IRS: Paying Other People

3. Paying Other People

You are responsible for issuing W-2s or 1099 forms (as appropriate) to employees or independent contractors. The IRS has specific definitions for independent contractors versus employees.

If you hire crew as employees, you must issue W-2s to them by January 31 following the end of the calendar year. You are responsible for following local, state and federal regulations. You are also subject to reporting requirements concerning withholding taxes, payment of Social Security, unemployment insurance and all of the other obligations of an employer. If you are unfamiliar with these regulations, you may find it useful to engage an accountant or payroll service to handle the payroll and related employer tax reporting. The use of a payroll service or payroll accountant as an appropriate and necessary production expense (more information on payroll services will follow.)

If you hire independent contractors (individuals who are not employees and not corporations), you must issue 1099 forms for payments made to them. At the time of publication, the IRS requires that if an individual has received $600 or more in the calendar year, you must send a 1099 to him/her by January 31 following the end of the calendar year in which you paid them, and you must also file a report of all 1099s with the IRS. Be sure to get Social Security or Federal I.D. numbers from anyone you contract as an independent contractor.