Tax Reform (A Sequel)

‘Tis the season – tax season, that is. If you’ve been following me, you know that taxes are kind of my hobby horse. One of the biggest problems for freelancers is that our taxes are ridiculously complex, but we don’t get any compensation for pain and suffering. I tried to remedy that a few years ago by invoicing President Obama for the time I spent filing taxes. (See below)

He didn’t bite.

Now that we’ve had the most sweeping tax “reform” in thirty years, you’d think I’d be golden. Well, it really didn’t really work out. We shall see if the Trump administration is more receptive to my work…

In the meantime, if you’re struggling with your own taxes, you still have two days to send them in or file for an extension. And if you’re completely baffled, may I recommend my post from last year: Taxes for Freelancers.

There’s No Such Thing as a Free Lance

The vast majority of jobs in the film industry are freelance. That means you, as an employee, are only hired per assignment (commercial, TV episode, feature film, mayonnaise training video…). Technically, you work for Paramount or Fox or Comcast NBCUniversal, but only for a few days at a time. The closest comparable thing in the “real world” is an independent contractor. These people own their own businesses and enter into negotiations directly with a client. Roofers, plumbers, electricians, etc. are all often independent contractors.

There is a slight difference, however. Freelancers are technically employed by a company (just for a few days at a time). If an independent roofer falls off of your roof, he’s the one paying the hospital bill. If you fall off of a roof making a commercial, the production company’s stuck with the bill. While it leads to countless jokes and is confusing to literally everyone, freelancing is a distinct form of employment that affects things like filing taxes, applying for loans, and unemployment compensation. (For example, when a project ends, you no longer work for Paramount Pictures, but you weren’t fired.)

Supposedly, the term “free lance” comes from the Middle Ages when unemployed knights would hire themselves out as private ruffians. They were literally “free lances” AKA mercenaries. And that’s probably the most accurate description of what we do.Freelance cartoon 1

 

So what does the world of freelancing look like? Well, here are a few thoughts.

Who’s the Boss?

 People will sometimes describe freelancing as being your own boss. That’s patently false. As a crewmember, your department head is your boss. Even as a department head, the producer or director is your boss. And if you’re in a lucky enough position to be a director, art director, or even producer, the client is your boss. Point is, once you get into the trenches, there will always be someone above you telling you how to screw up your job. Negotiating these conversations (using your skills and experience to achieve what your boss wants) is one of the freelancer’s most critical assets.

The Schedule from Hell

Can you set your own hours as a freelancer? Definitely not. As with your boss, once you sign up for a project, your time is at the mercy of the production company (or client). Working a one day job? Production doesn’t care if they go for eighteen hours because they only need you for one day. You, however, may have another job tomorrow. And if you do have something to do, it’s incumbent on you to find out if your shoot will go for eighteen hours (production will often give you bad information) and have your own contingency plan. (Keep a babysitter on hold, notify tomorrow’s production manager you may be late/exhausted, and sell your concert tickets.) Again, once the job starts, you’re in it for the long haul.

If there’s an act of God (inclement weather, a location falls through, an actor is taken hostage by the mob…) your job may push. Producers understand that you may not be available when this happens, and they won’t hold it against you. But you won’t earn that paycheck…

And of course, once you buy tickets to a sporting event, schedule a vacation, or plan a date, you will inevitably get a call for the most exciting job of your life. My wife’s friends (who have filled in for me on many dates) have started subtly suggesting I purchase more tickets to the ballet.

Freelance cartoon 2

Right of Refusal

 The idea of being your own boss and creating your own schedule originates from the idea of that you have a right of refusal. If you work for a normal company and your boss assigns you a shitty job, you can’t really get out of it without quitting. But if you’re a freelancer, you just don’t take the shitty job. Great in theory, doesn’t always work in practice.

For one thing, refusing a shitty job is contingent on whoever calls you for a job being honest about its shittiness. (Unlikely.) But questions like, “Who’s the director?” “How many locations are there?” “How many cameras are there?” and “Who’s the client?” can give you an idea of what the job will be like. (Pro Tip: If the person calling you can’t or doesn’t want to answer your questions, it’s probably a shitty job! I have also noticed that the number of phone calls and emails I receive before a job is directly proportional to how shitty a job will be. Sadly, at a certain point, it’s too late to back out.)

Then there are the market forces. A job you’d never take “in a million years” might not look that terrible in early January when you’ve drained your savings account over the holidays and haven’t been employed for three weeks.

Finally, if you turn someone down enough times, they’re going to stop calling you. That’s not always a bad thing. Some people just attract shitty jobs. But you never know who they’re going to talk to. It’s s small world and a smaller industry…

Rates

 Rates are fairly standard by region and they tend to be higher for freelancers than full time employees. But part of the reason for that is, if you work for eighteen hours Monday, you’re probably not going to be working on Tuesday. It’s also important to clarify rates with new employers before you start. How is overtime calculated? When does it start? Are you paid for travel or mileage? Do you get a prep day? A wrap day? What about a kit rental? Depending on your department, this might be a slider, lights, lenses, filters, microphones, mixers, monitors, transmitters, tables and chairs, tents, props, or vehicles. Union crews don’t have to worry about this as much because everything is covered by a contract (except kit rentals), but it’s up to the crew to make sure the contract is followed.

Also, if you’re starting out, it’s a really bad idea to undercut other crewmember’s rates. It creates a race to the bottom, and you won’t make any friends. You’ll also quickly learn that you’d make more money at Starbucks.

On the plus side, rates are a good way to weed out some of those shitty jobs. For one thing, if a production manager offers you a shitty rate, it’s an indicator that a job will be staffed by inexperienced people with low standards. On the flip side, if you know this will be a shitty job, inflate your normal rate a little. If they say no, don’t take the job. If they say yes, hey, all least you have some extra cash for your pain and suffering.

Paperwork

 If you read this post about taxes, you know what the bulk of freelancing paperwork entails. In addition to that, it’s entirely up to you to worry about heath care and retirement plans. If you get in a union, you’ll at least have a group plan, but you’ll still be amazed at the amount of paperwork required to maintain it. And sadly, there’s no H.R. office down the hall that you can visit on your lunch break.Freelance cartoon 3

 

Speaking of H.R….

It’s hard to talk about the film industry without bringing up Harvey Weinstein. With big personalities, small crews, and offices that constantly change locations and bank accounts, it’s not surprising that the film industry is a high-risk occupation for sexual harassment. The past few months have shown that men are pigs in all industries, but the film industry has no overarching governing body to enforce best practices. All of the unequal power dynamics that existed before Harvey was outed still exist today. Sadly, it’s up to you to look out for yourself.

Should you Freelance?

Depending on what you want to do, you don’t really have a choice. When you envision a film crew on the sidewalk, everyone (grips, gaffers, sound mixers, PAs, etc.) is freelancing. Most scripted TV employs freelancers, but shows with permanent sets (talk shows, game shows, late night shows, multi-camera sitcoms) will have a full-time staff. If you want a full time position, you need to find a brick and mortar studio with an open position. But recognize that it is your workplace and job description from there on out.

The real perk to freelancing is the variety of jobs, people, and places you get to experience. For some personality types, it’s the only way to live. But it is a lifestyle choice more than a job description. Hopefully this post gives you some good food for thought before you join the circus.

P.S. Resumes

The majority of freelance work comes through recommendations. And freelancers get it. If someone asks you for a resume it’ll look pretty weird (usually just a list of credits).Freelance cartoon 4But if you apply for a “real” job after freelancing, you’ve got your work cut out for you. For one thing, most people don’t understand what freelancing is (a euphemism for unemployment?). And most jobs now require you to submit resume information online. How do you type in your employee history when you’ve had twenty-five employers in the last year? It’s not fun (though it’s not impossible). I highly recommend taking a resume writing or career-coaching course if you do go in that direction.

TAXES FOR FREELANCERS

Like all forms of employment, freelancing has perks and shortcomings. But without a doubt, filing your taxes as a freelancer is one of the most obnoxious and time consuming ordeals you’ll have to deal with. I hate filing taxes so much, I made a video about them last year. (President Obama did write me back, but he never paid the invoice…) The point is, never have I ever—not even in TVF 361: Working in Film as a Freelancer—received any education about filing taxes as a freelancer. So if you do plan on going down this dark and terrifying path, I’d like to give you some pointers.

DISCLAIMER: I am not a tax expert. Anything you learn from this article is for informational purposes only. Do your own research and consult with a tax professional for your own specific tax situation.

OVERVIEW

If you earn money, you pay taxes. You generally owe taxes to 3 governmental agencies: the federal government (IRS), the state government (in my case the Pennsylvania Department of Revenue), and your local city, town, borough, hovel, whatever. Usually, your employer takes these taxes out of every paycheck. That’s why when you received your first job in high school, you were shocked to find out how little money you actually took home.

SMALL PAYCHECK

However, even if your employer doesn’t take this money out, you still owe taxes! At some point, someone’s going to come looking for that money. It’s up to you to make sure you’re paying the right amount of money on time. Keeping detailed records is the name of the game.

As a freelancer, you’ll have 2 basic kinds of employers: W-2 and 1099. Both are named after the tax forms you receive at the end of the year.

W-2

When it comes to taxes, W-2 jobs are a little bit easier. These are the jobs where the taxes are taken out for you. In the biz, they are also called timecard or payroll jobs. These are the kinds of employers that most of your relatives and friends with “real” jobs have. For us, things are a little confusing.

The thing is, most production companies don’t want to pay for accountants. They use payroll companies to take care of their paperwork. CAPS, Entertainment Partners, and Cast and Crew are three of the big ones. So even though you work for Mom & Pop Productions, The Josés Film Co., and Hollywood South, LLC, you might get W-2s from CAPS, Entertainment Partners, and Cast and Crew. To make it even more confusing, Mom & Pop and The Josés may use the same payroll company. Then every job you did for both of those companies will appear on the same W-2.  (Last year, which was a slow year for me, I worked for 17 different companies and received 6 different W-2s.)

1099

If your employer just hands you cash or a check, this is called 1099 or invoice work. Generally, you’ll have to send the company an invoice, and then they’ll send you a check. This check will be for the full amount of the job. (If you invoiced them for $250, you’ll receive a check for $250.) Even though your employer didn’t take taxes out of your paycheck, you still owe taxes!

QUARTERLY PAYMENTS

You may think tax season is early April, but for freelancers, it’s always tax season. The thing is, you owe taxes as you earn money, not at the end of the year. For W-2 work, those taxes are taken out every paycheck, and you’re golden. But for the 1099 work, you need to estimate how much money you’ll make and send out those estimated payments quarterly. (Remember, you owe federal, state, and local taxes.)

The four payment dates this year are April 18th, June 15th, September 15th, and January 15th. The perplexing thing is that quarter two is 3 months long while quarter four is 5 months long. Clearly no one at the IRS had my mother for math, since “quarter” implies four equal parts, but I digress.

unequal quarters

Your estimated payments aren’t what you will actually owe because your tax rate is based on what you earn, and on April 18th, no freelancer I know has any idea how much money they’ll earn in the next eight months. There’s a lengthy form to help you estimate your quarterly payments (which I have found utterly useless) called the 1040-ES. I’ve included a link to it below.

FILING YOUR TAXES

If you haven’t had enough fun yet, there’s tax day! When you “file” your taxes, you’re squaring away all of those uncertainties you’d had from the previous year. You find out what you actually earned, deduct what you can, and end up with your Adjusted Gross Income (AGI). Some people use accountants or tax professionals. Most tax professionals charge more as things get more complex. Since I didn’t make much money when I started in this business, I began filing my own taxes with the help of TurboTax. So far, so good.

For the most part, you just enter all of the data from your W-2s and 1099s. Remember to report income even if you didn’t receive a 1099. (Keep in mind, Al Capone was ultimately arrested for tax evasion, not murder.) And remember to report those quarterly payments you made. The software will do the rest.

DEDUCTIONS

Everybody is allowed to take a variety of personal deductions. Charitable donations, student loans, and mortgage interest come to mind. Many people will take the standard deduction because it’s easier and often bigger than an itemized deduction. But as a freelancer, you also have unreimbursed business expenses. Even if you take the standard personal deduction, you have plenty of additional business deductions.

These deductions may include, clothing, food, work tools, mileage, and even your house. There are rules and regulations for each thing, but a general rule of thumb is, if you use it exclusively for work, it’s deductible. I’m writing this from my home office, where I do all of my paperwork. I could potentially deduct the utilities for this room, but I use it for a guest room as well. Sadly, no deduction for this one. But that rain gear I bought exclusively for set? Deducted. Flashlight, surveillance headset, and Leatherman? Deducted. That Box of Joe I bought for the locations department to ensure I had good parking on the last shoot? Deducted. Make sure you save those receipts!

Mileage can also be deducted, whether that’s driving to another state for a job or running out to pick up lunch for the crew. As with all of these things, however, you need to keep detailed records.

And of course, if your employer reimburses you for any of these expenses, you cannot deduct them.

STATE AND LOCAL

Generally speaking, state and local taxes operate similarly to federal taxes. There are slightly different rules for each, so you’ll have to do your own research on that one. But here’s one small positive; programs like TurboTax have software for states, and most of the information transfers seamlessly from federal to state forms. One caveat, if you work outside the state where you live, you may need to file taxes in both states.

Local taxes are generally the easiest. You’ll simply need to transfer numbers from your federal or state tax form onto your local tax form. Unfortunately, W-2 employers will deduct local taxes from where you work, not where you live. It may take a bit of arithmetic to figure out what, if anything, you owe your local government. (For example, my borough has a 1% tax rate, but if I work in Philadelphia, Philadelphia takes 3.5% of my paycheck. I’m never going to see that 2.5% again. However, I can use it to offset the taxes I owe to my home borough from my 1099 work.)

DEATH AND TAXES

Taxes suck, no matter who you are. But if you plan to make this filmmaking thing work, they’re one more unforeseen hurdle you have to jump over. The most important thing is to keep detailed records and save paperwork. And speaking of paperwork… below are links to some of the forms you’ll encounter in your illustrious career. Check them out so you know what you’re looking at.

Finally, I’d like to reiterate that I am not a tax professional. If anyone who reads this post has other thoughts and comments, feel free to reach out or respond.

PAPERWORK

W-4

When doing W-2 work, the W-4 tells your employer what to withhold in taxes. You’ll receive this on set either when you’re hired or when you fill out your timecard. There’s an obnoxious worksheet to calculate how many allowances to claim (probably 1 or 0). If you claim 0, your employer will withhold more taxes, which means you’ll likely get a refund at the end of the year, but see less money in your paychecks.

I-9

When doing W-2 work, the I-9 verifies that you are allowed to work in the U.S. Most people only fill out a handful of these in their lives. You, however, have to fill one out every year for every employer. That is why I have my driver’s license number memorized. However, if you work for a new company, you’ll want to be sure to bring your 2 forms of I.D. (Click on the second link on the USCIS website to view the form.)

Timecard

Here is a blank, sample timecard from CAPS. Generally, you’ll only fill out your personal information and the hours you worked. Your production manager will help you with any questions.

W-2

You’ll receive this in January or February. It shows how much money you earned, what you paid in taxes, what you paid for Social Security, Medicare, state, and local taxes, etc. from the previous year. It’s very easy to transfer this information into a program like TurboTax. (This W2 is blank. Yours should come with numbers on it!)

W-9

This is identity verification for a 1099 job. (I-9 is to W-2 as W-9 is to 1099… where’s 3 through 8 in all of this?) Generally, you’ll need to send production one of these when you send them your invoice. Unless you are incorporated as a business, check the box that says “individual/sole proprietor” and fill in your social security number.

1099

This is what you get at the end of the year for your 1099 jobs. As with the W-2, it’s very easy to enter the information from this into a program like TurboTax. (And again, yours should come with numbers on it!)

Invoice

I’d say this is where you can flex your creativity because you get to make your own invoice, but that would probably just annoy your production manager. Generally, you just need your contact info, the company’s contact info, the job name and number, and days and hours worked. This is what I use. It’s not pretty, but I always get paid (except for the one I sent to Obama…).

1040-ES

This is the monstrosity that “helps” you estimate your quarterly taxes. In the least it shows you what is legally required and gives you a place to write down when you sent the money in.