# Independent Contractor



## chawalang (Jan 23, 2016)

I would like to see if there are any people on here who work as an IC.

What is the role you fill as an IC in our industry?

Why did you choose to work as an IC?

Was this decision something left to you or did an employer require this of you?


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## RickR (Jan 23, 2016)

I have had many roles over decades including 3 partnerships. Most of my IC work was as a designer, occasionally design/TD. In those cases it was clear that I was to accomplish a goal with minimal 'corporate' direction or management. They offered nothing but cash.

You will likely find that IRS rules are the major governor of whether one is an IC or employee.


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## BillConnerFASTC (Jan 23, 2016)

After leaving university level teaching in 1982, I have been an employee of an independent contractor, though since 2005 I work form my own company. Theatre consultants - like engineering and architecture firms, simply by the business of working on projects for a limited period of time are independent contractors. IRS has simplified the rules to determine if you are an employee or independent contractor: "The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done."


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## MNicolai (Jan 23, 2016)

It's generally preferable to be an employee unless you want to pay for your own liability insurance or don't care about being covered under workman's comp. You're responsible for yourself in pretty much every way as an IC.


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## BillConnerFASTC (Jan 23, 2016)

MNicolai said:


> It's generally preferable to be an employee unless you want to pay for your own liability insurance or don't care about being covered under workman's comp. You're responsible for yourself in pretty much every way as an IC.


But, as an independent contractor - your own boss - none of what you earn goes to an employer. It's all yours.

And my clearest memory of when I went out on my own is that it was much easier and more lucrative than I had imagined. A lot to balance.


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## ruinexplorer (Jan 23, 2016)

In Arizona, they are making our business more definitive for IC status, especially in regard to unemployment. Or to put it another way, if you work for the IA, where you end up working for a variety of employers (the IA isn't an actual employer for stagehands), you are not considered an employee for the purposes of unemployment. This works for non-union staging companies as well. See here.


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## soundman (Jan 24, 2016)

I try and avoid working as an IC. My bread and butter is touring automation and occasionally rigging. I don't want to deal with quarterly payments or providing my own workman's comp. I know guys that set up a K or S corp and deal with it that way. For my piece of mind it is worth it to have a large company standing in front of me should things go wrong.


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## BillConnerFASTC (Jan 24, 2016)

soundman said:


> I try and avoid working as an IC. My bread and butter is touring automation and occasionally rigging. I don't want to deal with quarterly payments or providing my own workman's comp. I know guys that set up a K or S corp and deal with it that way. For my piece of mind it is worth it to have a large company standing in front of me should things go wrong.


For what its worth, if you are an IC - a sole proprietor - you are not required to have workers comp on yourself. Quarterly payments - that's what accountants are for. But 8 checks a year - feds and state - isn't a big deal.

But the decision is a temperament/personality thing. More responsibility, but potential for more rewards as well. I decided a long time ago to not to hang out my own shingle and well, another case of never say never, and it's worked out for the best for me at this point in my life. As a one person company it's pretty easy admin; add an employee and just hope you can add enough to justify a bookkeeper - because that does get tricky. Not an easy or trivial decision and I'd never say anyone was wrong to remain a regular W-2 employee.


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## SteveB (Jan 24, 2016)

ruinexplorer said:


> In Arizona, they are making our business more definitive for IC status, especially in regard to unemployment. Or to put it another way, if you work for the IA, where you end up working for a variety of employers (the IA isn't an actual employer for stagehands), you are not considered an employee for the purposes of unemployment. This works for non-union staging companies as well. See here.



Seems that this law by state of AZ. might well put employers in violation of the federal definitions.


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## lwinters630 (Jan 26, 2016)

chawalang said:


> Was this decision something left to you or did an employer require this of you?


Even if an employer claims your an IC and gives you a 1099, it doesn't make you one.  The burden of proof is on an employer to show that you are a business, you advertise, have business type expenses, hold your company out to the public, are free of direction and control. If you are a c-corp or an s-Corp with a FEIN, that makes easier for them. 
After battling with the IRS and IDES for unemployment claim by in IC, I now require IC's to provide copies of FEIN, an ad, copies of bills showing their company name, business cards, and a contract for each job. 
There are many laws that an employer needs know before calling someone an IC.

To comment further on the OP'S questions, in some roles I function as an IC, (with a FEIN as a s-corp) for design, consulting, project management and more, involving lighting, sound, video and flooring. I totally love the freedom to take on projects (or not) as I choose. And for what it is worth, an s- corp is easy to set up with far more tax deduction and liability protection than a DBA name.


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## chawalang (Jan 28, 2016)

I was hoping to get some conversation going, specifically in regard to HB2112 in Arizona.

This is a terrible idea for stagehands wether you are union or non union.


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## jcslighting (Jan 28, 2016)

I started out as in IC doing side design work for a local high school while I was in college - they paid me a check and then a 1099 in January. This same process has now grown in to $20k plus a year as an IC. 
I still have a "day job" but that is also as an IC. 

I get to pick the jobs I take as well as the paychecks belong to me. Is it worth that much to let someone have a percentage of your labors in return for handling some paperwork for the govt? That was why I kept going with it. There are downsides - lack of benefits, PTO, insurance, vacation, and you can't call in sick but like others have said, you keep the check. Quarterly taxes aren't hard you just have to budget for yourself vs. letting your payroll dept do it for you.

As for the AZ bill, I think it is a terrible idea. If you work under a collective bargaining agreement (IA) or directly for a venue, you are not an IC but an employee.


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## ruinexplorer (Jan 29, 2016)

They are fighting the AZ bill. http://www.azstagehands-stop2112.com/


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## RickR (Jan 31, 2016)

The IRS rules are very clear. Nothing is left for the state to do in the matter.


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## BillConnerFASTC (Jan 31, 2016)

RickR said:


> The IRS rules are very clear. Nothing is left for the state to do in the matter.


How do you figure a state run unemployment is regulated by Federal rules?


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## SteveB (Jan 31, 2016)

BillConnerASTC said:


> How do you figure a state run unemployment is regulated by Federal rules?



The IRS among other federal agencies, have defined sets of rules of when and how a worker is an independent contractor or an employee.

My read on the Arizona law is that aspects of it are in contradiction to federal law(s). 

Typically and even though the states don't like it and enact local laws to circumvent federal law, the courts usually rules that federal trumps state.


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## BillConnerFASTC (Feb 1, 2016)

SteveB said:


> The IRS among other federal agencies, have defined sets of rules of when and how a worker is an independent contractor or an employee.
> 
> My read on the Arizona law is that aspects of it are in contradiction to federal law(s).
> 
> Typically and even though the states don't like it and enact local laws to circumvent federal law, the courts usually rules that federal trumps state.


 I understand that and disagree in general with the intent - saving unemployment costs to business - but as I read the backup the redefinition is only for the purposes of determining unemployment insurance eligibility. The "label" for that purpose would not change the label and status for IRS purposes, etc.


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## robartsd (Feb 1, 2016)

I agree with Bill; I see no reason a person doing a job is considered an "employee" for state unemployment insurance cannot be considered an "independent contractor" for the same job for federal (and probably state) income taxes. It might look really wierd in the tax history if they claim unemployment after not having W2 income, but that shouldn't stop it from being possible.


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## BillConnerFASTC (Feb 1, 2016)

I'm not taking sides, but would like clarity. I find legislation that relies on labels is not clear. I distrust the motives of this proposed legislation simply because of its reliance on labels and definitions. I've long worked against building and fire code language that focus on labels.


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## SteveB (Feb 1, 2016)

The IRS rules are actually not very clear. They allow a case by case status to be made depending on a host of factors. https://www.irs.gov/Businesses/Smal...ependent-Contractor-Self-Employed-or-Employee

The AZ law seemingly is attempting to clarify the conditions under which a worker is IC or an employee and for reasons of status for unemployment benefits. Trouble is, the law is written so that an employer can declare a workers status as IC using these definitions and thus avoid all the other factors and potential benefits that come along with being an employee, including any other protections that would be due an employee under state and federal laws, such as overtime, among others. 

Thus a bad thing for freelance technical folks in AZ.


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## BillConnerFASTC (Feb 2, 2016)

I'm not sure any law will actually prevent or allw what an employer - or employee - might try to do, but pretty sure a state law will have little impact on federal law.

As a sometime employer these days, I find the federal guidelines to be much more likely to classify a person as an employee than an ic when its not clear. The test to declare a person annic is much tougher and more scrutinized.

But I don't like the AZ law. A stage hand paid hourly working an event is clearly (or rarely) an employee.


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## SteveB (Feb 2, 2016)

Not following this logic Bill.

In a given scenario a promoter rents a hall/theater/arena, hires a performer and an event company to provide staging, lighting and audio according to the rider.

The promoter, in consultation with the event production company, states when certain aspects of the event technical services must be provided (the schedule). The event technical company then hires stagehands either from their own list, or from an IATSTE local, if the union has a contract with either the venue, promoter OR event technical company (or not).

The stagehands report to the venue at the appointed time and according to the schedule established by the promoter, usually expecting X amount of a day's work, for X amount per hour, to be paid via check or cash by the event production company, who in turn bills the promoter. Under some circumstances, the workers may be paid directly by the promoter, rather then the event production company. I have even seen scenarios where the promoter pays the union directly, who then distributes the checks. Paying the Union has sometimes been seen as an attempt by an employer to abdicate their responsibilities under IRS rules, by claiming the union is the employer.

Once the event producer and promoter establishes the work call time, all workers become employees, according to federal law, usually of the event production company. According to the IRS, if the employer retains control of when the worker does the work, that worker is automatically an employee.

The AZ has a caveat in that it states that ALL of certain conditions must be met, not just one. Problem is that the 2nd provision seemingly over-rides the first by simply declaring that all event workers are exempt. That can classify these workers as IC for every other potential interpretation of when and how they might be employees, including under the IRS rules. So bad law.


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## BillConnerFASTC (Feb 2, 2016)

I stated and agree that the stage hands are employees (with a few rare exceptions) and should be entitled to all of those compliance benefits. I don't agree the AZ law change of an AZ drfinition changes what the IRS requires.


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## ruinexplorer (Feb 3, 2016)

Please note that HB2112 is not yet law in AZ. This is still a bill at this point which I do not think has even passed the state Senate, let alone being signed into law. This of course does not invalidate any discussion we have had here. In fact it is extremely important to be aware of bills such as this as they could easily pop up in other states.


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## ruinexplorer (Feb 8, 2016)

And now there's a fight in California over this. 
http://www.orangecountyemploymentla...oyment-problems-for-stagehands-in-california/


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## lwinters630 (Feb 9, 2016)

SteveB said:


> Once the event producer and promoter establishes the work call time, all workers become employees, according to federal law


A start time does not create "direction and control". A stage hand may be directed to do things in a specific manor would create an employee relationship to the production company. However, a cleaning person, even though scheduled to start at 11pm, may not be an employee because "cleaning" is not the usual course of business of the production company.
It does get complex.


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## SteveB (Feb 9, 2016)

According to the IRS, there are 4 categories they look at:


Type of instructions given
Degree of instruction
Evaluation systems
Training
*Types of Instructions Given*

An employee is generally subject to the business’s instructions about when, where, and how to work. All of the following are examples of types of instructions about how to do work.

When and where to do the work.
What tools or equipment to use.
What workers to hire or to assist with the work.
Where to purchase supplies and services.
What work must be performed by a specified individual.
What order or sequence to follow when performing the work."

My thoughts and using the event as in my earlier post:

Under the Type of Instruction, when to work is key to establishing a worker as an employee as the business has removed the ability of an IC to set his/her own work schedule. From what I've read, this is almost the first and most important factor considered. As well, having a union or business making the choice to bring in additional workers takes that control away from an IC functioning as a GC, thus all the workers become employees. Where the work gets done as well establishes an employee, when the IC does not have the ability to say, assemble parts of a rig away from the event sight, or to prepare equipment off site. If the equipment is delivered to an event site by a 3rd party, to be assembled at the event site, the workers hired are employees, not having the freedoms assumed by an IC. 

There are some clear guidelines by the IRS.


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## BillConnerFASTC (Feb 9, 2016)

Well, aside from the fact that this is about AZ unemployment, not for IRS purposes, I don't think just one criteria of several or many is sufficient. There is a lot of work that is clearly independent contracting that has to be done on a schedule. Starting and stopping times are just one consideration of the control of the means and methods. This from the IRS:


*Common Law Rules*

Facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
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.

Don't like - they have a form: 
https://www.irs.gov/pub/irs-pdf/fss8.pdf


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## BillConnerFASTC (Feb 10, 2016)

Consider I hire a string quartet to play at a party at my house. I show the were to set up and tell them what time to start and finish, might even tell them what piece or kind of music I'd like. They are a group and sign a contract with me to do this. There is no question that from my position, these are independent contractors. Now if one person is the leader and hires the others, the rest of them might not be independent contractors, but no concern of mine.* They might, conversely, all be partners in the group and just agree to split the contract amount, before or after paying expenses - I don't know or care. 

Those same musicians get a call from the hall to play for a touring show at the road house the next night, I'm pretty sure they'd be employees, and entitled to the benefits.

The distinction for the IRS has always been nuanced as far as I can tell for many situations.

*If they are employees of a contractor working for me, I should ask for a certificate of insurance that indicates they have the proper insurance, including workers comp if in fact they are W-2 employees, else I'm on teh hook if they are injured.


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## ruinexplorer (Apr 27, 2016)

chawalang said:


> I was hoping to get some conversation going, specifically in regard to HB2112 in Arizona.



For those of you interested in politics, here's a link to the proceedings on HB2112 in Arizona.


There are eight videos in all.

It passed. We'll see how this plays out.


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## ruinexplorer (May 8, 2016)

Update: 2112 had gone back after these videos and then ended up being tabled (sine die). However, 2114 was passed setting up a requirement for declaration of independent contractor status. https://legiscan.com/AZ/text/HB2114/2016

Both of these bills came about after the governor made this executive order: http://azgovernor.gov/governor/news/2016/01/governors-council-sharing-economy


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