Independent filmmakers, working outside of the big budget movie system, have often favored gritty, down-to-earth, observational cinema. Characters behaving on screen like ordinary people, without glamour and sometimes without plot. But when Sean Baker, an offbeat writer/director whose credits include the absurd TV puppet series Greg the Bunny, does down-to-earth, the results are unpredictably silly and touching. His new film Tangerine is a low budget affair, no doubt about that, but there’s nothing sloppy about it—this is as talented a piece of filmmaking as you’re likely to see this year.

Tangerine’s two main characters live on the margins of Los Angeles—Alexandra and Sin-Dee are black transgender prostitutes scraping by somehow, day-to-day, mostly in West Hollywood, one of the seedier and less affluent sections of the city. It’s the day before Christmas, and Sin-Dee has just gotten out of a short stint in jail, when Alexandra has to break the news to her that her boyfriend, a pimp named Chester, has been cheating on her with a non-transgender white woman. Sin-Dee flips out and goes off in search of her rival, with the calmer and more reasonable Alexandra following and trying to calm her down.

In the meantime, we also meet Rasmik, an Armenian cabdriver living a double life—his wife and family don’t know that he has a thing for transgender prostitutes—Alexandra is one of his friends. One scene reverses a stereotypical situation—Rasmik gets upset when a hooker that he’s picked up turns out to be a “cis” female.

This is, in fact, a comedy, albeit a remarkably realistic one. Describing it makes it sound awfully sordid, and at first it may seem that way, but Baker and his co-writer Chris Bergoch are completely free of condescension, gawking curiosity, or any attitude at all other than total acceptance. They give you this world and these people at street level, on their terms, thereby affirming every ounce of humor and pride and sadness and emotional immaturity that they have. The two newcomers playing the leads, Mya Taylor as the sensitive and regal Alexandra, and Kitana Kiki Rodriguez as chaotic, impulsive Sin-Dee, inhabit their roles with utter assurance. Baker met them at an LGBT center in L.A., and cast them in the movie instead of getting professional actors—his faith was well rewarded. And although the characters converge on a local donut shop for a riotous climactic scene reminiscent of screwball comedy, none of it seems far-fetched.

The entire picture was shot on an iPhone 5, fitted out with some special anamorphic lenses. I’m not sure why it’s called Tangerine. Maybe it has something to with the orangey color of the light from the California sunset in some of the scenes. Or maybe just because it’s unexpectedly sweet.