ASK AMY SMITH
by Amy Smith for The Dance Journal
This new column in the Dance Journal seeks to improve the financial literacy of dancers and artists in all creative disciplines, so that they may develop sustainable practices and further expand the reach of their creativity. Questions for Amy may be mailed to firstname.lastname@example.org for consideration.
Q: In my regular 9-5 job, I get a W-2 form at the end of the year. I am being told by the dance company I perform with that I will get a 1099 form at the end of the year for monies earned. What is the difference? Should I be concerned? How does this affect my taxes?
You are not alone. Most dance artists make their living by cobbling together multiple sources of income, some as employees (who get a W2 at year-end) and some as independent contractors (who get a 1099 at year-end). As an employee, you have taxes withheld from your paycheck, which is good and bad. Good in that low-income folks (which most dance artists are, sadly) are often eligible for tax credits and will often get those withheld taxes back in the form of a refund at tax time. Bad in that your take home pay always feels so small (and is so small!) after federal taxes, Social Security, Medicare, PA and Philly wage taxes are taken out. As an independent contractor, you just get a flat fee or hourly rate for your work, and take home the full amount, which is also both good and bad. Good in that you can deduct expenses against that income and only pay taxes on the “net profit” (what’s left over, if any, on Schedule C after you deduct business expenses from your independent contractor income). Bad in that you need to plan ahead for the possible future tax liabilities and make sure you aren’t surprised by a big tax bill after spending every penny of your 1099 income. Remember, there is an additional 15% tax on self-employment income (the net profit on your Schedule C) above and beyond the other federal taxes you owe, plus PA’s 3.07%, plus you must get a business license and file returns with the City of Philadelphia if you live in the city. But that’s for another column. In general, I would say you’ll be fine if you keep good records, of who is paying you what, and track your expenses – those expenses like dance clothes, transportation, classes, etc. that are “ordinary and necessary” for you to be working as a dancer.
Q. I am a recent college graduate, having majored in dance. I have been going to quite a number of auditions for a position with a dance company. Most of the companies offer some sort of financial stipend but it seems to be inconsistent. None of them have mentioned any sort of written agreement or contract. Should I be concerned?
YES! You should be concerned! And companies, get off your pathetic asses and write up contracts for your dancers! As you can tell, this is a pet peeve of mine. Our field suffers from an abundance of people who think “I am lucky to be a dancer, and so I don’t deserve to be paid for my work”. But that is total crap. You are a highly trained professional, and you do deserve to be paid. For rehearsal, and performance, and touring. In the early years of Headlong, we couldn’t afford to hire dancers, so we didn’t hire dancers. When we did start getting grants, and decent paying gigs, we hired dancers, and were always extremely clear with them, before the project started, what the hourly rate for rehearsal would be, what the per-performance pay would be, what the weekly rate for the touring engagement would be. Nichole Canuso, Christy Lee and Heather Murphy will attest to this (I hope!). Even if the company is young and small and poor and everyone is working for less than they would like to get, which happens all the time, the clarity of a written agreement, signed by both parties, is crucial. It doesn’t have to be a super legalese-y contract, just a simple one-page letter of agreement laying out the time frame, the pay rate or stipend, and when it will get paid. Demand it.
Q. I am now out of college for 2 years and waitressing part-time while pursuing my passion for dancing part-time. I have a huge amount of debt from student loans and just make enough to get by from month to month. I want to be able to put some money away in savings, but just do not see how. Any suggestions? And if I can save a little, what is the best type of account to keep it in?
Sigh. This is a serious problem in our field specifically and in our nation generally. Student loan debt recently topped a trillion dollars nationally. A trillion! Plus, good day jobs are even harder to find than 20 years ago when I was your age. So the situation just sucks and you shouldn’t feel bad or guilty for carrying a lot of debt. However, you should stay on top of your student loans and try very hard not to default. It sounds like you are already staying on top of your loans, so congrats! There is a new program that will forgive student loans for people who spend 10 years working in public service, which includes non-profits. But unless you do something like that, you are going to be saddled with these loans for a long time, and the long term effect is that it will take you much longer to do things like buy a house, or start saving for retirement. But the fact that you are asking me about savings is also a good sign. Financial planning people will often recommend that folks build up savings of 3-6 months worth of expenses in case of an emergency (serious illness, etc). But for you, I would recommend starting with 1 month, so maybe somewhere in the range of $2000 (I imagine you live cheaply like I did at your age). Could you pick up one extra waitressing shift a month? Could you put away $100 a month for 20 months? Could you do all this while still staying current on your student loans, which is the first priority? If so, put it in a savings account, or even an index fund. The key is to keep it “liquid”, i.e. easy to access in an emergency. That cushion would give you some valuable financial peace of mind.
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