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2020 W-4 for Production: What You Need To Know

tablet with tax representing new W-4 for 2020

In case you haven’t heard, the IRS made a big change to Form W-4 for 2020, and it’s going to hit production crew workers harder than most.

As a refresher, the W-4 is the form you, as a film crew member, give your employer (production) to tell them the rate at which you want federal income taxes withheld from your paycheck. Easy, right? Well…

The old W-4 had a section that required the production crew employee to enter an “allowance” number from 0 to 9, or the word “EXEMPT.” That number, combined with your category (Single, Married, or Married but withhold at higher Single rate) determined the federal tax withholding rate.

When you would file taxes in April, you’d then find out if you had too much or too little withheld… or somehow pretty much Goldilocksed it.

What changed on the 2020 W-4 for production crew workers

The now-released W-4 for 2020 serves the same purpose as the older versions, but gets to the calculation in a very different way. The biggest change for short-term film crew workers is that there is no longer a place to enter a single-digit allowance number.

Due to the increased standard deductions defined by the 2017 Federal Tax Cuts and Jobs Act, the new form does away with the allowance number altogether, and the categories are updated:

  • Single or Married filing separately
  • Married filing jointly
  • Head of household

The rest of the form is optional (except the signature at the end – that’s required), and includes worksheets for adjusting your withholding based on dependents, your spouse’s job(s) and any concurrent other jobs (production crew or otherwise) you may have.

What does it all mean for production crew?

Production crew members and other short-term employees, freelancers, and W-2 gig workers may have a tougher time filling out the W-4 than your average fulltime nine-to-fiver. This is due to the short-term nature of most crew jobs for film and TV production.

When the new W-4 asks about multiple jobs in a year, freelance production folk will be disappointed to find there is no “Duh” response option. It may be helpful to consult with a tax professional to determine the best way to fill out the W-4 for your own particular situation.

Here’s why the IRS cares about how many crew jobs you have

The new tables and worksheets were not just designed to drive production crew workers nuts; they actually serve a purpose. To understand what it is, we need a little context.

To owe or not to owe

As much as crew members may look forward to getting a big tax refund at the end of the year, the government likes it even more than you do. Why? Because it means you gave them an interest-free loan for the year, which they don’t have to pay back until April. Pretty good deal!

On the other hand, if you have too little income tax withheld over the course of the year on your film crew gigs – and end up owing money at tax time – that means the opposite is true: the government gave you an interest-free loan over the course of the tax year! That’s not their favorite.

And for some taxpayers, owing taxes in April comes as a surprise… an unpleasant one, even. To make matters worse for the IRS, not everyone is willing or able to pay up when it comes time to collect. That means shortfalls.

Balancing it out for film crew workers

If, when you fill out your W-4, there’s no way to indicate that you have other concurrent income or possibly a sizable additional household salary from a spouse, withholding will be at a lower tax rate/bracket than actually applies to your situation… so you’ll end up being undertaxed, and owe big in April.

As we saw above, the government doesn’t like you to owe. So they worked out a way to learn about your other household income on the W-4, so there are fewer surprises for everyone on Tax Day. Make sense?

Note: The new sections of the new W-4 having to do with dependents and other expected deductions (such as mortgage interest, etc.) are designed to decrease your taxes withheld on each paycheck. It’s all about trying to hit the true rate as closely as possible.

Do some figuring of crew jobs in advance

There may be some trial and error for film crew freelancers. Just keep in mind that, as seen above, the IRS isn’t trying to punish you for having 50 production jobs over the course of 52 weeks. They’re just trying to get your ballpark annual income, so the best withholding estimates can be applied.

It’s also worth noting that film crew employees can just turn in a new W-4 anytime you want during a long-term crew assignment, to fine-tune your withholdings for the next check.

We recommend looking at the worksheets in advance, so you’ll be ready for that first W-4 in January. (By the way, if you have an ongoing production job you’re already on, and an old-timey W-4 on file, there is no requirement to submit a new one.)

You can also try some tax calculations in advance, to see where you land. The IRS offers an estimator here… use that in conjunction with some sound tax advice from a CPA, and you’ll be ready for the dawn of the new decade. At least as far as the W-4’s concerned.

Need crew payroll services for your production? See how Media Services can help with your entertainment payroll.

Getting Ready To Send Out W2s to Your Crew? The CA Supreme Courts Thinks You Should Be.

As we mentioned back in April, the California Supreme Court has weighed in on what makes a worker an independent contractor rather than an employee. As it turns out, the qualifications are rigorous. While the studios have long known that their production crew members don’t qualify as independent contractors (which would theoretically free the employer from payroll taxes, workers’ compensation and unemployment liabilities), some independent producers still operate under the mistaken idea that they do.

What’s the difference between independent contractors and employees, anyway?

Can someone really be an employee if they only work for one day? Certainly. An employee is someone who performs work at the direction of a person or entity, for pay. When that happens, the government wants the employee to have a safety net in case of injury, layoff, retirement and in some cases, sick time. Equally important is that the government gets paid its share of the employee’s wages in the form of income tax; as well as contributions to cover unemployment, disability and retirement (Social Security) benefits via employer payroll taxes.

It’s that last bit (employer payroll taxes) that inspires many an otherwise-upstanding production company to engage in inadvertent tax evasion by claiming that its crewmembers are actually independent contractors (1099) rather than employees (who get a W2). But while the bar was already high for qualifying a worker as an independent contractor, the California Supreme Court raised it further (or maybe just clarified it with straightforward scenarios). The court followed similar clarifications in Massachusetts and New Jersey, by spelling out three concrete requirements for an independent contractor classification.

According to the ruling, the worker must:

  • be free from the control and direction of the employer (can’t be compelled to show up for certain hours and do specific tasks – kinda like a film crew does)
  • perform work that is outside the hirer’s core business (like when a plumber fixes a leak at a retail electronics store… that plumber could legit be considered a contractor. A crewmember working on a movie, for a company that makes movies, doesn’t pass the test)
  • customarily engage in “an independently established trade, occupation or business.” (this is the one that throws people… but if you think about the plumber example above, the plumber probably has storefront, signage, advertising, a website, a truck with equipment… things your average P.A. will not have)

It’s important to note that the burden of classification falls completely on the business, and not on the worker. Even if the worker expressly states in writing that they consider themselves a contractor and want to be paid as a contractor, it’s the would-be employer that will suffer the consequences in penalties and lawsuit payouts.

The burden of classification falls completely on the business, and not on the worker.

You may ask: if the worker wants to be paid as a contractor, and that’s how I pay them, why would they then report the misclassification? Isn’t everyone happy as a clam?

Top two ways production companies get busted for misclassifying employees as independent contractors:

  1. Crewmember gets hurt.
    In addition to evading payroll taxes, productions also misclassify their crew as contractors to get avoid paying workers’ compensation premiums. This is an enormous liability for both the production company and its owner(s). All it takes is a twisted ankle on set to put a crewmember out of commission. They can then come after you not only for the doctor bills, but also lost pay as a result of not being able to work – whether on your production or another job. Many a production has been exposed as misclassifying crewmembers based on one simple claim. If the accident is worse, and your workers’ compensation policy doesn’t cover “independent contractors” – and it most likely doesn’t – you could be on the hook for significant sums of money in damages.
  2. Crewmember files for Unemployment.
    Many productions are surprised, halfway through the shoot, to find a day player from week 1 has filed an Unemployment claim against the company. When the company tries to argue that the person was not an employee, but an independent contractor, it opens itself up to greater scrutiny of the entire crew – with all the overtime back pay, payroll taxes and penalties that go along with it.

So how do you pay your production crew the right way?

The best way to meet all your obligations as an employer is to classify your crewmembers properly as employees, and engage the services of a reputable statutory (employer-of-record) payroll provider. When you work with Media Services to pay your crew and castmembers, we not only apply the proper withholding, submit payroll taxes on your behalf and provide workers’ compensation coverage… we also file all W2s and send them to your workers at the beginning of the next year. Since the unemployment and workers’ compensation are under our company, we also resolve and pay out any claims, some of which go on for years or even decades.

Want to learn more about payroll services for your next production? Get in touch with us here, and we’ll get you all the information you need about rates and how the system works.

CA Rolls Out First “New Program” Tax Credit Lottery in May

On April 1, the California Film Commission will accept applications for its last-ever tax credit lottery under what is now being referred to the “old program.” The office made an announcement today that a large number of television series productions currently receiving credits will return for an additional season and remain in the program for its final year – leaving only a handful of credits available to new productions and eliminating studio projects from eligibility for the final lottery.

Ten million dollars will still be available for independent productions via the lottery, with old program rules still in effect.

First Application Period for New Lottery May 11-17

The new program will have two application periods for fiscal year 2015-16 (July 1, 2015 – June 30, 2016). The first will be May 11-17, for non-independent television projects only. Credit allocations will be available July 1 at the earliest. Other details from the film commission:

  • $55.2 million in tax credits available for New TV series, TV pilots, MOWs, Mini-series for any distribution transmission
  • $27.6 million in credits available for Relocating TV Series (defined as a series with $1 M minimum production budget, previous season shot outside CA, and must attest that the tax credit is the primary reason for move to the state)
  • Projects will be selected via a new competitive ranking system based on jobs and other criteria

A second application period, to be announced this summer, will cover other types of production. Read more about the old and new programs at the California Film Commission website here. Learn about production incentives nationwide here.

ACA Subsidies Case Heard

Earlier this month, the U.S. Supreme Court decided to hear King v. Burwell, a case involving a challenge to the IRS’s interpretation of insurance subsidies under the Affordable Care Act. The issue is whether subsidies are available to those in states that have not created an insurance exchange. The IRS took the position that subsidies are available through either state or federal exchanges. If the Supreme Court strikes down the IRS’s interpretation, arguably, individuals and employers in states without an exchange will not be subject to the ACA’s mandate. However, employers and individuals in states that have an exchange (like CA and NY) will still be subject to the ACA’s mandate.

The fact that the Supreme Court decided to hear the King case came as a surprise as it generally does not do so unless the Courts of Appeals have issued conflicting decisions. The D.C. Circuit has agreed to re-hear a case raising the same question, so there is not currently a clear split. The case will be heard before the end of the Supreme Court’s term in June 2015. The effect of its decision on the ACA will not be clear until the Court has made its ruling.

Below is a depiction of some of the states that have made their own exchanges. More information about the ACA can be found on Media Service’s website.

Map of U.S. Exchanges ACA

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