Taxes: A 1099 For Your Gigs Goes
On Schedule C ... But Why A 1099?
Note: This article is reprinted with permission from a recent newsletter of Protalent Software, maker of protalentPERFORMER, “The total career organizer for performers.”
By Mike Campbell
Chuck Sloan Associates
Q: I made over $500 acting last year. I received a 1099 for it. Can I add this into my “regular” job income when I file before April 15? Or do I have to file it separately?
A. Thank you for the question. I have a lot to say on this topic, as you will see.
But the answer to your question is yes, you report this income. Because it was paid on a 1099, this income goes on the Schedule C.
The Schedule C is used to report income or loss from a business you operated or a profession you practiced as a sole proprietor.
You will also deduct only those expenses related to the 1099 income on the Schedule C. When you fill out the Schedule C, use business code 711510 (Independent artists, writers, and performers).
NEED A 1099?
Now let’s talk about situations where an actor should be paid on a 1099. In my opinion there isn't one. Not one. Actors are temporary employees, not independent contractors.
This is from the IRS:
The majority of entertainers and technicians are employees and will receive a Form W-2 with Federal income tax and FICA tax withheld. The extent of control a studio or production company has over an entertainer continues to be the determining factor in classifying an individual as either an employee or an independent contractor.
Independent Contractor (1099 income) The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.
Employee (W-2 income) Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done.
This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.
DEGREES OF CONTROL
Facts that provide evidence of the degree of control and independence fall into three categories:
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor.
There is no magic or set number of factors that makes the worker an employee or an independent contractor, and no one factor stands alone in making this determination.
Also, factors which are relevant in one situation may not be relevant in another.
The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.
UNION VS. NON-UNION
As a union actor performing a job, the union contract specifies that you are an employee (requiring a W-2). The production company must pay payroll taxes.
As a non-union actor, the production company treats you as an independent contractor (requiring a 1099). But you are performing the same job.
In both cases, the production company controls when and where you report for work, when you take breaks, when you eat, and when you are allowed to leave.
WHY A 1099?
The production company even decides whether or not to reimburse your expenses. So why do they pay you on a 1099?
This is why (from the Chuck Sloan and Associates web site):
When you are hired as an employee, the employer is required to withhold taxes for your Federal taxes and 7.5% of your gross earnings (up to a limit) for your Social Security obligation.
What most people don't know is that the employer is also required to match the 7.5% they are withholding from you with another 7.5%.
That's why, when you are self employed, you have to pay the full 15% as you are both the employer AND the employee.
So you know, there are other costs involved for the employer.
For example, when you are hired under a SAG or AFTRA contract, the producer has to pay another 14.3% of your gross salary to the union for Health and Pension. In just these two added costs (14.3% plus the 7.5% Social Security payment) they owe another 21.8%.
Simply put, for every $100 you are to receive in salary, they actually have to pay more than $122 out of their pocket.
That also explains why the person you might be working for is so anxious to have you working under the table or as an independent contractor. They would much rather save the money and force you to lose the 7.5% in Social Security than pay their fair share for what they would normally owe for your services.
They are trying to save money and make you pay their share of the tax bill.
I tell my clients it is up to them to call the IRS or the tax authority in their state and ask whether or not they should be reclassified as employees. I think they should.
Circular 230 Disclaimer: To comply with IRS requirements, please be advised that, unless otherwise stated by the sender, any tax advice contained in this e-mail message and its attachments is not intended or written to be used, and cannot be used, by the recipient to avoid any federal tax penalty that may be imposed on the recipient, or to promote, market or recommend to another any referenced entity, investment plan or arrangement.
Mike Campbell is a tax preparer at Chuck Sloan & Associates, a licensed tax preparation company for 18 years based in North Hollywood, CA, which specializes in preparing taxes for actors and other performers. Company owner Chuck Sloan is an author, frequent seminar presenter and former SAG board member.
Protalent Software specializes in software for performers, including the protalentPERFORMER career organizer, which helps to manage auditions/bookings, contacts, marketing, classes/workshops, income/expenses and more. It will also soon be available for access by iPhone.