Employee or Independent Contractor?

Most State's Workers Compensation laws require that if you hire an uninsured Independent Contractor, you must provide Workers Compensation benefits. The method of payment, i.e. 1099 versus W-2, does NOT matter in determining insurance benefits under the law.
If you hire an uninsured company, you must provide insurance for anyone they hire. If you hire an uninsured individual, you must provide insurance for the individual or anyone this individual hires.

For the most part, all crew qualify for Workers Compensation, and this should be taken in consideration when preparing your budget for insurance costs. There are some exceptions, i.e. such as set construction that may take place at the contractor’s premises or film location where a producer provides the specifications and the contractors are working unsupervised by the producer to build the set.

It is safe to assume that you will have to provide Workers Compensation for all your production personnel. Remember, it does not matter how you pay your production personnel, as the legal statute will always prevail.

If you are not sure about a specific State's requirements, you can contact the State's Workers Compensation Board.

 

The Internal Revenue Service

These are the 20 criteria used by the Internal Revenue Service to determine whether an individual should be treated as an Employee or an Independent Contractor. On the checklist below, affirmatives indicate Employee status, and negatives indicate Independent Contractor status. The IRS may not agree with evaluations based on this checklist. It may give overriding weight to one or two factors, tipping its evaluation in one direction.

This checklist will only give an indication of how the IRS would evaluate a situation. Before making a final determination, you should consult your accountant

  • The individual must comply with instructions as to when and how work is performed.
  • The individual is trained to perform the work in a particular method or manner.
  • The individual's services are integrated into the operations of the employer's business.
  • The individual must render the services personally.
  • The employer hires, supervises and/or pays the individual's assistants.
  • There is a continuing relationship between the individual and the employer.
  • The hours of work are set by the employer.
  • The employer directs the order in which the work must be done.
  • The individual is required to devote full time to the employer.
  • The work is performed at the employer's place of business.
  • Regular oral or written reports are required.
  • Hourly, daily or weekly compensation is paid.
  • Business or travel expenses are reimbursed.
  • The employer furnishes tools and materials used in providing the service.
  • The individual has no significant investment in the facilities used.
  • The individual can realize only a profit.
  • The individual is restricted from working for other firms at the same time.
  • The individual is restricted from making services available to the general public.
  • The individual is protected from dismissal for reasons other than breach of contract.
  • If the individual terminates the relationship before a job is completed, he or she is liable.

This checklist may or may not be complete. You must check with the IRS or your own accountant or tax attorney.

THE DEFINITION OF AN INDEPENDENT CONTRACTOR UNDER WORKERS COMPENSATION STATUTES IS NOT THE SAME AS THE TAX REGULATIONS. DO NOT ASSUME THAT YOU DO NOT HAVE TO COVER PERSONS PAID ON A CONTRACT, 1099, OR CASH BASIS FOR WORKERS COMPENSATION.

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