Internal Revenue Service

Entertainment Industry - Important 1040 Issues: IRS Audit Techniques Guide Internal Revenue Service

In the film industry, employees are categorized as "above" or "below the line." Above the line employees are thought of as creative talent; while, below the line generally refers to technicians and support services (although it includes set designers and artists). The "line" is an accounting demarcation used in developing the budget for production. Some above the line costs are incurred even before a film goes into the production stage. Above the line costs include the story rights, the screen play, the producer, the director, and the principal cast. Generally, during the "pre-production" period, the expense for the principal cast is negotiated, but the cost of the story rights is actually paid. This MSSP guide covers performers, producers, directors, technicians, and other workers in the film industry, the recording industry, and live performances. The same general rules apply and the same issues are found on most of these returns.