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#1 J Montreuil

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Posted 23 April 2013 - 04:51 PM

Someone mentioned to me last night that it is common for contract workers in the entertainment industry to collect unemployment when they are between jobs. He was speaking in a broad term about the entertainment but I have never heard of anything like this in our sector.

 

Has anyone here (I suppose this is a US only question) ever collected unemployment when they were between gigs? 



#2 oeuf

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Posted 23 April 2013 - 06:06 PM

I have heard that some freelancers have done this in the past (i'm in NYC). This is not legal and led to an IRS crackdown on companies payroll policies. If anyone remembers when NYC started seeing the use of 3rd party payment companies like Yurcor and MBO, that's when the crackdown happened. Many companies were fined and ordered to pay back taxes on improperly labeled freelancers as a direct result from freelancers claiming unemployment between gigs.

Unfortunately, the Independent Contractors and Employee definitions are very vague, leading to these very problems.



#3 AromaKat

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Posted 23 April 2013 - 06:11 PM

My good friend and neighbor is a DP in the reality TV circuit and always signs up for unemployment in between shows. I don't think its necessary for him to do so, but he tells me that if he is forced to pay into unemployment taxes then hes going to collect on the benefits of them.

 

I should note that he has taxes withheld by whatever production company is running the show hes on, and isn't an independent contractor / getting 1099ed. 


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#4 J Montreuil

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Posted 23 April 2013 - 08:27 PM

My good friend and neighbor is a DP in the reality TV circuit and always signs up for unemployment in between shows. I don't think its necessary for him to do so, but he tells me that if he is forced to pay into unemployment taxes then hes going to collect on the benefits of them.

 

I should note that he has taxes withheld by whatever production company is running the show hes on, and isn't an independent contractor / getting 1099ed. 

 

So if I work at a place that puts me on payroll instead of taking in invoices and 1099s, does that qualify me for unemployment after a project is up?



#5 AromaKat

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Posted 23 April 2013 - 08:30 PM

That is my understanding. He talks about running out of unemployment fairly quickly, so I think its relative to how much you have worked and paid into unemployment.


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#6 AromaKat

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Posted 23 April 2013 - 08:59 PM

irs.gov has a wealth of information regarding anything and everything taxes. 

 

I just pulled this:

 

Federal Unemployment Tax

The Federal Unemployment Tax Act (FUTA), with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both a Federal and a state unemployment tax. A list of state unemployment tax agencies, including addresses and phone numbers, is available in Publication 926, Household Employer's Tax Guide. Only the employer pays FUTA tax; it is not deducted from the employee's wages. For more information, refer to the Instructions for Form 940 (PDF).

 

 

 

The most important thing to note here is that contradictory to what I said earlier, the individual does not pay into unemployment - only the employer does. 

 

 

Here is a link to some good info for determining if you can collect unemployment:  http://www.nolo.com/...rnia-32504.html


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#7 J Montreuil

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Posted 23 April 2013 - 09:11 PM

Interesting. Thanks Adam, as always, you are a help and a half!



#8 sbmotiondesign

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Posted 24 April 2013 - 03:06 AM

When you do file for unemployment it can sometimes piss off your previous employer because it can affect the amount they need to pay in unemployment tax. If they are a small shop it can come as a big shock to them when they start getting bills and forms from the IRS saying that they need to start paying into the unemployment system on behalf of what they consider a freelance employee. That's a big reason that a lot of shops will treat you as an independent contractor and give you a 1099 instead of a w2 during tax time, that way they don't have to pay into the unemployment system or pay half of your social security and disability tax . That's also the reason a lot of shops get audited and end up changing from being a 1099 shop to a w2 shop when it comes to freelancers. When that happens that get screwed big time and end up paying a lot of penalties and fees to the IRS for misclassifying what the IRS calls employees as independent contractors. 

 

If you work as a w2 employee on a lot of smaller to mid size jobs and don't have long periods of downtime it's probably better not to file for unemployment. It's not worth the hassle it causes in relation to the money you receive. If you're working on a few bigger jobs a year with longer breaks in between, like a two months without work, I'd definitely file for unemployment. I have friends who work in construction and because it's a seasonal job they are on unemployment at least four months of every year, it's just part of the normal flow.

 

For me it seems about 1/3rd to a half of my gigs are on W2 and the rest are 1099. It's good to have a balance between the two so you can still write off a lot of expenses like your computer, software, home office and mileage to 1099 jobs, but still get a little tax help from the w2 employers.  

 

Sorry for the rambling!



#9 J Montreuil

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Posted 24 April 2013 - 04:38 AM

Good info and advice sb!



#10 AromaKat

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Posted 24 April 2013 - 05:13 AM

That isn't rambling SB. All good points. 

 

From looking further into it, I found the maximum you can receive is $450 per week, which I interpret as likely landing somewhere just above half that when you actually go to claim it. 


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#11 brandj

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Posted 24 April 2013 - 02:18 PM

I have heard that some freelancers have done this in the past (i'm in NYC). This is not legal and led to an IRS crackdown on companies payroll policies. If anyone remembers when NYC started seeing the use of 3rd party payment companies like Yurcor and MBO, that's when the crackdown happened. Many companies were fined and ordered to pay back taxes on improperly labeled freelancers as a direct result from freelancers claiming unemployment between gigs.

Unfortunately, the Independent Contractors and Employee definitions are very vague, leading to these very problems.

 

Ouef, I have to respond to this. When "freelancers" are working onsite and under the direction of studios they are in fact employees, no matter what kind of contract or deal memo they signed. So what is actually illegal is avoiding paying employer-side payroll taxes, incl. unemployment insurance, etc. and misclassifying the workers. Employers can be fined and are responsible for paying the employee's taxes and liabilities for years after the violation occurs. The Independent Contractor rules are not vague at all. What is happening is just a direct violation of the law.

 

Whether or not the "freelancers" should file for unemployment after their gig is up isn't for me to judge, although some have suggested that that's exactly what they should do for being forced to work on a 1099. 

 

More on employment in NY here: http://www.labor.ny....ouapplyfaq.shtm

 

More on misclassification here: http://www.labor.ny....of-workers.shtm


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#12 brandj

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Posted 24 April 2013 - 02:20 PM

 

So if I work at a place that puts me on payroll instead of taking in invoices and 1099s, does that qualify me for unemployment after a project is up?

Yes.


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#13 oeuf

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Posted 24 April 2013 - 05:01 PM

 

Ouef, I have to respond to this. When "freelancers" are working onsite and under the direction of studios they are in fact employees, no matter what kind of contract or deal memo they signed. So what is actually illegal is avoiding paying employer-side payroll taxes, incl. unemployment insurance, etc. and misclassifying the workers. Employers can be fined and are responsible for paying the employee's taxes and liabilities for years after the violation occurs. The Independent Contractor rules are not vague at all. What is happening is just a direct violation of the law.

 

Whether or not the "freelancers" should file for unemployment after their gig is up isn't for me to judge, although some have suggested that that's exactly what they should do for being forced to work on a 1099. 

 

More on employment in NY here: http://www.labor.ny....ouapplyfaq.shtm

 

More on misclassification here: http://www.labor.ny....of-workers.shtm

Good to know. There are some big name companies in clear violation of some laws.

So let me ask this. If i'm working on site and being paid as an employee and not an independent contractor, i'm legally within my rights to ask for OT after 8 hours, right?

Now how many producers have you guys talked to that say their shop operates on a 10 hour day and likely does not do overtime?

 

Some great info in this thread, should def be stickied.

Thanks fellas.



#14 AromaKat

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Posted 24 April 2013 - 05:09 PM

 

 

Ouef, I have to respond to this. When "freelancers" are working onsite and under the direction of studios they are in fact employees, no matter what kind of contract or deal memo they signed. So what is actually illegal is avoiding paying employer-side payroll taxes, incl. unemployment insurance, etc. and misclassifying the workers.

 

 

Its not as black and white as that. This freelance thing has gotten way out of hand in the last decade, losing sight of exactly what a freelancer is. What a freelancer is, in the eyes of the IRS, is all this boils down to.

 

Rules are in place to ensure fair practices are met, but  I just went through the verification process myself and can tell you that the IRS themselves will tell you that every business relationship needs to be judged independently for proper classification. I have no clue where all this talk about being on-site automatically classifying people as employees come from. I encourage people to stop reading sources that are trying to form unions etc and read the actual IRS documentation.

 

Freelancers should be classifying themselves as self-employed are supposed to pay their own medicare and social security taxes. Thats a higher tax rate than an employee, a 15% self-employment tax to be exact. If they are not filing their taxes as self-employed, the shady practices are on the individual, not the company. Why this is hairy is because far too many people are out there "freelancing" without doing their duties as a self-employed individual. 8% corporate tax (if incorporated), 22% income tax, and 15% self-employment tax.

 

Here is a fact: Uncle Sam does not know what a freelancer is. Its not in his vocabulary. There are a few larger shops for longer-term gigs that were blatantly abusing the fact that most freelancers don't do what they are supposed to and,.yes, effectively passing along those taxes to them. But a freelancer's rate is supposed to cover that type of stuff. Your fulltime and "freelance" (god, I hate that word) rates should be far different. 

 

When the entire talent pool out there isn't doing their due diligence, what is a shop to do? I'll tell you exactly what - go through a 3rd party billing company, which isn't unique to this industry at all nor is it illegal. So there isn't confusion, I'm not referring to how certain shops used companies like Yurcor and the exact practices in those examples. Just because one group didn't play by the rules doesn't mean the entire industry is doing things wrong.

 

I have a nice little piece of paper from the IRS granting me, in my use-case, the ability to hire on independent contractors, as long as a few common sense things are met.

 

If a freelancer is incorporated, has a city business license, pays for their own workers compensation insurance and files their taxes as self-employed then all is more than well. Not even all of those items together is entirely necessary.  You can also just have them sign something stating that they are independent contractors. If they don't do things right on their end to back up the Independent Contractor status they signed on with me for, its on them. If I feel they are blatantly not doing those things, then I need to hire them through a staffing agency, like creative circle, match, or 24/7. 

 

If anyone is working on a long-term gig, say over two months, at one location then maybe some weird things are going on there. If in doubt, either as an "employee" or employer, file a S-88 with the IRS yourself and get the same wonderful little piece of paper tailored to your own situation. If anyone has been self-employed for a while and not claiming as such, they might be in trouble down the road.

 

S-88 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding

 

If a company is hiring you on, as an individual, without getting due-diligance items from you, then maybe things are fishy. Again, every relationship is different. Just file the S-88 if you're in doubt.


Edited by AromaKat, 24 April 2013 - 05:16 PM.

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#15 brandj

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Posted 24 April 2013 - 05:42 PM

 

 

Its not as black and white as that. This freelance thing has gotten way out of hand in the last decade, losing sight of exactly what a freelancer is. What a freelancer is, in the eyes of the IRS, is all this boils down to.

 

Rules are in place to ensure fair practices are met, but  I just went through the verification process myself and can tell you that the IRS themselves will tell you that every business relationship needs to be judged independently for proper classification. I have no clue where all this talk about being on-site automatically classifying people as employees come from.

 

From here:

http://www.irs.gov/B...ent-Contractor-(Self-Employed)-or-Employee%3F

 

and here: http://www.irs.gov/B...tractor-Defined

 

It's pretty obvious that a "freelance" designer who goes into a studio every day at 10AM reports to a producer, takes direction from an Art Director, gets notes on how to revise his work from a Creative Director and is scheduled by the studio would be considered an employee  and as such should be paid on a W2, not a 1099.

 

Also this:

 "You can also just have them sign something stating that they are independent contractors." is just NOT true. A contract which states a workeris an independent contractor does not automagically nullify the misclassification.


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#16 AromaKat

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Posted 24 April 2013 - 06:31 PM

Yep, those links are exactly what I am referring to.

 

 

 

It's pretty obvious that a "freelance" designer who goes into a studio every day at 10AM reports to a producer, takes direction from an Art Director, gets notes on how to revise his work from a Creative Director and is scheduled by the studio would be considered an employee  and as such should be paid on a W2, not a 1099.

 

The key phrase there is "every day". In that situation, sure. That sounds shady. The 'direction from an AD, notes from CD' doesn't hold any kind of weight in terms of the "how" things are done. 

 

 

 

A contract which states a workeris an independent contractor does not automagically nullify the misclassification.

 

Not saying it nullifies anything. Its just both parties acknowledging that the IC is doing what they are supposed to be doing. Depends, on that 'every day' thing. 

 

 

I suppose there is a different world out there that I don't see that some are being subjected to. Again, if in doubt, fill out that S-88 for yourself. I, myself within my own practices, am in the clear, guaranteed by the irs themselves. I'm just sharing my experiences after jumping through many hoops and paying bunches of money to accountants, lawyers, and the IRS. 

 

 

Um.... if someone feels that they are getting screwed over, they have the power to leave or say no to a gig. Fairly simple. I don't even get where the other side of the argument is coming from, at all.


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#17 AromaKat

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Posted 24 April 2013 - 07:02 PM

Good to know. There are some big name companies in clear violation of some laws.

 

Some, for sure, like in any business. However, I think there its more common for freelancers to misinterpret the laws than it is for companies to not be following the rules. Freelancers are businesses. If they don't lawyer up, get a CPA, and get in a good status with the IRS, it can lead to problems.

 

 

 

 

So let me ask this. If i'm working on site and being paid as an employee and not an independent contractor, i'm legally within my rights to ask for OT after 8 hours, right?

 

If you are a non-exempt employee, not only is it within your right to ask for OT, it is the law. Whether OT starts after 8 hours in a day or 40 hours in a week depends on the state your in. If you are salary / exempt, then you are not entitled to overtime.

 

 

http://www.flsa.com/coverage.html

 

 

Now how many producers have you guys talked to that say their shop operates on a 10 hour day and likely does not do overtime?

 

All


Edited by AromaKat, 24 April 2013 - 07:05 PM.

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#18 brandj

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Posted 24 April 2013 - 07:02 PM

AromaKat, lots of artists in NY, LA, Seattle, Chicago etc, who are called freelancers, work project-to-project for different studios in their locations. They may be 3D artists, compositors, colorists, riggers, animators or type designers. The projects they work on may be a few weeks long or a few months, or they may work on several projects back-to-back at the same studio. Often this situation is also called perma-lancing. Many of these "freelancers" are being called independent contractors and made to sign agreements stating as much, even though the conditions of their employment would really suggest otherwise. They don't get taxes taken out, they get paid on 1099s and they are convinced that they don't have any protection from labor laws, being able to get unemployment, organize, etc. So that's what I'm talking about.

 

I'm not really talking about someone who has a full-time job and does "freelance" gigs on the side in their off-hours (BTW, I call that moonlighting). And I'm not talking about independent artists like me, who sometimes work with other independent artists (offsite) and contract with them for 3D or music composition or sound design, etc. Those situations are often called the same thing - freelancing - as the situation I'm describing, which is really just a series of temporary employment situations. And that may be where the confusion comes from.

 

The reason I brought up the definitions of Employee vs. Independent Contractor was because Ouef was stating that these folks shouldn't be considered employees, and consequently wouldn't have the "right" to get unemployment. Again, as you point out, it depends on the nature of the relationship, but in the situation I believe Oeuf was talking about - absolutely, they're employees. And I think they should absolutely be able to file for unemployment. 

 

I think lots of inexperienced and eager artists are just happy to take any job offered them, so they're not picky about the terms offered. Sure they can complain individually, or file forms with the IRS, but that can be a scary thing for artists to do when they more concerned about just getting the next gig. 


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#19 AromaKat

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Posted 24 April 2013 - 07:40 PM

Yeah.. permalance. An evil practice. I'm with you 100% on that one.

 

I think all of us are in agreement here, but just from different perspectives. 

 

I have never viewed freelancing or hiring individuals on 1099 in any capacity without being incorporated or having a business license as legal. The finger can be pointed at both the worker for not doing what they are supposed to and the employer for hiring them, knowing the IC hasn't properly filed with the city / state.


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#20 the_Monkey

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Posted 25 April 2013 - 01:06 PM

I have never been forced to pay unemployment taxes in NYC. You are forced to pay for your own Disability Insurance (Workman's Comp) which ranges from $10->$25/mo. You're also forced to pay for both halves of your social security (usually the employer pays half and the employee pays half). You're heavily taxed by the State for the privilege of working in NYC. You're also heavily taxed for being self-employed.

 

I've been paid in 1099's for nearly a decade now. Nobody has forced me into this situation and I don't feel exploited in the least. I'm responsible for my own health, retirement, and employment and if I can't get work that's part of the risk of being a freelancer. Personally I feel safer than the status quo that shows their loyalty to a mega-company for 19 years and then gets let go right before receiving their retirement benefits.

 

I've met a few freelancers that have said they collect unemployment between gigs. Personally, I think it's a real asshole thing to do. Back in 2001, I dated this hairstylist from LA that was the lead hair and make-up for 3 consecutive blockbuster HBO series and she said she did it religiously. She used the same argument..."it's my money". She said it was the first thing she did after she wrapped a gig. She'd march down and sign up for unemployment. Then she would just go to the beach and chill until it ran out. When it ran out she would start looking for work again.

 

Real fucking classy.

 

The simple reduction: 

- Freelancers shouldn't take unemployment.

- If you want to collect unemployment, be an employee on paper.

 

 

-m






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