Independent Contractor or Employee - Entertainment Tax Tips
The tax law covering independent contractors is very complicated. Before you can determine
how to treat payments you make for services, you must first know the business relationship
that exists between you and the person performing the services. In determining whether the
person providing service is an employee or an independent contractor, all information that
provides evidence of the degree of control and independence must be considered.
It is critical that you, the employer, correctly determine whether the individuals providing
services are employees or independent contractors. Generally, you must withhold income
taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on
wages paid to an employee. You do not generally have to withhold or pay any taxes on
payments to independent contractors.
If you incorrectly classify an employee as an independent contractor, you can be held
liable for employment taxes for that worker plus a penalty.
Who is An Independent Contractor?
A general rule is that you, the payer, have the right to control or direct only the result of the
work done by an independent contractor and not the means and methods of accomplishing
Steven Smith wrote a screenplay that has been acquired to make a movie. He sold it to XYZ
Film Productions to make a film. The work he's done has been completed independent of the
motion picture production with no instructions from XYZ. Steve is considered to be an
independent contractor. He is required to pay Federal and state taxes, and receives no
benefits from XYZ Film Productions. XYZ will file a Form 1099-MISC (PDF).
Photographers' models who worked through booking agents, had no continuing relationship
with any particular photographer, charged hourly rates, typically furnished their own make-up
and wardrobe, and "used their own initiative, ability, and experience in interpreting the roles
assigned to them," are not employees of the photographers, despite taking directions, etc.,
Who is An Employee?
A general rule is that anyone who performs services for you is your employee if you can
control what will be done and how it will be done.
Jack Jones, a staff writer for XYZ Film Productions has been instructed to perform
modifications to the screenplay that has been acquired from Steven Smith. Because Jack
Jones is receiving direction from XYZ Film Productions, he is an employee. Jack also
receives benefits from XYZ. XYZ is required to file a W-2 for Jack Jones.
An actor or actress who provides his or her own costume, delivers a few lines from a
script, and took technical instructions from the producer is considered an employee;
an announcer who took technical instruction from the producer and advice from the
client is also an employee.
Models who performed services under the agency's name, were not permitted to do free
lance modeling, were graduates of the agency's modeling school, and in general functioned
only through the agency, are employees of the agency.
For additional information on how to determine whether an individual providing services is an
independent contractor or an employee, see Publication 15-A, Employer's Supplemental Tax
Still Not Sure?
Employers and workers may file Form SS-8 (PDF) to request a determination of the status
of a worker for purposes of Federal employment taxes and income tax withholding.
If you need the IRS to determine whether a worker (or class of workers) is an employee, file
Form SS-8. This process takes approximately 120 days.
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