An interesting thing happened in Hollywood during the pandemic.
But there may have been another, more prosaic reason for their move: States like Florida, Nevada, Tennessee and Texas don’t impose income tax, compared to California’s
Yes, entertainers are different from you and me, but maybe not for the reasons you think: They can have more complex tax problems, especially when they work in more than one state. By necessity, many entertainment professionals, such as touring musicians, actors, TV anchors, athletes, and film crew members, have to work in many states and cities around the United States — and that means they have to pay a slew of state and local taxes (in addition to federal taxes). That entails filing non-resident tax returns, reporting income to each state, and paying taxes.
Keep records!
Usually, we owe taxes in our home state, where we spend most of our time; it’s where we own our home, register our car, or vote. If a taxpayer also works in another state and has to pay its taxes, some states allow workers to avoid double taxation via reciprocal agreements. But there’s a catch. Let’s say a taxpayer from New York moved to Florida to escape taxes, yet they spend the majority of their time still in New York. Unfortunately, the tax man can easily catch them out by examining their credit card purchases. (Did you know that the IRS has its own
That’s why it’s crucial for mobile entertainers to keep records of all out-of-state work; they should make a note of the number of days they spent in each state and municipality. They may also want to consider checking the “single” box on their employer’s tax form when they start a new job, even if they’re married; this will prevent additional taxes from being withheld from their paycheck.
And it gets more complicated: If they worked in the same state last year, they can avoid tax penalties by checking their previous tax return. If they withhold or make estimated tax payments equal to 100% of last year’s net income tax, they won’t trigger penalties. But what if they never worked in that state before? Then they have to download a blank tax return from the state’s website and try to estimate their taxes, based on their projected earnings for the year.
And interstate taxes can be knotty. A member of a California-based crew who has to relocate to Georgia for a new shoot must withhold Georgia taxes and file a non-resident return. But they’ll get a credit for the taxes paid on their California return. In this case, working out of state doesn’t damage their tax situation, because Georgia’s tax rate is lower.
Yet a member of a Georgia-based crew who must move to California for a production may end up with a bigger tax bill, because they can’t claim a full credit for higher California taxes paid on their Georgia return.
Let’s not forget city taxes
The complexity increases if we turn our attention to city taxes.
As you can gather from what I’ve said, complying with all of the varying levels of U.S. tax law isn’t simple — rules vary from state to state and city to city, and travelling entertainers are expected to maintain strict records of how much might be owed to whom. That’s where it can be helpful for entertainers to consult a tax professional well-versed in these complex edicts, and to choose the tax advisor they feel most comfortable with.
