Taxes for Freelancers with The Singing CPA
Steven Zelin, The Singing CPA, joined us once again for a workshop on Taxes this past Wednesday, February 20th, 2013. Steven has worked with many an animator and professional artist over the years, and being an artist himself – that makes him uniquely qualified to speak on issues that affects artists most as regards taxes, retirement planning, and financial planning. He has appeared on ABC Nightline, in the Wall Street Journal, the New York Times and National Public Radio. Steven earned an MBA in Marketing and Finance from Fordham, plus has a Series 6, 7 & 63. Steven also owns a guitar and can be found singing on the steps of the post office each April 15th singing funny song parodies about taxes.
An eager crowd packed into The Productive and had all sorts of questions for Steven. These ranged from what deductions one qualifies for, to the difference between a traditional IRA and a Roth IRA, to what distinguishes an independent contractor from an employee. That last issue is something we artists run into all the time, where a company will want you to come into the office to work for a certain amount of time, but have you classified as a 1099 employee instead of a W2. This distinction is very important because it affects how you deal with taxes as well as whether or not you’ll qualify for unemployment insurance later on down the road. The IRS has a number of rules on what defines an employee. There are many factors that go into this, but there are 3 basic factors. 1. Behavioral control: Are you told when to come in and when to leave? Are you given the equipment to do the job and are you told where to do it? 2. Financial control: Are you told how you will be paid? 3. Relationship of the Parties: What does your contract say? If you believe you are being classified wrong, do speak up. It may be that your employer just isn’t aware of IRS rules surrounding this issue.
The other big issue Steven went into is the recent change to the MCTMT tax. As of January 1, 2012, self-employed individuals pay MTA tax for net income exceeding $50,000. This tax has recently been the subject of a lawsuit and on August 22, 2012 the Nassau County Supreme Court found the MCTMT to be unconstitutional. It’s still in the court system, but in order to protect your right to request a refund, you must file a protective claim with the NYS Dept of Taxation and Finance before the three-year statute of limitations expires. https://www8.tax.ny.gov/MCPC/mcpcStart.
Below is an article I wrote last year that lists a number of important resources for artists. Feel free to read it again. ASIFA-East would like to thank Steven for taking us all out for kangaroo meat down under at The Australian, as well as treating us to a round of drinks and other tasty treats. Photos from the event are here, and I posted a highlights video of the performances above.
Hope to see you soon at our next event with BatteryPop, the new online kids network. If you have a show you’re pitching around or an idea you want to develop, don’t miss this event! AND our festival is still accepting entries – Click here for all details. Become a member today to vote on the winning films as well as support these and upcoming programs at ASIFA-East.
2012 Article: It’s not often you are treated to live music at an ASIFA-East event, and it makes it doubly special that our special guest was not only a talented song-writer but a fully certified CPA at that! Introducing, Steven Zelin, the Singing CPA! Steven has been speaking and singing at our annual Taxes for Artists for three years running now.
Steven is a certified public accountant with a unique gift for creating compelling song parody on what is often a mundane topic. Opening the night with “If You Don’t Like Paying Taxes (Clap Your Hands)”, and “When You’re Filing”, Steven discussed deductions for freelancers, retirement planning, the importance of record keeping, estimated taxes, and the MCTMT tax. One of those deductions is health insurance. The majority of freelancers and small business owners do purchase their own health insurance. As a Sole Proprietor or a Single Member LLC, this is deductible as an adjustment to your adjusted gross income on your individual 1040 tax return. Cobra payments count as well. What else is deductible? Specifically things that are business related. Things like travel, phone/communication, accountant fees, professional dues and memberships (like ASIFA-East’s dues), business meals and entertainment, automobile expenses, office supplies, Internet, computer equipment and software, postage, and your home office.
Steven recommends having an IRA, SEP, and/or 401K, and if your employer matches your contribution – you should definitely take advantage of the FREE money by contributing the max amount.
The MCTMT stands for the Metropolitan Commuter Transportation Mobility Tax. Freelancers and small business owners fall under those that are subjected to this tax. The tax applies if your net earnings from self-employment exceed $10K for the 2011 tax year. This tax was changed for the 2012 tax year to apply to income exceeding 50K.
A good rule of thumb is to keep your records on hand 7 years from when you file. Steven suggests making use of scanning technology or services that scan and keep your receipts on file electronically. He is also a strong advocate of reconciling your bank accounts and keeping track of what’s going in and out.
The IRS requires that taxes be paid on money as it is earned. For those of us paid with checks that have no taxes taken out – complying with this rule means that we must file estimated taxes quarterly throughout the tax year. Those due dates are 4/15, 6/15, 9/15, and 1/15. It’s a good idea to have a business bank account and to use this account to deposit all your business checks. To open a business bank account, you need an Employer Identification Number (EIN). If you are a full-time freelancer, you are in essence a Sole Proprietor and can open your own business bank account. However, unless you are a LLC or S-Corp, I would avoid trying to open one at an international bank like HSBC. They have different reporting requirements and will not work with Sole Proprietors unless they have a registered DBA. Instead, I would go with a local bank. For one, you avoid the long lines at the teller, and two, you are treated better because they want to support local enterprise. Once you have a business checking account, a good way to save for estimated taxes is the following: Deposit each business check into your business checking account. Leave a good third of each check in the account, and pay yourself the rest. That third of each check is what you set aside to pay your taxes each quarter.
Some examples of good accounting and tax software include Quicken, QuickBooks, and TurboTax. I will also put forth a solid endorsement of Freshbooks, as an Online Invoicing, Accounting, and Billing software. It’s amazing for keeping track of expenses, and invoicing, and it’s perfect for freelancers and small business owners. QuickBooks has an online system as well. Both options do have a monthly fee, so it may be something to wait on until you’re a full-time freelancer or business owner. Until then, you may find this Excel spreadsheet helpful. It allows you to enter the expenses by category, and tallies them up at the end. It’s for musicians but you can change the categories to your professional needs. I’ve been using that for the last couple of years to keep records, and just recently graduated to Freshbooks. Here is an income-tracking sheet that might be helpful as well.
Midway through the event, Steven performed “The Accountant” (to the tune of the gambler). He closed with “Filled Out Every Form” and then wowed us with a rousing duet of “Suddenly Steven” (to the tune of Suddenly Seymour) with Lisa Bridges. He answered questions throughout the night and coverage of taxes was very comprehensive. It was a fun and amazing night and the duet was a jaw-dropper. I really wish I had a camcorder on hand for that one. It’s his newest song and I highly encourage him to record it to CD.
www.irs.gov: Excellent site with special section for the self-employed
www.dudewheresmyrefund.com: Bodacious site to check the status of your refund
For information about Steven Zelin, the Singing CPA please contact:
Steven Zelin, CPA
450 Seventh Avenue, Suite 1500 (bw 34th and 35th Street)
New York, NY 10123
Click here to listen and buy Steven’s music.