Judging from their smiling faces on the red carpet at movie premieres and
film festivals, actors' lives appear to be all glamour. But not even these
celestial creatures can escape the humdrum human realities of death and taxes.
In fact, actors face unique tax issues that often require expert advice.
Whether they are performing before a live audience, or acting in a motion
picture or television show, performers are considered to be self-employed
(independent contractors). This distinction is important because self-employed
businesspeople have much more flexibility in the costs they can deduct.
Francis Sookradge, payroll and personnel manager at Mirvish Productions in
Toronto, which has produced such hits as Mamma Mia!, says all actors for
Mirvish's Canadian productions are independent contractors. Which means they are
not covered under the Employment Insurance Act and are required to pay double
the normal Canada Pension Plan contributions to compensate for the fact their
contributions are not being matched by an employer.
As an independent contractor, an actor can deduct "reasonable expenses"
incurred in connection with earning income from the acting profession. The same
rules would apply equally to musicians and other performers. Typical deductions
include legal and accounting fees, union dues, agent's commissions, the cost of
makeup and hair styling required for public appearances, publicity expenses and
advertising in talent magazines.
Performers and actors may also be entitled to deduct the cost of
transportation. While normally this is considered a personal expense, the Canada
Revenue Agency will administratively permit actors and performers to deduct
certain transportation expenses for getting to their performances.
For example, if dress clothes or a costume must be worn from the performer's
residence to the theatre or filming location, perhaps because no dressing room
is available on location, the cost of a cab to get to work can be a legitimate
deduction. Similarly, a double-bass player who must transport her instrument to
the symphony hall can also deduct transportation costs.
While it may seem as though the door is wide open as to the types of
deductions actors and performers can make, sometimes actors push the limit.
In the 1998 and 1999 taxation years, Doug Arthurs, a self-employed actor,
claimed certain expenses, many of which the CRA disallowed on the basis they
were "of a personal nature."
He deducted various costs for meals and entertainment with friends, who were
fellow actors, claiming "it was useful for him to meet them in order to build
his network and help himself locate business opportunities." He also dined on
occasion with his agent. The judge said the meals eaten with fellow actors were
"far too remote from the earning process to be deductible," but allowed the cost
of lunches with his agent.
Mr. Arthurs also attempted to deduct dry cleaning, eyeglasses, personal
hygiene, massage for his lower back pain, a jewellery box, a picture frame, a
season ski pass, magazines, video rentals, movie tickets, theatre tickets and
CDs. Again, the judge concluded most of these were not directly related to
earning income. The judge also denied his attempt to write off a trip to
Thailand to attend a puppeteering workshop, concluding "the trip ... would not
have been taken just for the purpose of attending the workshop."