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Old July 2nd, 2008, 12:47 PM   #1
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tax status

I know all tax questions should be submitted to a tax professional, but I was wondering if people are willing what their own experience is.

My understanding is when you hire someone to perform a service, and you are supervising them, you must withhold taxes from them if you are telling them when to show up and directing them what to do.

My question then is on people hired to work on a film.

If a production company hires a sound person and a director of photography are they employees? My sense was these guys get a day rate, and are self-employed.

But the sound guy is told who the actors are and what the action in the scene is. Maybe the sound guy has leeway in exactly how he records the sound, but not beyond that, right? Does the production company paying the sound guy give the sound guy a w-2, and withhold state and federal taxes, social security, etc?

Or is the sound guy a contractor who gets a 1099?

I know people have asked this question in general, but my limited knowledge was that people hired to work on a film are paid as independent contractors. But the job duties make them seem like employees.
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Old July 2nd, 2008, 01:47 PM   #2
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I'm not a tax authority nor do I play 1 on TV nor have I slept in a Holiday Inn but it's my understanding that it doesn't matter that someone is telling the person what to do. If that person is an indendent Contractor then that's what he or she is.
As an example, I do some AV work for a very large AV house in Chicago. They tell me what to do (set this up here, do this do that-operate camera 1, run videoworld, whatever) but I am an IC and therefore get 1099d at the end of the year. I'm not an employee with all the benefits that an employee would get from that company.
Best to check with your accountant though, maybe he slept in a Holiday Inn!
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Old July 2nd, 2008, 01:59 PM   #3
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Contractors are told what to do all the time. There are a lot of things that play into determining whether or not someone is an employee or a contractor, but I don't think whether or not they are supervised plays a big part.

The big thing is, does this person work for you full time? Do they have other clients?
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Old July 2nd, 2008, 02:07 PM   #4
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Thanks. Every time I read about this stuff, I become more convinced the design principle behind the tax code is a bit like the astrology section in newspapers. So vague it can mean whatever you want.
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Old July 2nd, 2008, 04:00 PM   #5
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Actually the system is designed to keep everyone accountable... in theory.

A "business" that has employees has a number of responsibilities - various taxes, collection of SS, medical, etc. etc. and forwarding them to the appropriate government agency.

An independent contractor in theory has the responsibilities to do some of these same things for themselves... and report 1099 income.

The problem usually arises when someone says "I'm an employee, where's my unemployment/benefits/taxes paid", and there's a "misunderstanding" about the exact nature of the relationship.

THUS, the various governmental agencies have developed a series of questions to help sort out the resulting mess... typically in the absence of a written contract, with a couple people who just "winged it" on vague oral agreements.

Supervision is not on the list AFAIK - any contractor is going to be told at least in general what they should do. Albeit the nature of the supervision COULD play into any decision.

FWIW, many businesses and individuals do everything possible to have people they treat just like an employee, but not do the needed paperwork or pay the necessary taxes... but if they don't follow the rules, this is dangerous ground.

One thing I've heard that is often a determining factor is who owns the equipment used for the job... a contractor brings his own tools, an employee uses the employer's tools and equipment. This is just one of many "questions" that arise should a government agency have cause to question the nature of the relationship. There are other things like if the IC contracts to multiple other businesses, if they are set up as a business independent of the "employer", if and who paid taxes, etc, etc.
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Old July 2nd, 2008, 04:38 PM   #6
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And just to make it even more interesting, many large productions use a payroll service who becomes the employer of record for the below-the-line staff and much of the talent for the duration of their involvement in the shoot. I think it works like this ... the payroll service receives money from the production company, divies it up, and disburses it to taxes and other withholding accounts, union payments, etc, as well as to the employee as a regular paycheck. The worker gets a single W-2 (in the US) at the end of the year from the payroll service covering all of the productions that used them, not separate ones from the various production companies he's worked for. From a tax standpoint it's not unlike working for a temp agency like Kelly, et al. There was a major payroll service that went belly up during the writer's strike and there was a lot of online chatter about problems getting W2's in time for tax filing.

I might mention that the list Dave is referring to is only an IRS guideline and it's not absolute. It's just a list of SOME of the various factors the IRS MAY take into account in determining whether someone is an employee or not.
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Old July 2nd, 2008, 07:19 PM   #7
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Quite correct, "guidelines"... meaning there's a wide possible range of interpretations... but if you stay within the guidelines at least you're a bit less likely to end up on the wrong end of a government probe...
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Old July 2nd, 2008, 07:26 PM   #8
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The IRS has different rules for different industry sectors based on their evaluation of work practices in an industry.

Here's a link to IRS guidelines for film and video http://www.mca-i.org/en/art/?9

You'll find that they specify three categories of film and video employees. Determination of employee/contractor status is related to what category a worker falls into. This may explain the different treatment of workers that Dennis asks about.

Important to note that these are audit guidelines, meaning these are the standards that will be applied should you or your employer ever be audited.
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Old July 3rd, 2008, 12:15 AM   #9
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The link Peter provided is excellent - but a bit long and complex

What I got out of it was that

Telling someone what to do doesn't make them an employee. Telling them HOW to do it might.

People who own their own equipment are more likely than not NOT to be employees

People who have a risk of loss are more likely than not NOT to be employees

There's a lot more - you should read it all.
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Old July 3rd, 2008, 08:42 AM   #10
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Quote:
Originally Posted by Jim Andrada View Post
The link Peter provided is excellent - but a bit long and complex
Welcome to the wonderful world of U.S. tax law . . .

An important point to make about this subject is that the IRS is well aware that there are employers who would like to avoid the overhead costs and tax record-keeping headache of having employees and who will attempt to claim more "independent contractors" than they actually have. In an audit situation IRS will look at the facts and what work was done and ignore contracts or other "understandings."
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