I am planning a shoot in late January for which I am going to be hiring a couple of freelancers. It is my first real experience with hiring talent, so I am a little lost. I am doing this as an individual, not as a company, so I don't know don't know what my obligations are in terms of collecting and filing tax documents on the workers' pay. Complicating matters, one of the workers does not reside in the USA, so I'm not sure what he would even be able to do with say, a 1099. I am tempted to simply pay people under the table, but am worried about spending so much on a project without being able to write it off as a business expense.
I am sorry if I am asking too basic of questions, but I tried searching the forums for topics on this subject and couldn't find anything, so I figured I would need to ask directly.
Please, any guidance you can share would be appreciated. Thank you.
simple answer -
pay them under the table, no one will know any better.
you can write off anything you want - but if you get audited, and don't have W9 forms from them, you will be screwed.
If one of these guys asks for unemployment (unemployment ? I only hired him for one damn day !!!) - just wait, you will be screwed. You will get a full audit from the IRS.
Could you get lucky - sure you could. Keep doing this, and you will be screwed. I could bore you with my not collecting sales tax for over 10 years (after all, I don't sell anything, you need a connector, I give you a connector that costs me 3 bucks, and you give me the 3 bucks back) - guess what - that is ILLEGAL, not without the proper paperwork for resale, and I almost got seriously screwed by the Florida Department of Revenue. And it was only caught because a client of mine got a full audit.
Let me put it simply - you could literally kill someone, and you might get away with it. Try to screw the government of their taxes, and you will be in big trouble. Play by the rules.
Rescue 1, Inc.
You use the two words: Freelancers and then Talent. Which is it? Freelancers imply crew, Talent implies actors.
So if it's freelancers, it helps if you hire techs who are incorporated. Many older, successful freelancers are incorporated and they are (in theory) responsible for their own taxes. I would write them a check with the understanding they are an Independent Contractor. They can sign a one page IC agreement. If you pay them less than $600 in a calendar year, you don't need to send in a 1099 form to the IRS. If you do pay them over $600 each and they are unincorporated, don't pay them until they have supplied their social security number. It's hard to track people down a year later and you'll need it for the 1099. Even if you do pay them each over $600 and you don't send in the 1099 form, nothing much will probably happen anyway. If you pay in cash, in theory you can't write it off.
So in sum, if you hire and pay established freelancers who have been doing it a while, there should be nothing to worry about, especially if they are incorporated and also sign an IC agreement, which isn't worth much but if you do get audited you can wave that around.
If they are actors, those types are known to apply for unemployment when gigs are completed and then if they put you down as their last "employer", ouch. I have had that happen, so if you are meaning that you will be hiring actors there's different ways to handle that. My first major producing project of my career, the two top talent did that to me. I learned. But crew, I wouldn't worry about.
Lastly, if it's a semi dangerous gig, where someone can get hurt or a light can fall on someone's head, etc., you are responsible so you best be insured. Being incorporated yourself helps because if something bad happens, and I have a couple of dozen stories, their bull dog lawyer can go after your personal assets, which is why most pros are incorporated and producers have insurance.
Ned made some very good points about insurance and protecting yourself.
You are not the first person to have this problem, and that's why if you go thru a search of your state or local film office's resource guide, you can find dedicated production accounting services that will handle your payroll and other paperwork and guarantee you're "legal" in every aspect of HR and payments, insurance, permits, clearances, government paperwork, etc. Of course, they charge for the service. If you think they are unaffordable, consider the worst-case scenario. Expenses like these are what separate the real Business people from the quasi-pros, who play Russian Roulette with compliance, hoping the odds never flip bad... and are one reason the Pros cost more. Even at your small-scale "beginner" level, you could at least drop a hundred bucks on an accountant firm to consult with. It's not an expense, it's an investment in success.
For "talent" the people who handle your payroll and pay taxes, etc. are call Paymasters. Last I recall, they charge about 30% over the amount being paid out. On bigger jobs it's worth the money.
Thanx to Mark because I was unaware that there are production accounting services who do the same thing for crew.
They are freelancers, not employees. They invoice, you pay, they are responsible for their own taxes.
Media Production Services
Winnipeg, Manitoba, Canada
No Scott. In the US the IRS rules. Even though we consider them to be "freelancers" the IRS has a checklist of 20+ items that they consider to be employees and in most cases, if you're audited, they will be considered employees and then you owe back taxes:
For instance, if you tell them what time to show up, if they use any of your gear, if they charge overtime, if you are supervising them, etc. BAM! They are then classified as an employee. It has never, thank God, happened to me, but as a freelancer myself I have heard many stories over the years from producers and production companies being fined. So what you call that person is totally irrelevant in the eyes of the IRS.