A concert at Red Rocks Park and Amphitheatre outside Denver.
John P Kelly | The Image Bank Unreleased | Getty Images
With the pandemic upending where Americans live and work, many now face the dizzying maze of income tax issues.
However, workers in some industries, such as entertainment, have been dealing with these problems for years.
Touring musicians, TV anchors, athletes, film crew and other entertainment professionals working throughout the U.S. have grappled with tax issues long before Covid-19, financial experts say.
Entertainers and sports professionals are often caught in the web of various state and local income taxes, said Chris Cooper, a certified financial planner at Chris Cooper & Company in San Diego.
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Typically, workers owe taxes in their home state, where they spend most of their time, own a home, register a car, vote and more.
When they work and pay levies elsewhere, some states have reciprocal agreements, which allow workers to avoid double taxation.
While New York and Los Angeles are still magnets for those working in entertainment, some professionals have moved to lower-tax jurisdictions, said Jason Moll, CPA and partner of HarnarMoll LLP in Nashville, Tennessee.
For example, while there’s a top levy of 13.3% in California, states like Florida, Nevada, Tennessee and Texas may be attractive because they are income-tax-free.
“I have had quite a few clients that have done that, even clients that are actors,” Moll said. “They aren’t filming year-round.”
However, if a Los Angeles transplant moves to Nashville but still spends a lot of time in California, they may have trouble proving they are no longer a resident, Moll explained.
“Your credit card bills tell a pretty revealing story as to where you spend your time,” said Robert Seltzer, CPA at Seltzer Business Management in Los Angeles.
State tax issues
Artists on tour or athletes working in multiple states throughout the year may have particularly complex tax issues. They need to report income to each state, pay levies and file non-resident tax returns.
“If someone is touring, then certain states will have their hand out,” Seltzer said.
TV and film is another sector with a slew of temporary workers who may have income tax challenges.
“It really depends on what your source of income is,” Seltzer said.
If someone is touring, then certain states will have their hand out.
Robert Seltzer
CPA at Seltzer Business Management
For example, let’s say a California-based crew relocates to Georgia for a new production. Those workers must withhold Georgia levies and file a non-resident return, he said. However, they will receive a credit for the taxes paid on their California return.
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