"Answering a Reader Question #1,039


Anonymous Wrote:

My child received a W-2 for a modeling job he did and the total wages he is being taxed for is prior to the agency directly taking their cut out. My question is whether he should be taxed for the full amount before they took their cut or the amount after they took their cut. He was only paid the amount after his taxes were already removed and after the agency then removed their cut.

Howdy, Anonymous!

As my post that you commented on states, I'm not a CPA and not giving legal advice as such, but after speaking with a talent agent who does have experience dealing with W2s and underage talent, this is the information I can share with you for informational purposes:

The info on the W2 you received is correct. They will always tax the full/gross amount before anyone takes their cut. This is because the funds for the original amount paid out contains the agency's cut. And since the funds are being distributed by the client and not the agency, the full amount is what you end up being taxed for according to the W2 that the client has to file by law. 

However, one method you can consider doing is deducting/writing off the amount the agency took out of that payment when you're reporting the income. This is optional and not mandatory but moving forward, any W2s you'll get will reflect the same scenario 99.9% of the time (I'm purposely not saying 100% because there's always exceptions or loopholes that I want to be careful to account for).

I hope that helps but I would recommend discussing this approach with your CPA (if you have one) when filing your taxes this year to be on the safe side and cover all your bases.

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