Vancouver has a very successful entertainment industry and as a result is the home of many actors and actresses. For a lot of people in the acting community what you can and cannot claim as a tax deduction can be very confusing as urban legends about possible expenses tend to run rampant throughout the city.
We spoke with a local actor, David, who was audited by the CRA in 2001. A lot of the expenses he believed he could claim were rejected by the CRA because they were deemed as personal expenses.
We hope that this post will help you improve your understanding of what you can claim and the penalties that you may face if you claim expenses that are denied.
Did you think you had anything to worry about when you found out you were being audited?
Not really, I had been given a rough guide to follow by my accountant that listed items that were considered fair deductions. After referring to the guide I thought all of my claims were rather conservative.
What expenses did you claim that were denied?
The cost of my headshots, clothes that I had purchased specifically for auditions, movie tickets that I had purchased to study my craft and the cost of my acting classes were all deemed as personal expenses, not business expenses.
Additionally my car expenses were denied (which was surprising) after the CRA deemed traveling to and from auditions as a personal expense.
Were you penalized?
YES!! I ended up owing around 30K in tax and penalties after the audit.
What did you learn from this experience?
Be really conservative with what you claim. Also if you are in doubt check with a recommended tax consultant who regularly deals with actors tax returns.
Also make sure you communicate with the CRA if you owe money. They are fair and will devise a payment plan for you so long as you talk to them. If you ignore them they will just continue to punish you.
Homeroom Small Business Solutions has a lot of experience filing tax returns for actors if you would like us to help you complete you 2013 tax return please contact us to make an appointment.