While employee classification errors plague virtually every industry, some are more likely than others to rely on independent contractors. These industries must examine their workers closely to ensure they are classifying them correctly.
In an article published by Broadcast Engineering, Scott Carroll, executive vice president of Take 1 Insurance, urges employers in the entertainment industry to look closely at their contractor relationships. Based on federal and state laws, these individuals may actually be temporary employees.
According to Carroll, rental and staging, tour sound, and satellite uplink vendors have always relied heavily on independent contractors. In the entertainment industry, many people only work while there is a production going on. As a result, it seems obvious that production companies would treat their workers as contractors.
However, Carroll adds, IRS and Department of Labor definitions would disagree. He says that, based on their definitions, most workers in the entertainment industry are temporary employees.
Determining whether an individual is an employee or a contractor means fully understanding their responsibilities and their level of independence. For instance, if the employer controls how their worker performs the job, the worker is probably an employee. Meanwhile, if the employer only controls the end result – but gives the worker freedom to do the job their own way – then the worker is likely a contractor.
Making this determination is not always easy. That is why employers can ask the IRS to do it for them. Form SS-8, Determination of Workers Status for Purposes of Federal Employment Taxes and Income Tax Withholding, allows you to provide the IRS with details about your worker’s responsibilities.
Carroll reminds organizations that state and local governments are watching this issue closely in order to make sure they are collecting all required employment taxes. In addition to federal fines for misclassification, many states have their own penalty structures. In California, where many entertainment businesses operate, fines can be as much as $15,000 (as well as the value of the back wages).
In order to avoid these issues, it may be easier for entertainment industry employers to begin classifying their workers as temporary employees and performing all required tax withholding. This will avoid putting your organization into the government’s crosshairs. After all, paying the taxes is a lot easier than paying the taxes and the fines.
See full article at Broadcast Engineering.