Red Rocks Park and Amphitheatre in Denver. The Image Bank UnreleasedMany now find themselves in a confusing maze of income tax issues due to the recent pandemic that has rocked America's work and home lives. These problems have been a problem for many years in certain industries like entertainment. Financial experts claim that touring musicians, television anchors, athletes, and other entertainment professionals throughout the U.S. have had to deal with tax issues for years. Chris Cooper, a certified financial advisor at Chris Cooper & Company, San Diego, stated that entertainers and sports professionals often get caught up in the web of income taxes in different states and localities. Learn more about Personal FinanceRemote working? Working remotely?Certain states offer business owners an exemption from the SALT capSenate proposes to change tax breaks for pass-through companies. Workers owe taxes in the state where they live, work, own a house, register a vehicle, vote, and many other things. Some states have reciprocal agreements that allow workers to avoid double taxation if they work and pay taxes elsewhere. Although New York and Los Angeles remain attractive destinations for entertainment professionals, many professionals have relocated to lower-tax countries, according to Jason Moll, CPA, and partner at HarnarMoll LLP, Nashville, Tennessee. California has a 13.3% top levy, but states such as Florida, Nevada and Texas are free of income tax.Moll stated, "I have had quite some clients that have done this, even clients who are actors." They don't film year-round. Moll explained that if a Los Angeles resident moves to Nashville, but spends a lot more time in California than they used to, it may be difficult for them prove they are not a resident. Robert Seltzer of Seltzer Business Management in Los Angeles, CPA said that credit cards can tell a lot about where you spend your time.Questions about state taxesTax issues may be more complicated for artists on tour and athletes who work in several states during the year. They must report their income to the state in which they reside, pay levies, and file tax returns for non-residents. Seltzer stated that "if someone is touring, certain states will have their hands out." Television and film are another sector that may face income tax problems. Seltzer stated that it all depends on your source of income.If someone is on tour, certain states will be able to help them. Robert Seltzer CPA at Seltzer Business ManagementLet's take, for example, a crew from California who moves to Georgia for a new production. He said that these workers would need to withhold Georgia levies from their paychecks and file a return for non-resident status. They will be credited for any California taxes they have paid. Seltzer stated that it doesn't harm them to be a California resident because the Georgia tax rates are lower. He said that a Georgia-based crew could have problems if they worked in California as they cannot claim credit for California's higher taxes.Trouble with the city taxCooper explained that entertainers could also be subject to city levies. According to the Tax Foundation, there are nearly 5,000 local taxes across the country. Many of these jurisdictions are located in the Rust Belt states, like Ohio and Pennsylvania. Cooper stated that it doesn't matter whether they are self-employed, W-2 employees or corporations. They are entitled to be pursued by the local taxing authorities."New York City, Philadelphia, San Francisco, St. Louis, and New York are some of the cities with local levies. Philadelphia has a wage tax that is one of the highest in America at 3.4481%. This applies to non-residents. Problem is: What if an artist has to perform somewhere that requires city taxes? Cooper stated that while many places offer credits to help avoid double taxes at state level, this credit doesn't usually apply to city taxes.How to avoid tax problems in the stateCooper stated, "Your tax planning starts the moment you step foot into another state." Cooper said that people who work in multiple places during the year need to take a proactive approach to avoid problems. Cooper said that the American Institute of CPAs recommends keeping track of remote work and including details about how many days worked in each state or municipality. Cooper suggests that clients check the "single box" on their employer's tax forms when starting a new job. This will allow them to withhold more taxes from each paycheck. They may also be able to avoid penalties if they have previously filed their tax returns in the same state. Cooper stated that penalties won't be imposed as long as they pay estimated taxes equal to 100% of their net income tax last year.The day you arrive in another state, your tax planning begins. Chris Cooper Certified financial advisor at Chris Cooper & CompanyWorking in a new state can be more difficult if you don't have a tax return for the previous year. He said that someone could pull a blank tax form from the state's website to calculate levies based upon their year's expected earnings. Cooper stated that working with a professional tax accountant may be the best way to avoid penalties and calculate withholdings, particularly if someone works at multiple locations throughout the year. Cooper said that while established entertainers may have business management to handle these matters, younger performers might not have that privilege. Cooper stated that they need to establish their own representation. Cooper said, "The tax professional is the best person to start."Americans work remotely
