How to pay freelancers?

A

aalleexx

Veteran
I am in texas guys and have a quick question, I am the sole proprietor of my own company and have a project coming up that will require to hire or subcontract a director of photography, gaffer, grips etc. I plan to pay with my own company checks, what do I need from them to make this legal at tax time, I just want to protect my behind but I've never subcontracted before so I am wondering what I need to have them sign or what form to use

thanks!!!!
 
You will have to give them a 1099 tax form if you pay them over $1000 in one year. Make sure you have a contract with them that outlines all services they are to perform and for the amount you agree on.
 
Better have a chat with your accountant. You don't have completely free rein to designate someone an independent contractor versus an employee simply on your or their preferences. You wouldn't want to find out later that legally they were employees and you should have withheld taxes, made workmen's comp and unemployment insurance payments, issued W2 instead of 1099, etc. Finding out those little details after the fact can get expensive.
 
First it's workers comp, has been for some time. Not workmen's comp.

Second, it's $600 per year, not $1,000. If it's $600 per year or higher, you must 1099 them.

Third, your results may vary, I would ask an accountant. I've spoken to two now, mine advises me to 1099 even grips and gaffers, even if the State of California says I should call them employees, for something like a 4 hour job or an 8 hour job, someone who doesn't work with you regularly, essentially a daily person, my accountant who is part of a large accounting firm said, no, do not treat as employees. 1099 them all. I'm sure there are a lot of people here, maybe even 95%, who would disagree. You should not do this if you are that worried about it. I personally am not worried about it, because I pay above minimum wage and the odds that any of these people will somehow "come after" me for paying them in cash, not going to happen. Most people prefer it.

But I won't engage in that debate again. I'm well aware of the gray area there, and I think if you really want to be safe you probably should treat most people as employees, just for safety's sake. I can confidently tell you that 99% of small production companies DO NOT do that, and I can also say based on numerous and lengthy conversations with other producers, unit production managers, etc., that most of them agree to 1099 anyone who is on a film shoot. Does that make it actually correct just because we all do it? No, not really, and as everyone always says ask your own professional. But I did ask mine, and I raised these concerns repeatedly, and both of them in a conference call said no, absolutely do not treat as employees, it is not worth the paperwork and the added expense, it is not necessary, and ultimately is unjustified. Treat them as contractors.

So based on my information, I'm comfortable 1099-ing everyone, and if for some reason that's a problem down the road I have a corporate accountant, I have taken that professional advise, and we'll deal with it from there. I'm not, however, worried, and don't think anyone else should be either. These are people who work numerous, numerous sets per year, they are not your employees, they are hired contractors for all intents and purposes. Gray or not, it makes no logical sense to call someone you hire for a single day, who has other jobs, an employee. It just doesn't.
 
this is great info thanks so much, how do I go about someone that is getting paid 500 for work plus 200 travel expense that puts them above the 600 cap but 500 is for work, and the 200 is travel expense
 
JonathanLB said:
First it's workers comp, has been for some time. Not workmen's comp.

...
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Depends on where you are ... for instance, here in Ontario the actual legal title is Workplace Safety Insurance Board coverage. I say tomato, you say tomahto ... :) The point is one should know whether they're required by law to pay into it, whatever it's called in your locale.
 
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Jonathan, only one person is getting paid above 600 in total including expenses, I guess this is the only person that would need a 1099 yes?
 
Yes it's annually. So I had several people who fell under this last year, I paid a makeup artist $525 for one project and $150 for another, so combined was above $600. You have to be careful to track that sort of thing, so you don't see pay stubs for checks and go, "Hmm, nothing here above $600, yay!" Rather, you have to make sure the total is less than $600.

IF you want to be really safe, and many large companies do this, you 1099 absolutely everyone, no matter amount. That's being really safe. I just don't care enough to bother with that. I mean I'm reporting my full expenses and income, and the law says below $600 no reporting needed, so I figure save myself paperwork...
 
I am still going to consult with my accountant but I am just trying to get a feel before I head down to see her, I am adding 150 dollars to the rate which accounts for the DP expenses, I take it that expenses added to the rate count as inclome? there is no need to give two checks, one for the rate and one for the travel expense correct?
 
As a side note, please pay your crew quickly. I do a Net 30 but pay much faster than that. I hate when companies do 90 days or later. In this economy, people need their money now. By paying quickly, you get a good reputation and people will be much more inclined to work for you in the future.
 
aalleexx said:
ohh that was not even a issue, I am planning to pay 100% on the spot as soon as we wrap.
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Exactly, what the heck, who would accept payment 30 days later? That's absurd. Someone tried to pay me that way with equipment and I was like ok this is the business world, in the real world, you don't get equipment without paying first. If you don't want to pay me, no problem, use a credit card, then you can pay them back later if you feel like it ;)
 
JonathanLB said:
Exactly, what the heck, who would accept payment 30 days later? That's absurd. Someone tried to pay me that way with equipment and I was like ok this is the business world, in the real world, you don't get equipment without paying first. If you don't want to pay me, no problem, use a credit card, then you can pay them back later if you feel like it ;)
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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.
 
here is another thing that is bothering me, since I have always delt with budgets around the 5-10k area and they are for my services only, what do you do when you have a budget of say 50k and even after you budget the whole shoot down to the T and when everything is set and done you have a couple of hundred dollars left over, how do you legally give that money back to the client? what form do you use
 
To be totally legit and safe, bare minimum:

W-9
I-9 and a look at the required ID
Copy of their business license
Signed subcontractor/vendor agreement
Proof of their Workmans Comp insurance coverage
A copy of their drivers license front and back

If they'll drive any form of production vehicle or their vehicle for any form of production other than their own arrival / departure you'll want a proof of valid automobile insurance.
If they ARE using your or their vehicle for some form of production related work, you'd be wise to make sure you have the insurance to cover them, their vehicle and anything / anyone they hurt or damage with it. We have our insurer run a DL check as well to make sure their license is still valid and they're not a habitually bad driver.

As the "employer" or "client" you'll always be held to the highest level of responsibility with regards to the IRS and state taxes, workmans comp, injury, damages and insurance. Even as freelancers they'll be considered "acting as an agent" on your behalf.

You risk everything and then some when you hire someone else so protect yourself.

The contracts I sign as a Steadicam Operator for Disney, MTV Networks, Scripps, HBO, NBC/Universal, Sony Pictures, NFL Network, feature films and other companies are staggering. Some as long as 46 pages, plus the normal W9 stuff. They do this for a reason whether we all like it or not and that is to protect THEIR interests.

No matter what the size and scope of your services / projects are, YOU are the risk management department, YOU are the legal department and you have to treat every client and every vendor as if they could one day under some circumstance be your worst nightmare or at least their lawyer could be.

They get hurt on your job, can't work, no insurance... some Personal Injury attorney is coming after you and your assets because Johnny can't work anymore.

They fail to pay their taxes... lie and say you were going to do it... you've got no proof unless they've signed an agreement AND they 100% fall under the IRS's rules as to what considers them a vendor rather than employee. Guess who gets stuck paying their witholding? YOU!

As soon as you hire someone else, they become your responsibility and even if you've done all the above, some scumbag lawyer will sue you and you'll spend tens of thousands defending yourself, plus your time and hassle.

January 2nd marked the 30th anniversary of my production company and I've seen all the above and then some! Don't slack on this; and don't think being "incorporated" protects you since even the slightest mingling of personal business with your corp will allow a savvy lawyer to pierce the corporate veil and come after you and your assets.

Not bitter... just experienced!

Robert Starling, SOC
 
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



robstar1 said:
To be totally legit and safe, bare minimum:

W-9
I-9 and a look at the required ID
Copy of their business license
Signed subcontractor/vendor agreement
Proof of their Workmans Comp insurance coverage
A copy of their drivers license front and back

If they'll drive any form of production vehicle or their vehicle for any form of production other than their own arrival / departure you'll want a proof of valid automobile insurance.
If they ARE using your or their vehicle for some form of production related work, you'd be wise to make sure you have the insurance to cover them, their vehicle and anything / anyone they hurt or damage with it. We have our insurer run a DL check as well to make sure their license is still valid and they're not a habitually bad driver.

As the "employer" or "client" you'll always be held to the highest level of responsibility with regards to the IRS and state taxes, workmans comp, injury, damages and insurance. Even as freelancers they'll be considered "acting as an agent" on your behalf.

You risk everything and then some when you hire someone else so protect yourself.

The contracts I sign as a Steadicam Operator for Disney, MTV Networks, Scripps, HBO, NBC/Universal, Sony Pictures, NFL Network, feature films and other companies are staggering. Some as long as 46 pages, plus the normal W9 stuff. They do this for a reason whether we all like it or not and that is to protect THEIR interests.

No matter what the size and scope of your services / projects are, YOU are the risk management department, YOU are the legal department and you have to treat every client and every vendor as if they could one day under some circumstance be your worst nightmare or at least their lawyer could be.

They get hurt on your job, can't work, no insurance... some Personal Injury attorney is coming after you and your assets because Johnny can't work anymore.

They fail to pay their taxes... lie and say you were going to do it... you've got no proof unless they've signed an agreement AND they 100% fall under the IRS's rules as to what considers them a vendor rather than employee. Guess who gets stuck paying their witholding? YOU!

As soon as you hire someone else, they become your responsibility and even if you've done all the above, some scumbag lawyer will sue you and you'll spend tens of thousands defending yourself, plus your time and hassle.

January 2nd marked the 30th anniversary of my production company and I've seen all the above and then some! Don't slack on this; and don't think being "incorporated" protects you since even the slightest mingling of personal business with your corp will allow a savvy lawyer to pierce the corporate veil and come after you and your assets.

Not bitter... just experienced!

Robert Starling, SOC
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