Remodeling | Finance, Contractors, Business: Answering the sub-vs.-employee question has always required a judgment call, and until recently the determining factors have involved the amount of control a contractor had over the sub and that amount of control a contractor had over his own decisions. But recently, the administrator of the Wage and Hour Division in the U.S. Department of Labor issued a memorandum that analysts say puts more emphasis on the sub’s economic independence. In essence, the more that subcontractor relies on you for his living, the harder it will be for you to prove he’s independent.
Meanwhile, the IRS is increasing its audits of contractors with 1099 classifications in its crosshairs. Protect yourself now!
4 comments:
While this article initially seems to be a simple guide to legally hiring a subcontractor, (something requiring a deceptively large amount of legal legwork), the fact that this article is on the PTM blog says a bit more about this process and the entertainment industry than the article itself.
Behind the scenes of every movie, concert, convention, theater performance, media installation, performance art piece, large-scale event requiring mics/lights/documentation, or rave, there is a tech or group of techs making the magic happen. These men and women are as diverse as the events they help orchestrate, and the ways they get paid are just one way to classify these differences. There are your 1099 subcontractors, your union workers, your union over-hire workers, your run of the mill hourly workers, your rare salaried worker, your interns and volunteers, students on work-study, and more. Often, two or more kinds of labor will be present at a venue. At my high school, the students were simply minimum wage hourly workers, my TD was salaried, and specialized labor, like lighting designers and rigging professionals, would be brought in as 1099 contractors.
My question, then, is why employers treat all techs like cutouts from the same mold. Techs are not simply useful labor to be abused until the job is done, nor are they able to be held equivalent to other workers, with more conventional schedules and different processes.
I have no clue where I was going with this comment, but it went somewhere, and i hope you enjoyed the ride.
After the taxes guy came to speak with us a few weeks ago in Professional Prep, I do have more of a solid opinion on the pros and cons of being a 1099 worker. Before I came to Grad school I worked about 1/2 1099 and 1/2 W2, I assure you that my accountant liked the W2’s, even though I would span a few states every year, but the more that i learn about it, I will now push to be a W2 worker, unless its for small projects I know I will be able to off set by write offs. Greece has for years now, been in a really bad financial place and while no one actually likes taxes, the fact that 80% of the bailout could have been subsidized by people actually paying their taxes, you wonder why the people of Greece haven’t gotten the message yet. Book keeping is often irritating and time consuming and I’m not under some guise that countries keep ‘accurate’ books, but Greece obviously took it to far.
At this point I've read and heard quite a bit about being a 1099 vs W2 worker, and I think that the distinction between the two is actually quite clear, and that there simply are a lot of people who talk about it like it's this great big mystifying mystery simply because they want to keep paying should-be-employees as independent contractors. This article outlines the criteria quite clearly, and going through your files to make sure that you can back up each independent contractor you have in your roster is probably a good idea. Obviously we know that this is huge in theater, and realistically designers are the only ones who should be paid as 1099 workers. Barring a few exceptions such as consultants or other, everyone else who works for a theater falls very much under the criteria of a W2 employee. It's definitely hard for those of us starting out, to negotiate for a W2 contract if your employer wants to pay you as a 1099 worker, because having the job at all is great.
At this point, it's a little mindblowing to me that there is still such confusion about who is and is not classified as an independent contractor. Maybe it's because in the past it was harder for the IRS to verify what sort of work people were actually doing on the job, so it was easier to "justify" someone's 1099 status, but regardless, it's frustrating how independent contractor became synonymous with "people we hire semi-regularly but don't want to pay taxes on."
I was mis-classified as a 1099 subcontractor this summer, because all of my intern-paperwork was handled by the Director of Education rather than a General Manager or Production Manager, and she thought we most closely resembled teaching artists... I didn't speak up for myself until my last couple of weeks there, because I figured it was a choice the organization as a whole had made, but when I ultimately mentioned it to my boss while talking about something else, he was pretty angry about how the whole thing went down.
I tell this story to encourage people to speak up if you think you're being misclassified. Most people don't want to take the huge financial risk of owing years of back-taxes with interest on every subcontractor they've ever hired, and so they're usually more than happy to work with you. Don't let yourself take on the liability of being self-employed if you don't have to!
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