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We were planning on paying all of our models in cash. Hiring them more or less as independent contractors. My question is, is this legal, or should we be paying by check, and taking out for state and federal taxes? Sorry, accounting I am totally stupid about...
Under US rules, Independent Contractors can be paid up to $600/year without "employers" reporting via 1099. No taxes withheld over $600 if they sign the form W9.
Your CPA/Tax Preparer is the best source for this answer, because if you pay a handful of models $200-$300 for a shoot during the tax year, that is easier for your CPA to support with a simple "I paid some models" line item on Schedule C, than say a dozen models being paid thousands of dollars each over the year with no paper work.
Over $600 in a calendar year, you need to get the model's SS number, and have it ready to report to the IRS their earnings on 1099 by January 31...
You'll recall, as well, this past January, PayPal and CCBill, et.al., were all abuzz over issuing 1099Ks for credit card processing over $20,000 for program sponsors. That was for "gross receipts" before fees and affiliate payouts, leaving the sponsor to need to report on his Schedule C the CCBill income, then stating the expenses of the CCBill fees and any automatic split payouts to affiliates for those sales.
As well as good ol' plain 1099s for affiliates of VOD sites like HotMovies, AEBN and DogGone for earnings over $600. And Amazon.com.
i got more 1099s this year than any year in the past.
In the UK we would get the models to invoice you for their services, they would be classed as self-employed. They would be liable for their own taxes etc. Because they have invoiced you for a service, that they have provided, you can claim the payment as a business expense against your tax liability.
Assuming that you are based in the US.Quote:
Originally Posted by erosproductions
We use Quickbooks for all of our accounting needs which even includes our model payments.
We do give the models cash. What we do is withdraw the amount needed from the bank. We do not input this pull amount into our Quickbooks. When the model fills out their model application, there is an additional form which is very short explaining how they are paid and attached to it is a W-9 Misc form. The model fills it out.
Regardless of any amount, it is entered into quickbooks as a cash pay. Legally, if a model is paid $600.00 or more in a tax year, you are required to issue them a 1099 form no later than January 31st the following year.
Once a model does reach this, Quickbooks will then allow you to submit the proper 1099 form. It even does it for you. You mail it to the model. They are required to do their own taxes.
We also hold a reserve. We will pay the models, however we will hold their money and treat it as a W-2 procuring short-term employment basically.
This is legal.
My suggestion to you is for you to 1099 them as an independent contractor in the event they are paid over the amount of $600.00 in a tax year. Cash is okay, however have them sign some form of tax receipt. IF YOU REPORT their income and you do not have a W-9 on them, then you are in trouble.
Paying models in cash is almost always a bad idea. Great for them, bad for you.
Depending on the jurisdiction where you are shooting, your models may need to be paid as employees and NOT independent contractors. If this is a business for you and not a hobby, get the advice of a local professional.