Tax Consequences for Canadian Actors Working in the US
If you’re a Canadian resident actor working in the US, you could be paying more tax than you should. The tax treatment of actors is completely different in the US compared to Canada.
Before you commit to your next job south of the border, make sure you understand the impact to your bottom line.
Self-Employed in Canada
As a Canadian resident working in Canada, you’re paid as a self-employed contractor and you can claim relevant expenses against this income to reduce your taxable income. However, as a Canadian resident actor working in the US, you’re paid as an employee.
Employee in the US
This means that federal, state and other social service taxes are deducted from each paycheque. You’re then required to file a federal and state tax return with the IRS (anyone who earns income in the US is required to file a tax return to report the US-sourced taxable income). Unlike in Canada, you cannot claim expenses against your acting income because you have earned it in your capacity as an employee. Expenses incurred to earn acting income can be significant. In fact, commissions alone (agency, management, legal, business management) can range from 10-30% of gross income. Other expenses include styling, supplies, travel, dues, etc.; and claiming these for tax purposes can greatly reduce your tax bill.
Many actors use corporations, often referred to as “loan-outs” in order to mitigate the tax burden. Non-US residents can incorporate a “C” corporation in the US to use only for their US-sourced income and expenses. It’s important to note that the net acting income has to be paid out via payroll by the end of the calendar year.
How We Can Help
This is where we come in. The Entertainment Group at DMCL has extensive knowledge and experience with Canadian resident actors earning worldwide income. Incorporating is not inexpensive, and it results in ongoing costs and compliance, including bookkeeping, payroll, annual maintenance and corporate filings. Our first order of business is always to gain an in-depth knowledge of your business, so we can determine together the best structure for you now, and in the future.