Entertainment

Entertainment businesses work project by project, often with people from other countries. Paying foreign performers brings US withholding rules. Production costs follow their own tax rules. Each project needs its own books to show whether it made money.

How money moves through a film or music project

The points where tax and accounting rules come into play are numbered.

Stage 1DevelopRights optioned, scripts or songs written, budgets drafted.1
Stage 2FinanceInvestors, loans and incentive programs fund the project.2
Stage 3ProduceCast, crew and performers paid through the shoot.3
Stage 4Post-productionEditing, mixing and finishing costs added to the project.
Stage 5DistributeLicensed to platforms and distributors, here and abroad.
Stage 6Royalties and residualsRoyalties received and paid; Forms 1099-MISC or 1042-S issued.

Numbered points are explained below.

The three points, explained

At: Develop

Production costs

Whether production costs are deducted now or spread out changes the tax for the year you spend the money. Film, television and sound recording costs are generally capitalized under the uniform capitalization rules, unless the business meets the small business gross receipts test. Section 181 has allowed an election to expense qualified production costs for productions that began before the date the law sets, so the year a production starts matters.

How we help

We check your gross receipts, the production’s start date and any election before you file.

At: Finance

Project-level accounting

Investors, and any incentive program you apply to, want to see what each production cost. Each production needs its own cost tracking, both for investors and for any state production incentive that audits costs by project.

How we help

We set up the books by project so each production’s costs and results are clear.

At: Produce

Withholding on foreign performers

Bringing a performer from abroad means US tax is taken from their pay before they receive it, and the timing of your paperwork affects how much. A nonresident artist performing at a US event usually has 30% withheld from gross pay; a Central Withholding Agreement, applied for on Form 13930 at least 45 days before the first event, can base withholding on net income instead.

How we help

We work out the withholding, the W-8 forms and the Form 1042-S reporting, and whether an agreement is worth requesting.

Services that apply

All services

Cross-Border Tax
Payments to foreign talent need W-8 forms, withholding and Form 1042-S reporting.
Bookkeeping & Accounting
Books set up by project so each production’s costs and results are clear.
Fractional CFO
Production budgets, cash flow across a shoot and reports for investors.

Questions

Still have a question?

We are bringing a performer from abroad. What do we withhold?

Usually 30% of gross pay, unless a treaty or a Central Withholding Agreement applies. The agreement must be requested at least 45 days before the first event.

Can we deduct production costs right away?

Sometimes. It depends on your gross receipts, when the production started and whether an election applies. We check before you file.