paying crew on
a 1099 basis,
you can not afford
to be ignorant of
the new IRS employee
guidelines for the
We can protect you
from making a costly
mistake by serving
as the "paymaster"
for your crew.
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WE CAN PROTECT YOU FROM THE IRSIndependent producers, production companies, and even cameramen are finding that their freelance crew, though once-considered independent contractors, are now more likely to be classified as freelance employees under recently revised IRS employee guidelines. To make you more aware of some of the issues regarding the hiring of film/video freelancers, its potentially devastating affect on your business, and how we can protect you from the costly error of misclassifying a freelancer, we have attempted to summarize here some highlights of the new IRS guidelines and their possible implications for your business. To review the following topics, simply scroll down this page.
THE NEW IRS EMPLOYEE GUIDELINESAfter reviewing the employment practices of the film/video production industry, the IRS revised their employee guidelines for the industry in 1994. Under the new guidelines, many crew positions that were previously classified as independent contractors are now classified as freelance employees - requiring the witholding of and contributing to payroll taxes. Here are some highlights of the revised I.R.S. guidelines.
Category One workers are responsible for overall planning and implementation of the film or video production and are likely to be independent contractors (writers, producers, directors).
Category Two workers have jobs involving planning, design, or implementation of specific aspects of the production and which involve problem solving and technical skills. (i.e. cameramen/women, sound tech, scenic artist, production designer, lighting director, gaffer, and key grip.) They can be either independent contractors or employees, depending on a variety of factors.
Category Three workers are likely to be employees because they usually have little or no control of the production or significant aspects of it (camera operators, dolly grips, electrics, grips, production assistants)
WHAT'S AT STAKE:If an employer is found in error of employee-classification guidelines, they may be required to do the following:
HOW YOU ARE LIKELY TO GET CAUGHTSecond, the greatest chance of exposure comes in workmen's compensation claims. That a film/video freelancer was illegally hired on a 1099 basis, comes out quite often in a personal injury claim when he or she is injured on a job. Accidents do happen - that is why the state workmen's compensation bureau has given the film/video industry one of the highest premium rates ($3.40 per $100 of payroll). If it comes out in a personal injury claim, that you illegally hired a film/video freelancer on a 1099 basis, not only will you have to retroactively pay workmen's compensation premiums, as well as severe penalties; but, you will also have to retroactively pay back taxes (employer & employee portions) for that and all other freelance employees hired, in addition to interest and penalties. This assessment could amount to approximately 43% of the wages you have paid to freelancers. For this reason, it is important to solicit certificates of insurance from all freelancers, even the independent contractors, to document that they are covered.
APPLYING THE IRS INDEPENDENT CONTRACTOR TESTThe common law test for worker classification that the IRS uses is difficult to apply. To help you to begin to determine the status of the Category Two and Three workers you hire, we have established this link to a web resource with a series of questions that will determine the proper classification. Ask yourself these questions about the individual you hire in each of the crew capacities listed below. You will almost certainly find a number of freelance workers who are employees rather than independent contractors. If you are presently paying these individuals on a 1099 basis, then you are most certainly in violation of Federal and State labor laws. Though it may not have caught up to you yet, how likely is it that you can avoid an audit given IASTE 481's recently declared policy of reporting all production entities issuing 1099's to freelancers, and the IRS's policy of aggressively prosecuting payroll tax violaters.
After you have applied the test to the crew positions listed below, return to us (by pressing "back"
on the upper left of your screen) and we will explain the ramifications of hiring freelance
employees, and how we can protect you from the costly mistake of misclassifying these workers as
HOW TO PROTECT YOURSELF AND YOUR BUSINESSIt is easy to misclassify a freelance employee, since you can not always go by their personal assurance that they are, in fact, an independent contractor. According to the IRS guidelines, that individual must meet certain legal requirements to obtain independent contractor status. If they are willfully, or unknowingly, negligent in meeting the IRS's requirements, the burden falls on you. To avoid misclassifying a film/video freelancer, you can either:
Option A) continue to use a centralized crew booking service, for crew referral and availability. But then ask a series of detailed questions, and solicit the necessary documentation, of the freelancers, to determine their proper classification. As always, you will need to book the production tools they will use from an equipment rental house - which only further establishes their employee status. When the shoot is over, you will then need to make the proper payments for employees vs. true independent contractors. For the freelance employees you hired, you must pay and do the following, in addition to paying their freelance rate:
Option B) hire, with just one phone call, a bonafide independent contractor, like ScreenLight & Grip. We can provide all the crew services listed above, or serve as the "employer of record" for your crew. We can also provide most of the production tools needed to accomplish the job. You get one invoice and write only one check to an incorporated business, not an individual. As the employer of record for the crew, we provide all the necessary insurance and make all the necessary payroll tax payments. But more importantly, you don't take the risk of possibly misclassifying a freelance employee as an independent contractor with devastating financial consequences.
HOW WE PROTECT YOU FROM IRS PROSECUTIONWe offer you protection from IRS prosecution, because Screenlight and Grip meets the common law definition used by the IRS of an independent contractor. Unlike, some grip truck owner/operators, who are sole proprietors operating under a business name (i.e. dba's), we have been incorporated in the state of Massachusetts since 1991 as ScreenLight Productions Inc. In response to the test questions, we can answer unequivocally yes to the independent contractor qualifications:
Yes, we accept responsibility for our own expenses.
Yes, we provide the tools and/or materials needed for the job.
Yes, we assume the potential to realize profits or losses from our business.
Yes, we have worked for more than 1 firm in the past 12 months.
Yes, we make our services available to the general public.
Yes, we have the freedom to hire, supervise, and fire employees in our own name.
Yes, we have a separate place of business in which to perform the service.
Yes, we require the individual to perform his services at a place we designate.
Yes, we establish a specific sequence or order for that crew member to follow in the performance of the job.
Yes, we pay for their services based on time.
Yes, we provide the detailed instructions as to how the work is to be done.
Yes, we provide the crew with the training related to the performance of the function.
Yes, we require the personal service of the individual crew member in question.
Yes, we establish or maintain a continuing relationship with the individual crew member.
Yes, we require the individual crew member to follow set hours of work.
Yes, we have the right to discharge the worker at will with no liability.
OUR CLIENT CONTRACT IS ADDED PROTECTIONFinally, we can offer you added protection with our "client service agreement". Our client agreement lays out in simple legal terminology the standard expectations, controls, and results of an independent contractor/client engagement. It offers you protection, because it not only specifies copyright terms and confidentiality of client information; but, more importantly, it is a formal service contract that satisfies the IRS's requirements of a client/independent contractor engagement; and firmly establishes us as the employer of record for the crew for payroll tax purposes. Signing of the service agreement, and prepayment of the crew payroll, union benefits, and paymaster service fee are the requirements of our serving as paymaster for the crew.To review our "client service agreement" click here. (To return to this page, press the back button at the top left of your browser window when you are done.)
Of course, you may not want to use our "client agreement" to contract our services - the choice is yours. Our services are not contingent upon your signing our client agreement. And, it goes without saying, that we do not have to crew your job for you to rent equipment. We are always happy to provide you with just equipment, or a grip truck - delivered to your location by a ScreenLight & Grip employee who is an experienced film technician and can serve in a number of crew capacities. You can continue to crew your shoots; and, if you like, we can simply serve as the "employer of record" for your crew with our paymaster service. Crewing is just an additional service we offer for your added protection.
YOU CAN USE THE SAME CREATIVE TEAM AS ALWAYSContracting us need not significantly alter the creative team you work with. If you are a producer, or production company, and have a particular cameraperson you like to use (or are a cameraperson and have a particular gaffer or key grip you use), but their independent contractor status is questionable, we can serve as the employer of record and process that individual through our payroll. The benefit to that individual is significant. Not only will their tax liability be reduced by our contribution to Social Security and Medicaid taxes, but they will also be covered under our workmen's compensation and unemployment insurance coverage. In the end, it will cost you no more than if you hired that individual as a freelance employee - but without the payroll headache and risk to you. Our paymaster service offers you the same protection as if we provided the crew ourselves.
FOR MORE DETAILED INFORMATIONSince the new IRS guidelines run 49 pages, summarizing them here only scratches the surface. The printed document and an explanatory companion booklet are available from ITVA (who worked with the IRS to develop them) for a small charge. The order form is available at http//www.ITVA.org. We recommend you get a copy for yourself, your financial adviser, and your attorney. For more details on how we can protect you on your next production, give us a call at 781-899-3633.