<p>Remember one thing about independent contractors: They are taxed for both social security and income tax based on their NET income after all business deductions for entertainment, meals, lodging ( if traveling on temporary status for a gig), home office and other deductions. Employees are taxed on dollar one! In addition, any employee deductions are only miscellaneous itemized deductions which must exceed a threshold amount. Even worse, if you take too many employee deductons, you could be subject to alternative minimum tax that will completely eliminate the employee deductions. This isn’t a problem for independent contractors.</p>
<p>But perhaps you missed my earlier post, as I read the IRS guidelines for independent contractors most of these FX people are not legitimately able to work as ICs. Most FX people have to work on-site as they need access to the equipment that the production company owns. And that fact alone means that they probably aren’t legally able to work as independent contractors. Most are or should be hired as free-lance which is a different situation. As my accountant always explained it, if you can’t do the work at home because you need to use the company’s equipment you can’t legally work as an independent contractor. Now if you have the equipment at home and are producing the work at home and turning it in then you’re legitimately an independent contractor. The IRS guidelines seem to bear this out.</p>
<p>Also you can only deduct the home expenses and office space based on a percentage of the amount of work you actually do at home. Not many of these people actually are working from home except for the time spent drumming up more work, the actual time you are working from that space. </p>
<p>Of course there’s a lot of fudging going on and I’m sure a lot of people are working as IC’s without even being aware of the guildelines and aren’t trying to bend rules.</p>
<p>artsmarts noted,"As my accountant always explained it, if you can’t do the work at home because you need to use the company’s equipment you can’t legally work as an independent contractor. "</p>
<p>Response: This isn’t necessarily true! I wrote a whole article on the factors that determine independent contractor status vs. employee. There are many factors;however, it all boils down to the control by the company. If all they want is a set end product and each designer is given a lot of leeway about what to do, they could be contractors. On the other hand, if each step in controlled, they must be in at set hours, must use employer equipment, among other factors, they probably are employees. </p>
<p>Moreover, it would be interesting to see if these companies obtained a private letter ruling from the IRS on this, which is available to all employers.</p>
<p>They may indeed be classified as employees. However, simply because they can’t work at home isn’t the only significant factor.</p>
<p>Recently there has been some issues in the vfx industry where studios were subcontracting out their employees via third party companies in order to classify them as independent contractors and avoid paying payroll taxes. Employees were also getting the shaft with an extra 5% collected off their paycheck by the 3rd party. TAG is currently going forward with a class action suit on behalf of the employed. </p>
<p>In any case, VFX is usually at the service of the studio, which is at the service of the client/director. Assets are proprietary and rarely shared, even between studios working on the same projects. Pipelines are often proprietary as is the software. And everything is heavily directed by tiers of directors, supervisors and leads, each pulling and pushing in different directions in a giant pixel cluster f. Does usually sound like a case for an IC classification.</p>
<p>The guy who worked made $1K/day for 3 months had to stop after 3 months because he hit 3 people on the LA freeway after driving home sleep deprived. He also had to take a break because he suffered a heart attack from the lack of exercise and unhealthy diet often caused by catered meals and snacks that come with 17 hour days, after which the studio declined to hire him back. Crunch on poorly managed projects can last for many more months, and jumping from job to job, some are pretty much always in crunch. Projects ramp up at different times, and a vfx worker must keep their ear to the ground at all times. Jobs don’t just fall in your lap when you need them, nor at the salary you desire. When not working, a vfx specialist needs to be constantly improving their reel and skills to remain competitive in this ever more crowded market. </p>
<p>Back in the heyday of the late 90’s there were those in the business who spent all their big paychecks, never saving for that rainy day when their salaries would fall back to earth and they were laid off. The best advice out there for vfx students these days is to always be ready for that rainy day. Buying a house, raising kids, paying your own health insurance can all be particularly tough due to the nomadic nature of vfx work these days.</p>
<p>Does usually sound like a case for an IC classification.
In a word . . . no.</p>
<p>And if you have a director or producer standing over your shoulder telling you what to change or create the answer is also no.</p>
<p>Here’s an independent contractor scenario. A company contacts you and gives you a description of some images they want. You work from your home office producing some rough drafts of the images. They pick the one they want to go with and you go back home and produce it.</p>
<p>Or as tax guy says, perhaps you produce the rough drafts at home then go in to a production studio paying for the time and renting use of their space and produce the images. You then take the finished product to the company. They want some changes, you go back to production and make the changes. Note that you are not producing the images for the production company, you are independently producing the images for the purchasing company. Basically you are functioning independently in the same manner as the production company does.</p>
<p>But as I said there has always been a bit of gray area, loose definition which is fine until you get a call that you’re being audited.</p>
<p>At any rate, fx kids should be very aware of the pitfalls of not saving, they’ll also have to set aside money so they can constantly keep up on technical improvements. But that advice might be good for all current students, especially those in the arts or in this day and age maybe just all students in all fields will suffice.</p>
<p>A question for Phillyartmom:
Do you think in retrospect there was any way for you to foresee that the legal field wasn’t going to be your cup of tea? Did you intern at a law office? Do you think an internship might have given you a clearer idea of what was going to be required at the beginning of a legal career? How do you feel about your studies at this point in your life?</p>
<p>Any advice for kids studying in the arts or any other field, especially those who are taking on a lot of debt load?</p>
<p>Thanks, everyone, for your useful insights. Young people should tackle these less glamourous nuts and bolts issues early in their careers. It’s more important than ever for an aspiring visual artist to be nimble and financially light on the feet. This is one reason (among many) that DS opted for a no-debt college option.</p>
<p>Sorry that was a typo. Should read “Doesn’t usually sound like a case for IC classification”</p>
<p>Vfx is always a service for the client. So i think only very early in the blue sky stage would there be more opportunity for independent work.</p>
<p>Artsmarts. I am not sure that I could have known. I don’t think all law experiences were similar to mine. I had in fact worked in a law firm for a couple of years and did a summer with the firm I worked for, but the first experience was in a smaller firm and the second, as a summer person you just don’t see the pressure. I did the work for about 15 years, some of that on a part-time status, which just meant I did not take as many projects on, so while my work would be bad for a while, there was more time in between. </p>
<p>I think in this day and age taking on debt is a very big challenge. Kids should think long and hard as to whether it is something they should want to do. If you love your work, then I don’t know the answer. Sometimes you have to work hard to get your rewards…I have no response about the guy that lost his job due to an accident perhaps caused by overwork…how sad. Sorry I can not be more help.</p>
<p>I was in LA actually having dinner with some vfx people when this article came out. Their take on this was interesting: the article is essentially true, that a union would be great, but the fear is that outsourcing could increase. It’s kind of hard to see friends in the industry getting retirement and fantastic health benefits through their union.</p>
<p>Overtime: That is negotiated in the contract. All those I talked to got paid overtime, including one guy who had worked with the woman featured in the article. That applies to those working hourly for vfx-houses. But for independent projects, people many times bid on a particular deliverables, and their work time could vary considerably for the negotiated price.</p>
<p>Working non-stop: These guys work long hours on projects, but they do take decompression time as well. I talked to two who were in gap periods because it was their choice - turning down gigs because they wanted a break.</p>
<p>Independent contractor status: This sort of makes sense, since work is contracted on a film-by-film basis. When that work is done, you go on to another project, many times for a different company. The guys I talked to had worked on lots of films for lots of companies.</p>
<p>Cost of health insurance: Health insurance is not too expensive if you are young and healthy (my son pays less than $200 a month). But for the older guys, it could be an incredible expense.</p>
<p>Taxes: these guys had accountants and paid quarterly taxes which helped keep track of things.</p>