In the eyes of the IRS your crew member might not be considered an independent contractor (IC), but rather your employee. A better way to determine how to properly classify a worker, is to consider these three categories: Behavioral Control, Financial Control and Relationship of the Parties. However, things are getting trickier as individual states are starting to govern what they define as an Independent Contractor and who should be an Employee, and the Production Industry has taken notice.
Always get things in writing before booking. Make sure you have a clear understanding of your terms for hiring before work is performed. At The Crew Company, we make sure contracts are in place before any work is performed. We only work with IC’s.
Define Your Worker: The IRS Rule
Independent Contractors vs. Employees
Employee – Required to comply with when, where, and how to work
Independent Contractor – Sets own hours, determines own sequence of work.
Employee – Works exclusively for the employer
Independent Contractor – Can work for multiple clients; his or her services are contracted by job
Employee – Hired by the employer
Independent Contractor – Self-employed
Employee – Subject to dismissal, can quit at will
Independent Contractor – A contract governs when the relationship ends
Employee – Has a continuing relationship with the employer
Independent Contractor – Works by the job, by contract
Employee – Does all work personally
Independent Contractor – Permitted to employ assistants
Employee – Performs services under the company’s name
Independent Contractor – Performs services under their own business name
Employee – Paid a salary, reimbursed for expenses & fringe benefits (W-2 for taxes)
Independent Contractor – Payment by the job by Invoice (1099 for self-employment taxes)
Employee – Is furnished tools, equipment, materials and training
Independent Contractor – Furnishes own tools, equipment, and training.
RISKY BUSINESS: THE NEW RULES
The states of CA, MA and NJ recently enacted the “ABC Test” to determine whether an employer can legally classify a worker as an independent contractor, considering that most below the line positions would not pass this test, it is important to ensure that you know where your production stands.
Under the ABC test, a worker is only an independent contractor if they meet all three parts of the test: