Tax Issues for Starting out as a Stand Up Comic

Today's tax question comes from Sue in New York City. She asks:

"I am interested in next year trying to somehow put in for my part-time job, which is stand up comedy. I’ve never been paid, in fact I pay to do it, but I feel as though there’s someway I can get reimbursed for pursuing this (besides the joy/rush of laughter). Basically, I have no idea where to start, I’m pretty sure I’m doing it wrong, and I find the whole process overwhelming and frightening. Is there any help for me?"

Sue, relax. You'll be fine. You are in business for yourself, which is actually quite exciting. Yes, you can have a full time day job and still pursue a side business. You'll be reporting all your income and expenses on Schedule C. Take some time to look over my tax tips for freelancers.

The big thing you need to do is keep track of all your expenses. Entrance fees, door fees, and other fees you have to pay just to get a gig all count, and they will reduce your taxable income. Basically, as a self-employed person, you report your income and expenses, and then are taxed only on your net income -- what's left over after you've paid all your expenses. If you spent more than you earned, you'll have a business loss, which will reduce your taxable income.

Some entertainers, however, get small W-2 statements for their gigs. If you receive two or more such W-2 forms, you may qualify for the Qualified Performing Artist deduction. With this deduction, you get to subtract from your taxable income all your job-related expenses. Entrance fees, job-related travel, costumes, and special equipment you need to purchase would all count as allowable expenses.

One thing you might want to be aware of is the Unicorporated Business Tax in New York City (UBT). This doesn't apply to you right now because you aren't earning any business income yet. You are exempt from the UBT if your net business income is less than $35,000 or if your gross revenues are less than $75,000. You're not there yet, but maybe someday you will be.

Also, as your performing career takes off and you start making some money, you'll need to be aware of the Self-Employment Tax. This is a 15.3% tax on net business income and goes to pay for Social Security and Medicare. It is similar to the FICA payroll taxes already being deducted on your paycheck.

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