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Agency Funny Money

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Jason Jenkins
Agency Funny Money
on Oct 15, 2012 at 7:08:17 pm

I recently finished a project through a social media agency for a large corporate client. It's one of those "we can't pay you 'til the client pays us" type of situations. Anyway, I wasn't worried about getting paid, but I just got these emails from a staffing agency stating:

"Atrium Staffing will process payment due to you through our payroll in the form of a paycheck. This means taxes will be withheld at the time of payment and you will receive a W-2 from Atrium at tax time next year, detailing your earned income and withheld taxes for this project.

In order for us to process your payroll, we must on-board you as an employee of Atrium Staffing. Rest assured enrollment is easy – kindly see step-by-step details below..."


What?! Why can't the agency I did the work for just cut me a check like all my other clients do?

Has anybody else run into this?

Jason Jenkins
Flowmotion Media
Video production... with style!

Check out my Mormon.org profile.


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Todd Terry
Re: Agency Funny Money
on Oct 15, 2012 at 7:29:53 pm

Ummmm.... no. That's crap.

You are not nor were not their employee in any way, shape or form. Your company was a contracted vendor.

They should be paying you like anyone else. I'm sure they don't put their paper supplier, landlord, utility company, or any other vendor "on the payroll." I frankly can't even see why they would want to or what advantage to them it would be. I can only see disadvantages, besides it being just plain screwy.

I'd politely decline, and ask for my check.

On the upside if they have to put you on their payroll for some inconceivable reason, then ask "What time do I come in Monday?" When they explain you are not needed as a regular employee, say "No problem... that's fine. What's a good time to pick up my severance check?" :)

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com



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Walter Soyka
Re: Agency Funny Money
on Oct 15, 2012 at 7:53:01 pm

[Todd Terry] "You are not nor were not their employee in any way, shape or form. Your company was a contracted vendor. They should be paying you like anyone else. I'm sure they don't put their paper supplier, landlord, utility company, or any other vendor "on the payroll." I frankly can't even see why they would want to or what advantage to them it would be. I can only see disadvantages, besides it being just plain screwy."

I am not a tax expert or an attorney, so none of this is advice!

A lot of agencies do like to pay freelancers as W2 employees rather than 1099 independent contractors, particularly when said freelancers are working out of the agency's office -- and with good reason. Quoth the IRS (see Independent Contractor Defined [link]): "The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done."

In cases like these, treating freelancers as employees (and deducting payroll taxes) can apparently avoid a dispute during an audit over whether the freelancer was truly an independent contractor and therefore whether the employer should have been liable for payroll tax.

However, if you are doing the work on your own time, in your own space, with your own tools, you could well be properly considered an independent contractor just like the paper supplier.

Personally, I'd find it strange that this did not come up before you began the work.

Walter Soyka
Principal & Designer at Keen Live
Motion Graphics, Widescreen Events, Presentation Design, and Consulting
RenderBreak Blog - What I'm thinking when my workstation's thinking
Creative Cow Forum Host: Live & Stage Events


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Mark Suszko
Re: Agency Funny Money
on Oct 15, 2012 at 8:08:52 pm

Is Atrium acting for the big corporate client, or the social media agency?


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Jason Jenkins
Re: Agency Funny Money
on Oct 15, 2012 at 8:17:37 pm

[Mark Suszko] "Is Atrium acting for the big corporate client, or the social media agency?"

The social media agency.

Jason Jenkins
Flowmotion Media
Video production... with style!

Check out my Mormon.org profile.


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Gregg Jamback
Re: Agency Funny Money
on Oct 15, 2012 at 8:09:15 pm

And hey, they just matched your social security. So they already gave you a raise!


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Jason Jenkins
Re: Agency Funny Money
on Oct 15, 2012 at 8:14:55 pm

[Todd Terry] "ask "What time do I come in Monday?" When they explain you are not needed as a regular employee, say "No problem... that's fine. What's a good time to pick up my severance check?" :)"

Thanks, Todd. That's a great line! Hopefully I won't have to use it :)

Jason Jenkins
Flowmotion Media
Video production... with style!

Check out my Mormon.org profile.


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Mark Suszko
Re: Agency Funny Money
on Oct 15, 2012 at 10:00:39 pm

Yeah, someone at some point decided you were not a contractor. Contractors can get paid faster, usually cash on delivery. They want to earn interest on your paycheck or spend it elsewhere as long as they can, while still getting the product when THEY need it, so they are putting you thru the staff employee payment track. Did you agree to this or know about this when the project started?


"Dear Astria:

We are prepared to deliver the agreed-upon product in person. Delivery Operatives Zelin and Wilson will escort you to your bank of choice, where the exchange of fee for services will be made in good faith. For our records, please declare if you have any pre-existing cardiac conditions or hemophiliac symptoms prior to the exchange. We look forward earnestly to a successful transaction ."


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Richard Herd
Re: Agency Funny Money
on Oct 15, 2012 at 10:58:47 pm

[Jason Jenkins] "What?! Why can't the agency I did the work for just cut me a check like all my other clients do?"

Sounds to me (and what do I know) like the agency didn't have approval from the client to spend money on your fees, but they do have approval for a temp-agency -- probably the approved temp-agency the client already uses, so the social media agency can put your fees on that line item on the really big invoice they will be submitting (end of quarter?).

And you have no leverage because you delivered the work.

I say "take the money and run; live and learn...die and forget it all."


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Rich Rubasch
Re: Agency Funny Money
on Oct 16, 2012 at 12:29:07 am

Are you an S-Corp? As an S-Corp this wouldn't work for me, but I issue a W-9 up front so they see I am an S-Corp. Taxes are handled differently.

Rich Rubasch
Tilt Media Inc.
Video Production, Post, Studio Sound Stage
Founder/President/Editor/Designer/Animator
http://www.tiltmedia.com


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Ron Gerber
Re: Agency Funny Money
on Oct 16, 2012 at 3:38:41 pm

I work for a large corporation and we started having our freelancers register with temp agencies a few years ago. Basically they are outsourcing payroll and shielding their liability. They should have let you know before the job not at the end. You could make a big stink and they would have to pay you directly but if it's a good client, it might not be worth damaging the relationship.


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Richard Herd
Re: Agency Funny Money
on Oct 16, 2012 at 5:06:22 pm

[Rich Rubasch] "I issue a W-9 up front "

That's a good idea. http://www.irs.gov/pub/irs-pdf/fw9.pdf


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Ned Miller
Re: Agency Funny Money
on Oct 17, 2012 at 2:03:53 am

I have been freelance 30 years and run into this once or twice a year, usually from agencies. The first question I have is are you incorporated? If so, then just call their AP department and then there should be No Problem, but you will have to prove you are incorporated so therefore you can't be an employee.

But what's at play here are two things:

1) They don't want to be what's designated as the "Employer of Record" which means that if you are a sole proprietor and were injured on the job they aren't responsible, the staffing service is.

2) States are desperate for tax revenue, they HATE the designation "Freelance" because they can't collect the maximum amount of taxes. By using a payroll service your client isn't designated the Employer of Record so by using the payroll service they protect themselves from the IRS and their state coming after them.

However, the BS about "we can't pay you until we get paid", well, they should have mentioned that upfront. I will usually give a small producer or struggling production company or agency slack if I don't need the money. I like to be known as "flexible". But if they go past 60 or 90 then I go up a DefCon level. If I see Lexuses or BMWs in the parking lot the gloves are off. Even though the end client is large, if your immediate client is small they will often have such tight cash flow they can't pay you until they get paid, but they should have told you up front.

Ned Miller
Chicago Videographer
http://www.nedmiller.com
www,bizvideo.com


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