How to pay freelancers?

kgimedia said:
Actually the business world is what he was talking about and it is extremely common. Now I no what your talking about as I have learned to try and get money day of at least. That being said most companies in the real world work on NET 30 or sometimes even more. Under the understanding that they are legit and they will pay.
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Yes, that may be true for contract work, that is not, however, true of equipment. You will not rent equipment ANYWHERE without full payment upfront and a credit card on hold with the amount of your deductible. That's how it works. You don't borrow equipment and say lolomg i'll pay u guyz back later lawls. No, it doesn't work that way, this is the real world. No cash, no equipment.

And I won't deal with any company that doesn't pay upfront, if they're credible they have cash and will pay. I don't do work for free. There is a minimum 50% payment up front for any production work done, and if they only pay 50% upfront I'll be pretty pissed on a larger project, unless it's like 50-25-25.
 
Most of us charge a standard $75/hr consulting fee, sorry :(

haha, j/k, what questions specifically did you want help with?
 
Exactly, what the heck, who would accept payment 30 days later?
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This is not always possible. I agree that paying after Net 30 is silly/lazy/unfair, there are however a lot of groups, like the Gov't, Corporations with Gov't contracts that do not have an internal media dept., the Networks, Ad Agencies, Talent Agencies, etc. that do not. I wish it would change but there is too much supply than demand.
 
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JonathanLB said:
Yes, that may be true for contract work, that is not, however, true of equipment. You will not rent equipment ANYWHERE without full payment upfront and a credit card on hold with the amount of your deductible. That's how it works. You don't borrow equipment and say lolomg i'll pay u guyz back later lawls. No, it doesn't work that way, this is the real world. No cash, no equipment.
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Ok, first off, that IS how it works. Any rental house will give trusted clients 30-45 day terms. I have 2 houses that give me 30 days + a grace period.

JonathanLB said:
And I won't deal with any company that doesn't pay upfront, if they're credible they have cash and will pay. I don't do work for free. There is a minimum 50% payment up front for any production work done, and if they only pay 50% upfront I'll be pretty pissed on a larger project, unless it's like 50-25-25.
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Well, good luck in business then, as it is near impossible to get a network or large corp to pay upfront. MTV/Viacom = 45-50 days, Universal = up to 90, CBS = forever

This business, and all businesses in the US for that matter are built on Lines of credit. Sure, Joe No Name comes to you and says they want you to shoot their kids communion, you get cash up front, but if you told a network you want cash upfront, unless you're in a one-horse town, they are gonna yell NEXT! and call the next company on their list.
 
well I am still going down to see my accountant later on this week but what is really bugging me is to wether have all the freelancers fill a w9 or a 1099? only one person is getting paid more than 600 bucks for that gig including expenses so I donno
 
First off, freelancers dont fill out 1099, employers do. The form that freelancers fill out is a w9, and although you should collect one from everyone who you are paying, you only need to file them with the IRS if you are paying them over 600. Note that if you are paying them under 600, you can still write it off as an expense.

you can get the form here:
http://www.irs.gov/pub/irs-pdf/fw9.pdf

As an example, sometimes, If I know I am only going to do one job for a client, and the bill is around 600, I will just bill them 595 so they dont have to 1099 me, and then its up to you if you want to report it on your taxes or not.
 
thanks for the info but I dont think that really applies to what I am doing because for my taxes that would complicate things since I am getting a check from the client for x amount of dollars, do all the hiring, do the production and then if there is any money not spent, give that money back to the client, and since the big check from the client is going in our business bank account, the IRS i guess is going to expect from me that I have proof of what everyone got paid so I dont get taxed on that, and write it off, does that make sense?

here is a breakdown
I have my own production company
client x hires me to shoot a spot and gives me a check for say 10 bucks :) I take the check and deposit into our business account, I find the freelancers, they come down and do their job, I give them a check for their troubles and their services :)
when tax time comes for my company, I have to explain to the irs where those 10 bucks came from and what they were used for

how would you do it? what IRS forms come to mind?
 
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bro, like I said, if someone is working for under 600 total for the year, you dont report that to your IRS. You can still deduct it from your gross income, just like you can any other business expense, but if you send any 1099 tax forms to the IRS for under 600 you are wasting you time. The IRS really doesn't micromanage as much as you think they do. Just keep good records and everything is fine. Their invoice to you serves as your proof of payment. Here is how it works....

they hire you,

you payroll everything, and write it all off on your taxes.

you ONLY report 1099 info for people who work over 600 for the year, anyone else is just a random expense against your gross income for the year. The money returned to the client is also written off at the end of the year, so it all comes out in the wash.
 
thanks man, hope I didnt upset ya:huh:

NewYorkLion said:
bro, like I said, if someone is working for under 600 total for the year, you dont report that to your IRS. You can still deduct it from your gross income, just like you can any other business expense, but if you send any 1099 tax forms to the IRS for under 600 you are wasting you time. The IRS really doesn't micromanage as much as you think they do. Just keep good records and everything is fine. Their invoice to you serves as your proof of payment. Here is how it works....

they hire you,

you payroll everything, and write it all off on your taxes.

you ONLY report 1099 info for people who work over 600 for the year, anyone else is just a random expense against your gross income for the year. The money returned to the client is also written off at the end of the year, so it all comes out in the wash.
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aalleexx said:
Robert thanks for the insight a lot of good info on there, I take it that whenever you subcontract you dont use a 1099 but rather a W9, which is funny because I have filled out a lot of those maybe hundreds for all the different corporations I have freelanced for...now I am confussed on what do to
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The W-9 is the form the freelancer fills out to claim exemptions (if any) or to claim Exempt if they qualify. They give that form to you for your records.

The 1099 form is the form you send to the freelancer and send a copy to the IRS at the end of the year showing what you paid them. It's the IRS's way of making sure the freelancer is reporting income as opposed to just cashing the check. The IRS lays the responsibility on YOU and if you fail to report their income and the freelancer fails to report it and either one of you get caught, YOU will be the one held responsible if the freelance doesn't cough up. The burden of "proof" that they are a legitimate freelancer versus an employee is totally 100% on you.

If you the IRS determines in fact that the freelance was an employee despite what they may have signed etc., you'll have to pay their withholding, FICA, penalties and the employee's share of their obligation.

Don't di*k around with this employee versus freelancer issue; protect yourself !

Robert Starling
 
NewYorkLion said:
you ONLY report 1099 info for people who work over 600 for the year
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Actually many companies report all income, the $600 is just the IRS's "must file and report" threshold.

Regardless of who we hire, we get complete information and paperwork on everyone, else you find yourself chasing them down at the end of the year. We still only report and send 1099's on $600+ but we still have to keep paperwork that supports their freelance status regardless of how much they are paid.
 
robert so to be on the safe side the best thing to do is to have every freelancer working that day regarless what they are getting paid fill out a W9 and a 1099 ?
 
NewYorkLion said:
Ok, first off, that IS how it works. Any rental house will give trusted clients 30-45 day terms. I have 2 houses that give me 30 days + a grace period.



Well, good luck in business then, as it is near impossible to get a network or large corp to pay upfront. MTV/Viacom = 45-50 days, Universal = up to 90, CBS = forever

This business, and all businesses in the US for that matter are built on Lines of credit. Sure, Joe No Name comes to you and says they want you to shoot their kids communion, you get cash up front, but if you told a network you want cash upfront, unless you're in a one-horse town, they are gonna yell NEXT! and call the next company on their list.
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First off, no, that's not how it works with equipment houses. Yeah, they'll do that for a major client, but they won't do that for most small production companies, like mine, they wouldn't even consider it. There is ONE standard business practice, they do it everywhere, EVS, Birns & Sawyer, Mole Richardson, etc. -- you pay what you owe, and they take a credit card, usually separate from what you paid with, to put a hold for the amount of the insurance deductible. That's just how it works. I don't know where the hell you live but in Los Angeles, THE film city, that's what happens. Of course they don't care about these details with Fox, Warner Bros, etc., but that's the exception. We, the regular people, don't have those exceptions made for us.

Next, of course it's different if you're working with a huge corporation everyone knows about, a household name, and they tell you they will pay you later, but that STILL won't fly for the type of work I do for the most part. I am not going to take pay later, I need 50% upfront, every company does, because I'm not going to FLOAT them cash when it costs me cash upfront. It's not the way you do business. If they're hiring me as a director, sure, they can pay me whenever they reasonably do, that's not an issue. But you want me to use my equipment, hire a crew, finish the project, THEN you'll supposedly pay me down the road? No, I don't think so. I don't have $30,000, $40,000 cash laying around I'm going to take out of some account and spend on a project. The client will pay upfront and that money will go towards making their project. Any business I would work with understands this. Now if I was a larger company with plenty of cash on hand to handle big projects, and hire an attorney to go after non-paying clients, perhaps so. I'll cross that bridge when I get to it. But the work I do, corporate work, there is no way a company has a problem with paying half upfront. They understand this is how you do business.
 
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aalleexx said:
thanks for the info but I dont think that really applies to what I am doing because for my taxes that would complicate things since I am getting a check from the client for x amount of dollars, do all the hiring, do the production and then if there is any money not spent, give that money back to the client, and since the big check from the client is going in our business bank account, the IRS i guess is going to expect from me that I have proof of what everyone got paid so I dont get taxed on that, and write it off, does that make sense?

here is a breakdown
I have my own production company
client x hires me to shoot a spot and gives me a check for say 10 bucks :) I take the check and deposit into our business account, I find the freelancers, they come down and do their job, I give them a check for their troubles and their services :)
when tax time comes for my company, I have to explain to the irs where those 10 bucks came from and what they were used for

how would you do it? what IRS forms come to mind?
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Yup, probably most of us do the same thing, those of us with real businesses anyway not people who are shooters with an LLC. I mean, production company owners.

I charge the client let's say $20,000. I hire a few people and spend money on transportation, editing, expendables, etc., and eventually I've spent $8,000 let's say. Now I am reporting $20,000 of income for this project against $8,000 of tax-deductible expenses. At year's end, then I have a series of projects, each with expenses and each with income. Then additionally I have the company's overall expenses, its overhead, like phone lines, insurance, and equipment storage, plus any equipment I bought (which is deducted over a period of several years) and that kinda stuff. You want to keep really accurate records if you can for everything. I divide my records by project, and keep a wrap book for each one. Then I keep separate company expenses in another area, along with research and promotional expenses (books on film can be written off, as can film festival submission fees, etc.). For each wrap book I scan everything into the computer, W9 forms, I9 forms (you need these along with the W9s, actually, so the previous info on this thread hadn't mentioned that), crew deal memos, cast deal memos if applicable, photo / video / audio release forms for the project if applicable, receipts for money spent, a petty cash log chart, etc. Then I backup that digitally so I have two digital copies of the wrap book info and one printed version. At year's end it's really easy because if I had 10 projects, I have the bottom line for them all -- add up expenses, add up incomes, and it's done totally. Because all of the minor details were already dealt with in each wrap book as the year went along, so it isn't one HUGE ordeal at the start of the next year that swamps you for weeks, haha. Plus it all is fresh in your mind when you do it.

Organization is very important to me. There is a lot that goes into running a corporation, though, some of which is incredibly annoying. Like you should be having an annual meeting, required by law, and keeping track of your "minutes of the meeting," even if you have only yourself. You still have to document those minutes so that if later you get into court for whatever reason, you can prove you conducted your company as a business, and the better documentation you have, the more unlikely it will be that anyone will be able to "pierce the corporate veil" (go after you personally for the actions or debts of your company).
 
aalleexx said:
robert so to be on the safe side the best thing to do is to have every freelancer working that day regarless what they are getting paid fill out a W9 and a 1099 ?
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No, they fill out a W9 form and an I9 form -- the 1099 form YOU fill out, and it's generally due at the end of January or start of February, like this year it was to be mailed to all contractors no later than Monday, February 2.
 
An I9??? that s DHS form not even IRS form :huh:

JonathanLB said:
No, they fill out a W9 form and an I9 form -- the 1099 form YOU fill out, and it's generally due at the end of January or start of February, like this year it was to be mailed to all contractors no later than Monday, February 2.
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