The issue of money and child actors can be a source of confusion for families. And this confusion can lead to broken relationships and the kinds of headlines you hope never feature your child’s name.
Photo Source: @AKG_0209 via Twenty20
It’s both the legal and moral responsibility of the parents to properly manage the money earned by their minor child, and most parents do their best to do right by their kids. Different states have different laws governing who owns the income a young actor makes. But if your child lives in, works in, or works for a company based in California—even if the project shoots elsewhere—the law is very clear about to whom the money belongs: 100 percent of the income belongs to the child.
Most parents of child actors working in California are familiar with the best-known section of California’s Coogan Law that states 15 percent of every dollar a minor performer earns must go directly into a blocked trust (or Coogan) account that may not be touched until the minor is 18. It also states that this money belongs exclusively to the minor.
The part of that law that many parents are less familiar with is the piece based on Section 771 of the California Family Code: not only does that 15 percent in the blocked trust account belongs to the minor, but 100 percent of a minor’s earnings belong to the minor—it’s not family money. This can come as a surprise to families from other states, where a child’s money often is legally considered to belong to the family.
What does this mean from a parent’s standpoint?
First of all, when a child performer earns a paycheck, the 15 percent to the Coogan account is typically deducted automatically. Standard procedure on any professional set requires that Coogan account info be supplied to production before work is allowed to start.
And that’s not all. Commissions can take another 10 to 30 percent or more, depending on the size of the team:
Agents typically get 10 percent commission
Managers typically get 10-15 percent commission
A lawyer may get five percent commission
Of course, young actors have business expenses like any other working professionals and these should be paid out of any earnings. Headshots, classes, union dues, transportation to auditions, etc., have traditionally been deductible expenses.
However here’s another surprise for many parents: the new tax law that goes into effect for 2018 features some changes that affect performers at any age and the changes hit low and middle-earning actors hardest. In the case of performers who are not incorporated, they will no longer be able to deduct many traditional W-2/employee-related business expenses, including commissions.
“The more people on your team, the sooner you may need to incorporate. Depending on the commission structure, the level of income that would trigger the savings associated with incorporation may start at around $150k now,” says Cory Barash, partner at Grant, Tani, Barash & Altman, a leading business management firm. Barash recommends you reach out to an accountant for an analysis.
See: The Business Move You Might Want to Consider Under the New Tax Plan
Kids may also be required to pay income taxes, depending on where their income falls each year.
If you are doing some basic math, you can see that there may not actually be a lot left after you subtract commissions, expenses, and taxes.
The best approach for parents of young actors is to treat their child’s career like the business that it is. Open up a dedicated checking and savings account so any earnings are not comingled. Track expenses and income as you would with any other business. Consult with your accountant to make sure you are up to date with the current tax laws as they affect your kid’s liabilities.
If your child is old enough, walk them through where the money goes so they understand it. The gap between gross and net income can be eye-opening and a good life lesson.
Understanding the law and planning accordingly can help families navigate their young actor’s career much more successfully. It will help keep the parent/child relationship healthy too.
This post was first published in my Backstage Expert column on Backstage.
Helping your child start and build an acting career can be exciting and also complicated! I can help you cut through the confusion with a Skype, or in-person consultation session, where we address your most pressing concerns, as well as cover things that are probably not even on your radar. If you’d like to save time and money with some sage advice, book a consultation session with me today— before any more time goes by.