s.
TRAugust 8, 2019 at 9:24 am MST #237315JBMEParticipantStatus: SpousePosts: 498Joined: 03/26/2018
depending on her earnings, she might want to be a business and get paid via a 1099 instead of W2. The more she makes the more it makes sense to be a 1099 contractor/business. This is a complicated thing and you should post her historical numbers and/or expectations going forward along with the goals you and her have for the next 5, 10 or 20 yearsAugust 8, 2019 at 9:42 am MST #237325spiritriderParticipantStatus: Small Business OwnerPosts: 1869Joined: 02/01/2016
There is no need to make herself a “business”. An individual is always a sole proprietor and can simply receive payments in their name.
If she receives direct payments in her name or a “business name” that is business income.
There would be a whole range of possible deductions. Some examples:
- Promotional expenses such as business cards, audition tapes, professional publicity photos, resumes, portfolios, and website development costs
- Amounts paid to others such as pay for a personal assistant, agent or manager commissions, and attorney fees
- Travel expenses such as travel for auditions and other job searches, business meetings and seminars, professional society meetings and seminars, and business assignments; and the costs of attending these meetings and seminars
- Purchasing, cleaning, and alteration costs for costumes if they are required for work and not suitable for everyday wear
- Stage make-up and other beauty aids used for a performance or other promotional events and appearances
- Educational expenses such as voice and other lessons, and continuing education, including a limited amount of “research”. This research could be concert, theater, movies including animated ones.
- Other expenses, such as subscriptions to professional journals, union and professional dues, business licenses, business gifts, and home office or part of your home used regularly and exclusively for your work
Excellent. Spiritrider, that sounds good. Don’t want to bring attention to our taxes but I thought she should be able to write off things like travel and the set up of a sound room and microphone.
Regarding how much she might make, depends on the how often she gets chosen. Maybe 10-15K per year max.
TRAugust 8, 2019 at 12:22 pm MST #237374GParticipantStatus: Physician, Small Business OwnerPosts: 1753Joined: 01/08/2016
So, I went and looked,I reported both her W2 from the agent and 1099’s from freelance work. Also reported direct cash as income when it was not on a 1099. Looks like we have the opportunity for more write offs.
TRAugust 9, 2019 at 3:10 pm MST #237723