Freelancer Payment

A case involving embezzlement, tax liability, and good intentions added up to a nightmare for one man. Dr. Robert McClendon’s story proves there’s no amount of caution too intense when it comes to payroll tax liability.

The road to hell is paved with good intentions

In a sobering case reported in Forbes, a man who loaned $100,000 to a struggling business was fined $4.3 million for said company’s payroll tax liability. When you dig into the details, it’s not as unfair as it may seem at first blush, but that doesn’t make the situation any less painful for Dr. McClendon—the defendant and a legally-deemed responsible party. As the Forbes article states, “You can be ‘willful’ under the tax law even if you didn’t have a bad motive or evil intent.”

So what was the kiss of death for Dr. McClendon?

Responsible & willful: A match made in IRS hell

Dr. McClendon owned the business to which he loaned the money and the cash went toward the seemingly noble goal of paying employees to prevent shuttering the doors altogether. While it was an employee who’d embezzled the funds earmarked for payroll taxes, the case against Dr. McClendon was strong enough to prove him responsible and willful. He wasn’t responsible for the embezzlement but he was responsible for choosing to pay employees instead of the payroll taxes, which by that time, he knew about. The case against Dr. McClendon withstood the legal tests and left the doc to nurse his own wounds. Ouch.

How to protect yourself

Either learn the rules of payroll taxes and precisely follow them or hire a qualified company to do it for you. The Forbes article suggests that one benefit to hiring a payroll service is that “the employer doesn’t have the discretion to use the money to pay vendors or for anything else.” It’s sort of like a much higher-stakes version of a 401K: If you can’t access the money when the temptation for an out-of-reach car comes up, you’ll still have it when you need it for less sexy reasons. Additionally, hiring a payroll service takes the burden of having to understand all of the rules and make heavy decisions off the company leadership.  The payroll service takes on the liability and frees up the small business to focus on business.

The bottom line:

There are too many ways to get in trouble with the IRS to choose ignorance. With fines and possible jail time on the line, legitimate small businesses must take payroll taxes seriously. The government sure does.

About PayReel

When it comes to payroll taxes and so much more, PayReel makes your life easier. Producing multimedia content and executing live events is chaotic. At PayReel, we make sure our clients are able to hire who they want, when they want and that everyone is paid properly. Leave all payroll services and details up to the PayReel team so you can focus on pulling off a flawless production. Contact us anytime at 303-526-4900 or by emailing us here.

Relax. We got it.

The freedom that comes with being an independent contractor often comes at a price. Being in the driver’s seat means managing your own schedule, finances, and a lot of other complex aspects of your career. Independent contractors must pay their own self-employment tax, pay for health insurance out of pocket, and don’t have paid time off or employer matching on retirement contributions. In addition, while there are multiple opportunities for deductions and credits on the tax front, keeping careful records is essential to being able to take advantage of them.  

While many people enjoy the relative stability of a full-time job, some crave the freedom and control of being an independent contractor. President Trump’s proposals for tax changes are far from guaranteed, but they may be enough to push some people off the fence and into freelance. 

So what do small business owners and potential small business owners need to know?

Trump’s plan includes lower tax rates for small business

Under Trump’s proposed tax code overhaul, some businesses would be subject to lower tax rates topping out at 15 percent instead of the current 35 percent. Such businesses include Subchapter S corporations and, in some cases, limited liability companies or partnerships. According to this New York Times article, that includes “those in which income and deductions accrue directly to the owners and are reported on their personal tax returns.” Lower tax rates increase the incentive for full-time employees to approach employers about working as an independent contractor instead. 

It’s still hypothetical

Like everything in government, this tax code overhaul will be up for debate. One major concern includes that such a reduction in tax revenues could mean an increase in national debt. Legislators will be sure to contribute their own opinions and carry out negotiations before anything actually changes. According to Trump, though, the plan is “very well finalized” and will become a focus after the ACA repeal efforts. One way or another, we’ll have some time before we see how things play out. 

The bottom line:

Don’t quit your day job. Well, at least not yet. Tax laws are always subject to change (so much so that even the original link on the Trump Administration’s website now leads to an error page). As such, tax considerations alone shouldn’t be the foundation for a decision as big as becoming an independent contractor. The bigger question is whether freelancing is the right fit for your life. If it is, then go ahead and get behind the driver’s seat. Enjoy the ride and be sure to track those business miles—they’re deductible!

About PayReel

Producing multimedia content and executing live events is chaotic. At PayReel, we make sure our clients are able to hire who they want, when they want, and that everyone is paid properly. Leave all payroll services and details (even managing your independent contractors!) up to the PayReel team so you can focus on pulling off a flawless production. Contact us anytime at 303-526-4900 or by emailing us here.

Relax. We got it.

According to a study by Princeton University, 95% of the 10 million new jobs added during President Obama’s terms were temporary or part-time. Unfortunately, the reality for many such workers is difficult. Often, they lack access to benefits, work overtime without corresponding compensation, and deal with clients who pay late or don’t pay at all.

On the other end, employers often have a difficult time keeping up with contractor and freelancer management. Staying on top of ever-evolving laws, minimum wage and overtime change benefits eligibility, and the differences between state and local regulations are time-consuming. It is a worthwhile investment, though. It raises businesses to preferred client status among contract workers and helps protect them from costly fines, to boot.

If you’re wondering how to pay temp employees and freelancers fairly and accurately, we can help.

How to pay temp employees and freelancers accurately and fairly

Accurate worker classification is an essential starting place. It’s easy to get wrong, but with your reputation and large fines on the line, it’s also important to get it right. Here’s a list of the most common classification errors and how to avoid them. Here are some basic guidelines for identifying the difference between employees and independent contractors.

Pay accurately and on time. Some big companies make a habit of net 90, but we don’t recommend it. Net 30 is more ethical and ultimately better for business. Here’s why. The dust hasn’t settled on new overtime regulations or minimum wage debates, but here are our suggestions on this front.

Be proactive about benefits and keep up with evolving state and local laws rather than waiting for workers to knock on your door. Transparency is a great way to build trust. 

The bottom line:

We know you care about your freelancers, but they only know it if you show it. Taking these measures makes sure you handle your freelancers in a way that is ethical, shows your appreciation, and keeps you compliant.

We know you’re busy. If you don’t have the time, resources, or desire to pay attention to all the details, hire an expert to keep track of contractor and freelancer management for you. Our team of experts and our PayReel OnLine software are fully equipped to help you sort out the rules and execute processes while also balancing contractor expectations, legalities, and company budgets. This quiz can help you decide if you’d benefit from hiring a team like PayReel.  

We help you care about your workers even when you’re short on time. We think happy workers and peace of mind are pretty close to priceless. 

About PayReel

Producing multimedia content and executing live events is chaotic. At PayReel, we make sure our clients are able to hire who they want when they want and that everyone is paid properly. Leave the details up to the PayReel team so you can focus on pulling off a flawless production. Contact us anytime at 303-526-4900 or by emailing us here.

Relax. We got it.

There are two certainties in life: Death and paperwork. Mountains and mountains of paperwork. From teachers to creative professionals, every role has its own version of the dreaded TPS report. The joy-sucking chore of managing stacks of paper often supplants dreams of making paradigm-shifting creative work. A paperless vendor payment solution, on the other hand, liberates cluttered desks and minds.

Top Five Benefits of a Vendor Payment Service:

1. Customization: Unique business realities mean cookie-cutter solutions won’t cut it. Custom software that’s designed for the fast-paced nature of video production and live events industries will cut down on the frustrating workarounds that bog down conventional payrolling tools.
2. Compliance: The only thing you want less than more paper is attention from the IRS. PayReel OnLine keeps businesses compliant with federal, state, and local regulations.
3. Automation: Why manage details manually when digital reports, forecasting, and timesheets are a few clicks away?
4. Consolidation & Centralization: Process independent contractor and vendor invoices simultaneously and approve invoices and timesheets with one click.
5. Paperless: And finally, the real prize: No more paper.

Movements toward minimalism and Tiny Houses are gaining traction in part because people feel oppressed by the sheer volume of stuff in their lives. Steve Jobs and Albert Einstein wore the same outfits each day to free their minds to focus on more substantial decisions. President Barack Obama and Mark Zuckerberg followed suit (and t-shirt, respectively). People are digitizing everything from photo albums to music—and for good reason. Life’s better on top of the mountain, not buried underneath it.

Do these five benefits speak to you? Then click here to speak to us! PayReel OnLine eliminates paperwork and cuts through red tape to get you back to doing the creative work you love.

About PayReel:

PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail—down to eliminating paperwork—perfectly while making sure their clients think nothing of it, so they can get back to doing what they do best.