Many people working in video production in Las Vegas choose to work as a freelancer or independent contractor, providing their services to organizations as a non-employee. There are important legal and financial differences between working as an employee and an independent contractor, most significantly related to payroll taxes. Independent contractors are paid the full amount for their services without taxes withheld, and with no employer contributions for Medicare, Social Security, or State and Federal Unemployment. Although this might seem like a less expensive alternative for an organization looking to hiring a full-time employee, there are some important laws everyone needs to be aware of, both as a business owner and as an independent contractor.
The most important thing to realize is that it is not up to the employer or the worker to decide if they are an independent contractor, it’s up to the Federal and State Government. In Nevada, even a written contract between the two parties does not establish independent contractor status. There are specific requirements a worker has to meet in order to be considered an independent contractor:
- The person has been and will continue to be free from control or direction over the performance of the services, both under his contract of service and in fact. In other words, the business owner doesn’t control the manner in which the services are performed; and
- The service is either outside the usual course of the business for which the service is performed or that the service is performed outside of all the places of business of the enterprise for which the service is performed. In other words, hiring a bookkeeper for a video production company is outside the course of business, but a camera operator is not; and
- The service is performed in the course of an independently established trade, occupation, profession or business in which the person is customarily engaged, of the same nature as that involved in the contract of service. In other words, this person runs a business and supplies these services to multiple organizations.
If you cannot demonstrate ALL of the above conditions, the person is considered an employee and the employer is required to pay taxes and other benefits for that individual. If the individual is economically dependent on the business, or the service being provided is integral to the business, then the worker should be paid as an employee.
One way that a company can avoid any legal headache and back taxes is by hiring freelancers operating as a business. This is also important for the worker, as any person or entity conducting business in Nevada without a business license may incur fines up to $10,000. According to Nevada law, a business is defined as any person who performs a service or engages in trade for profit. If you receive a 1099 form for any work performed in Nevada, you need a business license. When the worker is operating as a business, they are subject to self-employment tax on their personal tax return if the business is profitable. This arrangement bypasses unemployment tax liability altogether, and both parties are operating legally under Nevada law.