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My check had withholdings however I'm an independent contractor


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I worked a couple days for a tv show and just received my paycheck in the mail today. I noticed they had withholdings for social security, medicare, and CA disability. I was thrown off by this since I'm not really an employee of theirs, just a day player.

Anyone ever dealt with this before or know if this is right?

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This is not legal advice:

Many companies treat you as an independent contractor when if fact you are their employee. It is a fine line at times, but one that most production companies either aren't aware of, or don't care to deal with. Remember it's much easier for them to treat you as an independent contractor. No complicated tax filings, one single lump sum check, a lot less liability, etc.

Most of the time, when someone can control how you do your job, what tools you use, when you show up etc, then you are an employee. You are an independent contractor most of the time when you control all of the things listed just now and they can't tell you when or how to do your job to get the same result. It is much more complicated than this and there are even implied actions that make you an employee at times, so you need to look up the paperwork in your state, and on the federal level or contact a CPA to determine what the correct practice for you should be.

Most of the time though, they treat us as independent contractors and we just file our own taxes etc. That said, it shouldn't matter too much since you have to file your taxes anyway, and they are just doing the work for you by treating you as an employee. In this case, they held liability for you, insured you most likely, did taxation work for you and paid you most likely in a timely manner. All of that crap goes out the window when you're an IC and you have to fight for every inch. In most cases, ICs have very little recourse if someone decides to pay late, or not pay them at all, and getting someone to sign an agreement absolving you of liability when you're an IC and they are supposed to insure a job has lost me a bit of work from shady production companies.

Oh well I guess, I'd rather be safe than sorry.

Having taxes taken out might throw off your planning for immediate financial goals, but year-end it works out the same since you will still owe those taxes next tax season anyway. Since they did everything by the book, you'll be getting a proper tax form from them next tax season and you will enter that you already paid taxes on that money.

Now Uncle Sam is happy, the company is happy, and hopefully you are happy.

And out of curiosity, did they pay on time?

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Following up on what Alex wrote, seems to me (neither a lawyer nor a CPA) that you may very well have been an employee for that job.

Check out the free info and inexpensive books from Nolo, written and/or edited by lawyers, for more about this and other small business topics. Really; I find Nolo's information super helpful. Here's a page with links to articles of theirs about self-employed consultants and contractors:

http://www.nolo.com/legal-encyclopedia/consultants-contractors

Best,

Jim

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You are typically better off as an employee, unless you're incorporated and paying yourself as an employee of that corporation.

Just part of the reason is that as an employee, the company pays a portion of your social security contribution. 1099 income requires you pay all of that.

As others have said, you'll pay the tax on it at some point, so why not be protected by labor laws as an employee.

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Here's how I've come to understand it:

A worker in our field is usually an employee who is temporarily employed by a producer, then paid by either the producers' employee account or by a payroll company who then becomes the employer of record. The producer is usually the independent contractor to the ad agency, studio, client, etc., and we are their employees.

(If you are a corporation, then that changes everything.)

By most peoples' understanding, we do not meet all of the requirements to be an independent contractor by state and federal definitions. For instance, a true IC has liberties as to how their product or service is delivered as long as it meets the needs of the job. An IC--for example, a plumber or a landscaper--can hire their own employees to do the work and the IC can then simply manage and oversee the project. How many times have you done that?

If you supply the sound equipment, then that can be a separate business. You are a sound rental company as well as an employee. As a rental company, you can take the usual tax deductions for advertising, purchases, maintenance, and transportation and mileage to deliver the equipment to your job. Once you're on the job at call time, you are then the employee of the producer.

As an employee, you are covered by workman's comp. for injuries, and the employer will pay half of your social security when an IC would have to pay all of it. That and the mentioned expedient payment is a benefit. For those who find that unemployment insurance is helpful, that can be collected when needed through payroll jobs.

Also bookkeeping can be kept in separate ledgers, with your equipment paid on 1099's and your wages paid on W4's. And remember that you don't make overtime on your equipment, so quoting a day rate that includes your equipment rental only gives part of the equation. If you go into overtime, (which is based on your hourly wage), you have to decide what part of your day rate is equipment. Add to that that fed tax on earnings is less for equipment rentals than for wages and you now have a good case for working as an employee.

That's my take on it.

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I've found the "Independent Contractor" determination to be solely an IRS thing. Maybe there are states that have a say in it, but I haven't encountered that. When the IRS speaks, it doesn't matter too much what the state says anyway.

A number of years ago, the IRS (we're from the government, and we're here to help you) decided they wanted to classify everyone that they possibly could as employees. Toward that end they issued a document that had ten points that may, or may not, show if you qualify as an independent contractor. But, then, there's a "gotcha" -- a rather big "gotcha."

The "gotcha" was in how they applied those ten items. You see, that was left solely up to the discretion of the (guess who) IRS! Yes, the IRS issued guidelines, but those guidelines were to be interpreted and implemented at the wish and whim of the IRS -- however and whenever chose. Some people call that "playing with a stacked deck": Here are the "rules" but we decide if, how, and when they apply.

Where the states came into it, was, the IRS was going state-by-state and working with the state unemployment offices, comparing records with them on who applied for unemployment and whether or not those people had been hired as employees or independent contractors. If they had been hired as an independent contractor, the IRS would then go back to the employer and demand past withholding, etc.

What you'll generally find is that many smaller companies treat everyone as independent contractors, as there is much less paperwork, and they can list the independent contractor fees as expenses at the end of the year. Quite frankly, for smaller companies, this makes sense, as the expense of having employees adds greatly to the cost, paperwork, and infrastructure of a company, and some companies are just too small to easily absorb that.

Most larger companies, however, not wanting to deal with the IRS and all that it implies, have accepted the perspective that everyone is an employee. Some allow anyone who is incorporated to be an independent contractor -- some do not.

As far as consulting an accountant or attorney about your status -- it isn't up to them -- it's up to the IRS -- and the guidelines are still blurred. As long as it's the IRS who makes the rules, who interprets the rules, and then who enforces the rules, the government has much more power over its citizens -- and that's just the way people in power like it.

A friend of mine who owns a successful business said the IRS demanded that his company list their accounting firm as an employee. And, of course, this established and well known accounting firm was incorporated.

So, yes, this is common and getting to be more so.

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Two years ago I purchased a house. I had both 1099s and W2s. The mortgage underwriter wouldn't accept any of my W2 income since I was "no longer working for that employer." However, all my 1099 income applied and I got the loan by the skin of my teeth and after 60+ days of delays. I much prefer 1099 income and will go that route whenever I'm able.

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Two years ago I purchased a house. I had both 1099s and W2s. The mortgage underwriter wouldn't accept any of my W2 income since I was "no longer working for that employer." However, all my 1099 income applied and I got the loan by the skin of my teeth and after 60+ days of delays. I much prefer 1099 income and will go that route whenever I'm able.

Being a Mortgage Broker I can say that 1099 income is a lot harder to use to qualify someone for a loan. W2 income is very easy to use however most lenders want to see 2 years in the same line of work in order for that W2 income to matter. 1099 requires a lot more paperwork and underwriting in order for it to pass. Seems like you had more "years as a 1099 worker" then a W2 so that's why it was easier going that route for you. But, generally speaking W2 is the way to go if you want the file to go through easily. Heck, I can talk about this stuff all day. Sorry for going on this tangent.

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I can come to that argument with a different tack: Your bankster was a MORON who has no idea how the entertainment industry works. God help him if he ever gets a longshoreman looking to buy a house.

I have worked as a stagehand for over 10 years now. This is extremely similar to film production, in that every time you have a gig, it is most likely with a different payroll company. Each and every summer, all the stagehands file for unemployment b/c the work dies entirely for 2 months+ depending on where you are.

When you go to file, they want to know the physical locations where you were working. This is useless information to provide, because the venue didn't hire you. Same for films - That stretch of roadway you were using for a highway scene was your job "location"... but it didn't hire you either. You WANT to be listed as an employee, and decently sized productions know this is the correct way to do it, or THEY could end up holding the bag with the IRS, as John mentioned above.

As far as the unemployment or bankster connection to a longshoreman? I had to speak directly with an unemployment counselor / supervisor the last time, because their computer-based determination system couldn't figure out the 15+ pay stubs I had, and the stack of W2s... And could only locate about $1200 that I had made from just a single employer within the state. All the others were out-of-state payroll companies, and their system rejected those based on my address, and that I usually only worked for them for under 5 days.

According to the supervisor, our profession is very similar to that of a longshoreman - He might be continually employed at a physical location (the dock) but he spends much of his time sitting either at home or in a room at the dock, waiting for a ship. The payroll he gets is from the shipping company - So every time a new boat arrives, it is a "new job" and the address of that job might be in China, who knows. Again, the length of employment is very short, which confuses the systems.

Basically, he told me that the stubs / W2s I had were perfectly valid to show continuous employment, in an "as needed" (key phrase) industry, and while my union affiliation might not be the employer of record (the W2 providers are), the union IS a referral service, which can act to tie all the different payrolls together.

Yea... Its a disaster area if the person you are talking with hasn't ever worked in eventing or entertainment or international shipping. Those are the only people I have ever been able to get to understand this mess. Even the members of the plumbers' union (who also never work at the same location twice) don't have this problem, b/c they are referred to the jobs by local shops that act as THEIR employers of record.

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" it's much easier for them to treat you as an independent contractor. "

cheaper, too...

for employees, they pay the same amount as the deduction to Social Security (currently the employer paid "half" is actually a bit more than the employee share).As IC, you will eventually pay 100% of the SS. The employer also pays for workman's comp coverage, unemployment insurance, and other "benefits" may apply, like life insurance, health insurance, etc.

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Let's let the cat out of the bag.

One thing you folks seem to be missing, and I know this from the photo world, is that as an employee, or someone hired under a work-for-hire contract (and that contract MUST at some point use the actual term "work for hire") the copyright of the material you produce belongs to your employer. If, on the other hand, you are a subcontractor employed WITHOUT a work-for-hire contract, the copyright of the creative work you produce (photos, sound recording, video recordings, etc) belong to you.

Let me emphasize that.

YOU OWN THE COPYRIGHT TO YOUR RECORDINGS IF YOU ARE HIRED AS A SUBCONTRACTOR.

What happens next is that someone wanting to use your creative works in another creative work (a film or TV show) has to either BUY the copyright from you or LEASE it from you, the copyright holder.

This assumes that you, the subcontractor, uses recording machines and recording media that you own. If someone compensates you for the cost of materials (i.e. recording media) you still own the media and the copyright.

Ta-Da!

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Jim, this is the first time I have heard this! Very interesting. I'm not sure if this also applies under Canadian law, but it's worth checking out. When i sign a contractor's agreement (work for hire) there is almost always a section declaring the content on the media the property of the production company (in perpetuity, throughout the known universe, blah, blah, blah). I've only been stiffed by a client twice in 20 years of freelancing, and I withheld the media (DAT tapes) once. I never did get paid, but they sure as hell weren't getting the sound for nothing. Oh yeah, there was a contract. So sue me I said. They didn't. The movie was never completed.

Chris Newton

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Jim: I often have to sign a "work for hire" agreement as part of my start paperwork. Even if I am an employee on payroll. That agreement would *probably* be void if they don't pay you, and then you could threaten to block the project from being released until you are paid.

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" Let's let the cat out of the bag. "

free advice is always worth what you pay for it...

there are lots of incorrect facts on the Internet...

specific legal advice needs to be obtained from a competent source...

I'm not a lawyer, so this is not legal advice: generally, a contract requires a meeting of the minds, and something of value for all the parties, aka quid pro quo, and if a party fails to fulfill some termin the contract (like paying!) then the contract is not completed and possibly vacated or voided..

several things are now in play in this discussion: labor laws, tax laws, intellectual property laws, and contract laws. situations vary and competent, specific legal advice might be appropriate.

The person who represents themself in such affairs has a fool for a client.

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  • 8 months later...

speaking of "independent contractors"

" In the eyes of the government, there are almost no independent contractors in our industry. Studios and production companies have been hit with massive audits and paid millions to the IRS in back penalties for misclassifying crew members. "

http://aboveandbelow.media-services.com/2013/03/20/producers-take-advantage-of-irs-forgiveness-program/

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