One of the biggest questions we get as a tax accountant for writers is, “When should a screen writer incorporate?”
From my professional experience, you are ready to incorporate if you consistently earn $150,000 in writing income and above on annual basis. Another important question to ask is — are your legal, agency, and management fees above $15,000 annually or above 10% of your annual writing income?
If you do not pay more than $15,000 or 10% of your earnings, it might be more beneficial for you to be an employee of the production company who pays an employer share of your FICA taxes. You might be advised to start a Loan Out Corporation to be able to write off expenses, however, someone earning less than $150,000 annually might not generate enough business expenses to offset Employer FICA taxes. I perform a comprehensive review of my writer client’s expenses in order to determine whether incorporation makes sense. It is a complex calculation with many movable parts depending on overall income and expenses of a Writer. The goal of this calculation is to save enough in income taxes to offset compliance and record keeping costs of his/her corporation.
See HERE for more on the topic of Loan Out S-Corporation.
Every great screenplay begins with a winning outline. Let an accountant that is well-versed in the entertainment bookkeeping help you get the award you deserve – freedom from tax overwhelm!