Tax advice for creatives moving to America

Every year thousands of individuals and families leave the UK to further their career in America. The increased opportunity is very attractive for a wide range of different careers; however, the differences in tax regulation can be tedious and difficult to navigate for those who have taken the step to move abroad.

We aim to aid expats in their exciting new journey and alleviate some of the stress and pressure that comes with moving to America by providing free tax advice.

We are a team of American and British Accountants who are expert in all areas surrounding cross border taxation.

How Different is the American Tax System? 

The American tax system, when compared to the United Kingdoms tax system, is widely considered to be much more complicated and difficult to understand. According to the BBC a ‘typical company’ will spend around 110 hours to comply to the UK tax code, this is substantially less than the 175 hours that American companies spend with the US tax code. Below are some key differences

What British Expats need to know about the IRS

 It is important to know the regulatory body for the American tax system is the IRS. Like the HMRC (UK’s regulatory body) they are responsible for the collection of tax and enforcement of tax laws. This includes, auditing households and individuals, providing the yearly tax brackets, providing tax aid, collecting tax, etc.

The Taxation of Households rather than individuals

The US tax code allows couples to file under one household, this doubles the tax bracket and is generally favored over opting to file separately. This is because it provides a tax break to households with one high-income earner, as the tax bracket will essentially double.

State Taxes

 Different states have different State Taxes. For example, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no state income tax at all; whereas, a state such as Utah has a flat income tax rate of 4.95%.

Better Rates for High Income Earners

Despite the more complicated nature of the American tax system there can be substantial benefits in regards to the money you come away with for the wealthier portion of the population. This is because of the lower tax percentage for higher earners. Where in UK the income tax brackets can go as high as 45% in the US federal income tax is capped at 37%.

How to know if I need to submit a US Tax Return?

According to the IRS any individual can be considered a “United States resident for tax purposes if you meet the substantial presence test for the calendar year”.

The Substantial Presence Test is a means of measuring the amount of time an individual has spent in the USA for work purposes. To fit the requirements you must either be “physically present” for 31 days of the current year and 183 days over a 3 year period (this period being the current year and the 2 years prior).

For queries regarding your tax the IRS has an interactive tax assistant. This online database contains answers to frequently asked questions to help individuals and households with tax problems.

The income tax due date is normally the 15th of April; However, due to the current coronavirus pandemic, the due date for income tax return 2018/19 has been deferred 3 months to July 15th.

Tax Advice for Actor Expats in America

The USA has one of the biggest entertainment industries on the planet. Every year thousands of budding actors from all across the globe make the move to America to further their career. We have compiled brief tax advice for an actor who has moved to America.

The Forms 

British expats who are employed by a US employer must fill out form W-4, which lets their employer know how much tax to withhold from their pay check, based on their circumstances.

The US tax return form is called form 1040, and it can be e-filed online. The American tax year is the same as the calendar year, and the filing deadline is 15th April following the end of the tax year. It’s important not to miss this deadline, as fines for late filing are much higher than those in the UK.

There is a vast array of forms all with different uses. For a comprehensive list of each form and what each one is for, visit irs.gov/forms-instructions. Failing that you should contact a tax professional to assist you with your tax return.

More information on tax forms

Deductions

 Tax-deductible expenses function to reduce an individual/ household’s taxable liability. For example, if a household’s net income is $40,000, and they have $5,000 in tax-deductible expenses, said household will only have to pay tax on $35,000 of their income.

Some common deductible expenses include:

·     Travel - Any transportation, accommodation, Airfare that occur as a direct result of your work. You can also include 50% of Meals within this category

·     Agent Fees

·     Manager Fees

·     Equipment - Film Camera, Lights, etc.

·     Headshots

·     Office Expenses

·     Education

·     Promotional Expenses - Photos, Videos, Websites, Advertisements in trade publications, Business cards and other promotional expense

·     Makeup and Wardrobe - Deductible only when incurred through business use directly, i.e. not for a pair of Jeans you have used on stage but also wear day-to-day outside of Acting

·     Subscriptions: Magazines, Newsletters and other Subscriptions relevant to your business

·     Legal and Professional Fees

Receipts 

It is very important that you keep your receipts organized and filed. If the IRS were to conduct an audit on your account, and were to query a deduction claimed, it would be your responsibility to provide the receipt for said deduction. Failure to do so would lead to a re-evaluation in tax owed and, depending on the severity of the circumstance, could lead to fines and maybe even legal action.

Tax Legislation for Expats

Specific legislation has been formed to provide financial aids for expats. It is important to be aware of the various legislations as they can allow for maximum savings on your tax bill.

Double Tax Treaty

Double tax treaties (also known as double tax agreements) are created between two countries, which define the tax rules when it comes to a tax resident of both countries. These agreements often aid in the reduction of overall tax liability for individuals who have to submit tax returns in two countries. Double tax treaties are complex and often require a tax professional’s assistance to make sure you are claiming correctly and taking full advantage of the legislation. 

The Totalisation Agreement

The Totalisation Agreement is designed to ensure that UK expats living in America (and Americans living in the UK) only pay social security tax (i.e. National Insurance tax) contributions in one of the two countries rather than both, with the contributions counting towards state pension entitlement in both.

Aid for Expats

Navigating the murky waters of US tax legislation is the last thing you will want to do when making the exciting move to further your career. We understand this and want to help. Please do not hesitate to contact us for expert advice on any and all of your tax needs.

Bambridge Accountants London and New York aims makes tax simpler for self-employed professionals worldwide.

Our team of highly trained US and UK accountants are expert in tax for all sectors within the creative industry. We have worked with self employed actors, photographer, graphic designers, architects, directors, creative directors and so much more. We have prepared thousands of UK tax returns and US tax returns for self employed professionals and learn't so much along the way.

Contact us for expert entertainment industry tax support

One of the first steps that we will take when looking at your accounts is ensuring that you are claiming absolutely every expense you are eligible to as a make-up artists. 

Make-up artists HAVE A NUMBER OF TAX DEDUCTIONS THAT ARE UNIQUE TO ANY OTHER INDUSTRY.

Below we have put together a list of some of the expense you are entitled to as a make-up artist. 

USE OF HOME AS AN OFFICE

As a make-up artist, it is not unusual to work with clients from your home or for other work-related activities. Use of home is a claimable expense that is all too often missed out, or inaccurately claimed.

You are able to claim a percentage of your household bills for your use of home as an office. This includes expenses on bills such as your mortgage/rent, electricity, heating and wifi

CLOTHING

Clothing can be an extremely useful expense to claim on your tax return. As a make-up artist you almost definitely spend some of your income on work-related clothing, whether it be clothing for meetings or comfy shoes to help you stand all day behind while working behind the scenes.

Clothing is definitely one of the more obvious expenses to claim. However for a smooth and painless tax-filing season every year, it is vital that you are aware of your entitlements when claiming this expense. Many make-up are subject to penalties and hold-backs due to over claiming. 

TRAVEL TICKETS

Part of the nature of being a make-up artist is moving from location to locations, working behind the scenes. All travel that is work-related is claimable against tax. Therefore flights, train-tickets and bus-rides to events are claimable. 

It is important to note that if your travel was partly personal-related, i.e. 5 days of your travel were taken as holiday, you must apportion the expense.

Work-related petrol and other motor costs are also claimable.

EQUIPMENT 

Perhaps on of the most obvious expenses to claim as a make-up artist is work-related equipment i.e. your make-up! This expense can, however, be stretched much further. For example, the equipment need to take a picture of your work for your portfolio.

Make sure you are identifying all work-related expenses on equipment. Equipment is defined as items that you intend to use for a prolonged period. Your do not include this in your business expenses but instead in an AIA (Annual Investment Allowance), which works to reduce the tax you pay. 

ADVERTISING

Getting your name seen and heard is a major part of being a successful make-up artist. Any methods you use to promote yourself in an effort to get ahead in your career is claimable. Whether you pay to be mentioned in an article or directory, run an ad campaign on your make-up blog or any other forms of promotion- it's claimable. 

Contact us to find out the many more expenses, deductions and reliefs you are entitled to as a make up artist

Comprehensive Tax Guide for US Actors Working Abroad:

Filing, Deductions, and Recent Changes

Taxes as a US actor working internationally can be complex. Understanding tax obligations is essential to avoid unnecessary tax bills and penalties. This article provides a detailed overview of US and UK tax obligations, relevant tax treaties, FTC, and other international considerations for US actors.

Our Expertise

Bambridge Accountants specialises in international tax services for actors, creatives, and US citizens worldwide. We offer expert guidance tailored to your unique needs, ensuring you can focus on your acting career while we handle the complexities of tax compliance.

Understanding Employment Status and Tax Options for US Actors Abroad

Your employment status directly impacts your tax obligations, liability, and entitlements when working internationally.

Employment categories 

Category	Description	Example
Employee	Directed and controlled by an employer. Taxes are typically withheld by the employer.	Jane, a US actor, is hired by a UK-based production company. Her employer withholds UK income tax, but she must still report this income to the IRS.
Self-Employed	Works for themselves and is responsible for paying their own taxes.	John, a US actor, freelances in the UK, paying taxes to HMRC while also reporting income to the IRS, claiming the Foreign Tax Credit to avoid double taxation.
Business Owner	Operating through their own business entity (e.g., LLC or limited company).	Sarah, a US actor, sets up an LLC in the US and a limited company in the UK to manage her earnings and optimize her tax liabilitie

Registration and Compliance

Registering as self-employed is often one of the first steps an actor will take when they start earning income or land a new role.

Self-Employment Registration

In the US, you must obtain an Employer Identification Number (EIN) and register for relevant state and local taxes. In the UK, register with HM Revenue and Customs (HMRC) and consider setting up a limited company for potential tax benefits.

Required Documentation when filing your taxes

Below are some of the documents that may be required when you are filing your taxes

Income Documents: Pay stubs, wage and tax statements, dividend statements, interest statements, rental income records.

Self-Employment and Business Income: Invoices, receipts, business bank statements, profit and loss statements.

Investment and Savings: Investment statements, interest earned statements, and capital gains reports.

Expenses and Deductions: Medical and dental receipts, mortgage interest statements, property tax records, and charitable donation receipts.

Travel and Relocation: Travel dates records, travel expenses receipts, relocation expenses.

Bank Statements: Monthly statements for all accounts, and foreign bank account reports (FBAR).

Property and Assets: Property purchase and sale records, rental income and expenses, and depreciation records.

Claimable Expenses

Understanding deductible expenses can help optimise tax filings with both the IRS and HMRC.

Common Deductible Expenses for Actors

• Travel and Accommodation: In the US, expenses like flights and hotels for film shoots are deductible if work-related. In the UK, travel for auditions or filming is allowable if incurred wholly, exclusively, and necessarily for work. For instance, if you travel from London to Edinburgh for a film shoot, both your travel and accommodation costs can be claimed.

• Professional Training and Education: Courses and workshops that improve acting skills are deductible in the US, such as acting classes. In the UK, professional development courses related to acting can be claimed. An example is attending an advanced acting workshop in London to refine your skills.

• Costumes and Props: In the US, expenses for costumes and props used specifically for performances are deductible. Similarly, in the UK, costumes and props used exclusively for performances can be claimed. For example, if you purchase a unique costume for a period drama role, these expenses are deductible.

• Agent and Manager Fees: Fees paid to agents or managers for their services are deductible in the US, such as a commission for booking jobs. In the UK, necessary fees for professional representation can be claimed. For instance, if your agent takes a 10% commission on your earnings for securing a role, this amount is deductible.

• Home Office Expenses: In the US, part of your home used exclusively for business purposes is deductible. File Form 8829 to claim these expenses. In the UK, similar claims can be made if part of the home is used for business, such as a dedicated rehearsal space or office.

International Income Reporting

US citizens and residents must report all income from all sources worldwide, including wages, dividends, rental income, and other earnings. Common forms include Form 1040 with attachments like Schedule B and D, FBAR, and Form 8938 (FATCA). In the UK, a self-assessment form may be required if you have worked self-employed. It is advisable to consult an international tax accountant to identify exact forms and filing requirements.

Double Tax Treaties

The double tax treaty helps prevent paying tax twice and provides guidelines on how income earned in one country is taxed by both that country and the taxpayer's home country. The US-UK tax treaty outlines taxing rights based on residency and domicile status and specifies rules for different types of income. It offers exemptions or reduced rates on certain incomes and allows for tax credits to prevent double taxation.

Methods to Prevent Double Taxation

Foreign Tax Credit (FTC): Claim a credit for income taxes paid to a foreign country. File Form 1116 to calculate and claim the credit. For example, if you pay UK taxes on your acting income, you can claim a credit for these taxes on your US return.

Foreign Earned Income Exclusion (FEIE): Exclude a certain amount of foreign earned income from US taxable income by filing Form 2555. The 2023 exclusion amount is $112,000. For instance, if you earn $120,000 from acting in the UK, you can exclude up to $112,000 from your US taxable income, significantly reducing your US tax liability.

Housing Exclusion/Deduction: Exclude or deduct certain foreign housing costs if qualifying for the FEIE. File Form 2555 to claim these benefits. For example, if you rent an apartment in London while working on a film, a portion of your rent and related expenses may be excluded from your US taxable income.

Remittance Basis

The remittance basis allows non-domiciled individuals to pay UK tax only on income remitted to the UK. This can be particularly beneficial for US expats, including actors, who earn income from various sources worldwide.

If you are considered non-domiciled and intend to stay in the UK temporarily, you can benefit from the remittance basis. This means you only pay UK tax on UK-source income and any foreign income remitted to the UK. For example, if you earn $50,000 from a US project and keep it in a US bank account, it won't be subject to UK tax unless you transfer it to a UK account. However, be mindful that after 7 years of residence in the UK, a Remittance Basis Charge (RBC) applies.

Pension and Retirement Planning

Understanding pension options and the impact of the US-UK tax treaty is crucial for effective retirement planning.

Pension Options

In the US, you have options like Traditional IRA, Roth IRA, and 401(k). In the UK, you can contribute to Self-Invested Personal Pensions (SIPPs), employer-sponsored pensions, and the State Pension.

US-UK Tax Treaty

The US-UK tax treaty prevents double taxation on pension income. It allows for foreign tax credits or exclusions for taxes paid on pension income. For example, if you contribute to a UK pension scheme, the treaty can help you avoid being taxed on the same income in both countries.

Sales Tax and Other Local Taxes for US Expat Actors in the UK

Sales Tax (US)

Sales tax in the US is a state-level tax on goods and certain services, varying by state. If you provide services like performances, workshops, or merchandise sales, you may be subject to sales tax depending on the state. For instance, if you sell DVDs of your performances, you may need to collect sales tax from customers and remit it to the state.

To set up sales tax collection, register for a sales tax permit in each state where you conduct business. Maintain detailed records and adhere to the state's filing frequency requirements (monthly, quarterly, or annually).

Other Local Taxes (US)

In addition to state sales tax, some cities and counties impose additional local taxes on services and goods. These taxes can vary significantly by jurisdiction, affecting your overall tax liability. For example, New York City imposes a local income tax in addition to state and federal taxes. Register with local tax authorities if required and ensure timely payment and filing to avoid penalties.

UK VAT (Value Added Tax)

VAT is a consumption tax on goods and services in the UK. If your taxable turnover exceeds £85,000 in a 12-month period, you must register for VAT. Acting services, performance fees, and workshops can be subject to VAT. For instance, if you earn over the threshold from acting gigs, you need to register with HMRC and include your VAT number on invoices.

Issue VAT-compliant invoices, maintain detailed records of all sales, purchases, and VAT charged and paid. File VAT returns quarterly and pay any VAT due to HMRC.

Marital Status and Tax Impact for US Actors Working in the UK

IRS Considerations (US)

Your marital status affects your tax brackets and rates. Filing statuses include Single, Married Filing Jointly, Married Filing Separately, and Head of Household.

Marital status also impacts deductions and credits such as the Standard Deduction, Child Tax Credit, and Earned Income Tax Credit (EITC). For instance, married couples filing jointly often benefit from wider tax brackets and higher deductions compared to single filers.

If you are claiming the Foreign Earned Income Exclusion (FEIE), your marital status affects how much you can exclude. Both spouses can claim the exclusion if they both have foreign earned income and meet the requirements. Use Form 2555 to claim the exclusion.

HMRC Considerations (UK)

In the UK, tax codes vary based on marital status. Single individuals typically use the standard tax code, while married couples can benefit from the Marriage Allowance. This allows one spouse to transfer part of their personal allowance to the other, reducing the overall tax bill. For example, if one spouse earns less than the personal allowance, they can transfer up to 10% of this allowance to their partner, provided the higher-earning spouse is a basic rate taxpayer.

Joint income and expenses must be split equally between spouses for tax purposes unless a different ownership ratio is proven. For example, if you and your spouse own a rental property, rental income and expenses must be reported according to your ownership share.

Budgeting with Pre-Payments

US: Estimated Quarterly Taxes (Form 1040-ES)

Payments made four times a year on income not subject to withholding help avoid penalties and manage cash flow. Use Form 1040-ES to estimate total income, deductions, and credits. Payments are typically due on April 15, June 15, September 15, and January 15 of the following year.

For instance, if you estimate your annual income and deductions, you can divide the estimated tax liability into four equal payments. This ensures you stay compliant and avoid a large tax bill at the end of the year.

UK: Payments on Account

Advance payments to HMRC for the current year’s tax liability are required if your last tax bill was over £1,000 and less than 80% of tax was collected at source. Payments are due on January 31 and July 31, with a balancing payment due on January 31 of the following year. Payments are automatically calculated based on the previous year’s tax bill.

For example, if your last tax bill was £2,000, you would make two payments of £1,000 each in January and July. If your actual tax liability for the year is higher, you would make a balancing payment the following January.

For more support

For tailored support, contact Bambridge Accountants to consult with our team of international tax professionals. We help you navigate the complexities of international taxation and ensure compliance, allowing you to focus on your acting career.

Tax Reliefs and Expenses for TV Directors in US

Film production is an expensive affair; the average cost to produce and market a major movie is about $100M. Saving even a small percentage of this money would mean millions added to the spending budget for a film. To incentivize production companies to spend more money in their area, different states in the U.S. offer various tax incentives, such as tax credit, grants, and bonuses. 

What are film tax incentives?

Tax incentives for production companies were introduced in the 90s and provided a win-win scenario for both production companies and the state. These incentives were created in response to an increasing number of movie productions shifting to other countries, like Canada.

States benefit through movies being filmed in their area because it drives the economy through employment opportunities, revenue, and related infrastructure development. However, the structure and type of tax benefits vary by state. 

What are the types of incentives?

There are several types of incentives offered to production companies, and each state uses a different combination of these incentives to encourage production companies to film in their state. 

Here’s a breakdown of the most common film industry tax incentives:

• Grants: The state issues a tax-free payment to production companies for filming. 

• Film Tax Rebates: Film tax rebates are paid to production companies by the state, usually as a percentage of the company's qualified expenses. They are similar to grants, but they are taxable.

• Bonuses: These are additional perks offered to producers, such as shooting at locations free of cost, special permissions for filming in public places, hiring local staff, or discounts while buying from local businesses.

• Refundable Tax Credit: This is applicable only on tax credits. The state repays production companies' excess production credits after all income tax is paid.

• Transferable Refundable Tax Credit: The production company can transfer their tax credits to a local company to reduce or eliminate their tax liability.
  

How do film tax credits work?

Television directors in the US may be eligible for tax reliefs and expenses depending on the state they are working in. Here are some examples of tax reliefs and expenses that television directors may be able to claim:

California

California offers tax credits through the California Film and Television Tax Credit Program for qualified productions that are produced in California. The tax credit amount varies based on the production's budget, the number of jobs created, and the location of the production.

Television directors in California can also claim tax deductions for work-related expenses such as travel, lodging, meals, and equipment, as long as these expenses are not reimbursed by their employer.

New York

New York offers tax incentives for television and film productions through the New York State Film Tax Credit Program. The program provides tax credits based on the production's qualified production costs, which include wages paid to New York residents and other expenses.

Television directors in New York can also claim tax deductions for work-related expenses such as travel, lodging, meals, and equipment, as long as these expenses are not reimbursed by their employer.

Georgia

Georgia offers tax incentives for television and film productions through the Georgia Film Tax Credit Program. The program provides tax credits for qualified production expenses, including the wages paid to Georgia residents and other expenses.

Television directors in Georgia can also claim tax deductions for work-related expenses such as travel, lodging, meals, and equipment, as long as these expenses are not reimbursed by their employer.

Louisiana

Louisiana offers tax incentives for television and film productions through the Louisiana Film Tax Credit Program. The program provides tax credits for qualified production expenses, including the wages paid to Louisiana residents and other expenses.

Television directors in Louisiana can also claim tax deductions for work-related expenses such as travel, lodging, meals, and equipment, as long as these expenses are not reimbursed by their employer.

It's important to note that tax laws and regulations can change frequently, so it's always a good idea to consult with a qualified tax professional for the latest information and guidance on tax reliefs and expenses for television directors in each state.

In conclusion, television directors in the US may be eligible for tax reliefs and expenses depending on the state they are working in. These may include tax incentives for qualified production expenses, tax deductions for work-related expenses, and other programs designed to support the film and television industry. By taking advantage of these tax reliefs and expenses, television directors can reduce their tax liability and keep more of their hard-earned income.